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Trends

Rotterdam (ARA) fuel oil - USD7 higher

Singapore fuel oil - USD4 higher

US Gulf fuel oil - USD6 higher

OPEC agreed to disagree (Brent: $97.9)

At the two-day summit in Vienna the 12 OPEC members could not come to an agreement on the total production limit. Public statements from: Algeria, Angola, Iran, Iraq, Libya Nigeria and Venezuela signalled that they were very unhappy with the current drop in oil prices, and pushed for production to be cut. While Saudi Arabia, the only country with significant spare production capacity, and the remaining 4 OPEC members represented the fraction that still saw a risk on the ban on Iran’s oil export from 1 July, and thus did not want to cut production ahead of the 18-19 June Moscow negotiations on Iran’s nuclear program.

While the two OPEC fractions are equal in size (measured on proven oil reserves and total crude export) Saudi Arabia remains the only country with any real production spare capacity. OPEC decided to leave the production limit at 30 mbpd that was agreed in December. While actual production continues to be at 31.5 mbpd the agreement will have little practical impact. Should oil prices continue to drop, it will be a important game changer, as more OPEC countries will potentially begin to struggle to balance their budgets. The Greek election on Sunday, and the nuclear negotiations on Monday-Tuesday will be important oil market drivers.

Recommendation

We strongly urge clients to pay close attention to the following dates in June: Sunday 17 June the second Greek election will take place. Monday 18 and Tuesday 19 June will give hints on Iran nuclear talks. On Thursday 28 June the US financial sanctions on any financial institution dealing with Iran will kick in. Saturday 30 June is the last day before EU sanctions on Iranian oil kick in.