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Trends

Rotterdam (ARA) fuel oil - USD5 higher

Singapore fuel oil - USD2 lower

US Gulf fuel oil - USD3 lower

Strike, Golden rule, and a lit powder keg (Brent: $91.1)

Norwegian oil strike – oil supply drops

As Norwegian oil workers and companies have not been able to find an agreement on wage and pension rights, the workers have gone on strike. Production is estimated to be affected by the loss of 165,000 barrels per day.

The Golden Rule: He, who has the gold, makes the rules

Meanwhile, the EU leaders are preparing to meet in Brussels on 28-29 June to discuss cross country fiscal policy and the Euro construction itself. On the agenda is a possible setup to combine Germany's logical reluctance to pick up the bill for countries with excess spending, without being able to counter further excess spending. A construction where sovereign states are allowed to spend all their income without EU restriction sounds pretty much like how the bus is driven today. The twist being: if any government wishes to spend more than their income, they would have to apply for funds from an EU budget commission. Such a construction, Eurobonds with a spending-break, would help restore market confidence in the Euro project and significantly lower a risk-off scenario.

Syria the lit powder keg – be aware of potential further unrest

On the geopolitical front, things have escalated in the political powder keg that is Syria. First, reports that high ranking military officers were defecting, ticked in - a situation very similar to Libya 2011. Then a Turkish jet was shot down by Syria. Turkish vice PM: "Turkey will protect itself within the international laws, and the Syrian shooting will not go unpunished." Turkey, a NATO member, has been immediately backed by UK for international action to be taken. NATO is to meet tomorrow to discuss the matter. While Syria is a small oil producer (approx. 120,000 bpd), the tension in the Middle East is already at a high as sanctions kick in on Iran later this week.

Recommendation

A lot of volatility is scheduled ahead and markets are awaiting the outcome of the EU summit on Thursday and Friday. In a long term perspective and given Saudi Arabia's "target level" of $100 we see the current levels as favorable from a consumer point of view.