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Trends

Rotterdam (ARA) fuel oil - USD1 lower

Singapore fuel oil - USD1 higher

US Gulf fuel oil - USD6 lower

All eyes on the ECB (Brent: USD 99.4)

The European central bank will announce its interest rate later today (13.45 CET), followed by the usual press conference at 14.30 CET. The latest statements from chairman Draghi have raised market expectation of a 25 basis point rate cut to 0.75%. With the rate cut already build into prices, we urge clients to be aware of potential disappointment. Oil prices would react with the general risk sentiment. Some volatility is to be expected this afternoon.

Iranian crude buyer reluctant to buy

More and more Iranian crude buyers are finding alternative supplies. Most recently Kenya cut all of their import (80,000 bpd), Japan together with South Korea halted all their purchase as well (>250,000 bpd). A freight and insurance dispute with top Iranian crude buyer, China, has halted all VLCC (Very Large Crude Carriers – 2m barrels each) originally set to sail in July. The sanctions are weighing heavily on Iran’s exports and an estimated export loss of 1.0-1.5 million barrels per day equals a revenue loss of $100m per day.

Recommendation

A lot of volatility is scheduled ahead. The agreement of a growth package is having a bullish effect on oil prices, as will the continued unstable environment in the Middle East. As liquidity usually decreases over the summer, clients are advised to take advantage of any "outliers" in prices. We recommend consumers to enter hedges should it suit your budgets.