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Trends

Rotterdam (ARA) fuel oil - USD1 lower

Singapore fuel oil - unchanged

US Gulf fuel oil - USD3 higher

Iranian oil fields might be shut down (Brent: $98.5)

As the tough sanctions from EU/US begin to bite, Iran has had increasingly difficulties in selling its oil production. Pre-sanction production was approximately 3.5 mbpd, where roughly 2.0 mbpd was exported. As the exports declined both floating storage in the form of Very Large Crude Carriers (VLCC 2m/bbl), and land-based facilities have been holding the excess production. Storage facilities are however now almost full, and a shutdown of oil fields looks increasingly likely in the near term. We stick to the analogy of shutting off a very old diesel engine that has been running non-stop for decades. Once you shut it off, there is a very high possibility that it will not run as smoothly as before.

FED statement due tonight

Later today (20.00 CET) the FED Open Market Committee (FOMC) will release their latest statement. The oil and financial markets will watch closely to see if there was any discussion on alternative tools to "Operation Twist", where FED sells short bonds for long term. As they will eventually run out of short term bonds to sell, new tools might be warranted after the Presidential election in November. We expect minor short term jitters in oil prices at release of the FOMC statement.

Recommendation

A lot of volatility is scheduled ahead. As liquidity usually decreases over the summer, clients are advised to take advantage of any "outliers" in prices. Sparked either by news from the Middle East or the never-ending global debt story. We recommend consumers to enter hedges should it suit your budgets.