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Trends

Rotterdam: $ 2 higher
Singapore: $ 1 lower
US Gulf: $ 2 higher

U.S. Trading to resume after 'Sandy' (Brent: $109.1)

Following the Super Storm Sandy, that left a path of destruction, the U.S. Markets are set to re-open today. As a result the trading around U.S. open could become a bit choppy as traders find their feet after the unscheduled halt. Currently equity futures are pointing relatively flat, but watch out for the U.S. open. The affected refineries, totaling 1.5 mbpd capacity, will likely slowly restart, but we do not expect them to be fully operational within this week. A refinery re-start can easily take a full week.

As a result crude inventories will likely build (as refineries do not use it for processing), but the product inventories are expected to fall further from already scarce levels. Heading into winter this could pose a significant issue for especially heating oil/diesel. Therefore a potential SPR (Strategic Petroleum Reserve) release cannot be ruled out. However, during the last release (2011, Libyan crisis) it took between 30 and 90 days for the fuel to actually reach the market.

Please note that due to Sandy the U.S. Inventory numbers will NOT be published today at 16.30 CET. Instead the figures will be available tomorrow at 16.30 CET.

Recommendation

Lower oil prices are considered a buying opportunity and we advise our clients to take advantage of any dips in the market. The supply-demand situation is walking a tightrope, and the geopolitical nuclear wildcard in the Middle East remains. Given the scarce inventory levels, and the ongoing maintenance season for refineries, consumers of distillates are strongly advised to consider hedging for the upcoming winter.