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Trends

Rotterdam: $ 4 higher
Singapore: $ 1 higher
US Gulf: $ 2 higher

Greece bailout almost approved. Oil prices show little interest (Brent: $111.3)

The EU/IMF agreed on lending 43bn EUR to Greece with the first tranche to be paid on 13 December. However, the individual European parliament will still have to approve the deal for the payment to begin. The deal contains reform demand to bring down the 180 pct debt-to-GDP to below 110 pct within the next decade. Furthermore, a small twist has been added; Greece can now use bailout money to purchase debt from private investors. As the debt is trading 80 cents to the dollar, debt can be reduced by 20% with the stroke of a pen. (Unloading the debt to private investors, should they choose to sell back the debt). The effect on oil prices has so far been extremely limited. The oil market seems to be immune to debt related news for now.

So far the restart of the 350,000 bpd production in South Sudan, pumped through pipelines in Sudan, to reach the Red Sea and the world market has been going smoothly. 180,000bpd is scheduled to beging flowing very shortly. But alas, the two nations are, again, battling over pipeline terms. If the matter is not resolved shortly, the restart will likely be further delayed a couple of weeks. In Libya production is back at pre-war levels of 1.6 mbpd, but as foreign oil traders struggle to identify legal counterparts and/or decision makers the situation remains slightly unstable. Furthermore, in an effort to fill the public tax and oil chest, Libyan oil has been priced significantly above world market levels. As a result, traders slash demand by approximately 300,000 bpd, and found supply elsewhere. The latest reports show Libyan oil prices have returned somewhat to world market levels, but the unsecurity of who to deal with and at what price still lingers in the back of traders' minds.

Recommendation

We continue to advise consumers to establish hedges during market dips. Oil prices immunity to debt news have increased a lot during the financial crisis, whereas the geopolitical risk premium is the major wild card in the weeks and months to come. Disstilate inventories remain at multi year lows. A colder-than-average winter would significantly increase the chance of higher product prices.