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Market Movers Europe


Market Movers Europe, Jan 8-12: Oil market awaits Iran sanctions decision; Ukraine in focus for European gas market

With Nick Coleman, Senior Editor, Oil News

January 08, 2018 04:00:57 EST (3:38)

A big question for oil markets this week is what US President Donald Trump decides to do about Iranian nuclear sanctions.


Oil prices have received a boost not only from the Iran issue, but also from freezing winter conditions in the United States, which look set to continue. European refiners may benefit by selling oil for heating to the US, but car owners in the US remain cautious in their motor fuel buying.


Meanwhile, Europe's petrochemicals industry will be hoping that naphtha costs, which have been depressed, stay low this week.


Finally, Europe's natural gas industry will be keeping a close eye on Ukraine and whether it resumes buying gas from Russia, in line with a recent court ruling.


Will the US waive sanctions against Iran, or re-impose limits on crude oil exports? Tweet us your comments with the hashtag #PlattsMM.

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Video Transcript


In this week's highlights: the future of the Iran sanctions regime is set to have an impact on oil prices; Europe's markets are feeling the ripple effects of US storms; and Ukraine is at a crossroads over where to buy its gas.


[CAPTION: Oil market awaits Iran sanctions decision]


A big question for oil markets this week is what US President Donald Trump decides to do about Iranian nuclear sanctions. On Friday, he is due to decide whether to continue waiving sanctions that were first eased two years ago, in January 2016, allowing the country to freely export its oil.


[CHART: Iran oil exports]


As you can see from this chart, that decision led to a doubling of Iran's crude oil exports—and spurred a drive by Iran to attract investment in its oil sector. More recently, political instability in Iran and hostility from Trump have raised expectations the US will re-impose sanctions, potentially removing almost a million b/d of crude oil from the market.


[CHART OUT]


The possibility has already pushed up oil prices. Our social media question this week is: Will the US waive sanctions against Iran, or re-impose limits on exports? Tweet us your comments with the hashtag #PlattsMM.


[CAPTION: US bad weather boosts oil prices]


Oil prices have received a boost not only from the Iran issue, but also from freezing winter conditions in the United States, which look set to continue. Sub-zero temperatures have caused a surge in heating oil demand in the US that looks set to persist this week, even as temperatures start to return to more normal seasonal levels.


European refiners may benefit by selling oil for heating to the US, but car owners in the US remain cautious in their motor fuel buying. US distillate stocks rose to unexpected levels last week, and arbitrage opportunities for gasoline shipments from Europe to the US remain limited.


[CAPTION: Chemical producers eye feedstock costs]


Europe's petrochemicals industry will be hoping that naphtha costs, which have been depressed, stay low this week. The industry is in need of relief after being caught off-guard by the rapid rise in oil prices at the end of last year, when it struggled to pass on the rising cost of feedstocks such as ethylene to end users. Last week, amid low US demand, front-month naphtha crack swaps fell to near six-month lows in northwest Europe.


[CAPTION: Ukraine in focus for European gas market]


Meanwhile, Europe's gas industry will be keeping a close eye on Ukraine and whether it resumes buying gas from Russia, in line with a recent court ruling. The Stockholm arbitration court in late December ruled Ukraine must buy at least 4 billion cubic meters of gas from Russia's Gazprom this year—something that would reduce Ukrainian demand at European hubs.


For Ukraine, a resumption might be no bad thing, as Russian contract gas looks cheaper than gas at European hubs through to the end of this quarter. Such a move would exert downward pressure on gas prices in continental Europe. Thanks for kicking off your Monday with us, and have a great week ahead.





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