Oil could not shake off the Euro blues as the trade seemed lackluster, passionless and worthy of the shoulder season. In fact trading was so boring you have to wonder whether the bottom is near. Wasn’t Spain supposed to ask for a bailout by now and what is taking the Chinese so long to juice up their economy? Are they worried about that spat with Japan over those disputed islands? Does Middle East tension matter anymore or has the well supplied market made those headlines a mute point? Or could reports of a new round of Iranian sanctions

You see after fears that the EU banking accord was falling apart and weak German manufacturing you might think that the market would get crushed in epic fashion. Instead you got a lackluster selloff that dutifully reflected the weakening fundamentals. Yet today reports that the heat is rising on Iran could boost the risk premium again.

The AFP is reporting that the United States, Britain, France and Germany moved to apply more restrictions and sanctions on Iran over its controversial nuclear program. Britain, France and Germany urged their European Union partners "to further step up the pressure" on Iran by agreeing new sanctions to undermine its nuclear drive, in a joint letter seen by AFP. The sanctions set to be formally adopted on October 15 called for punitive action in the Iranian energy, finance, trade and transportation sectors. Also Monday the US government further tightened financial sanctions on Iran. The move comes after Washington said the National Iranian Oil Company (NIOC) "is an agent or affiliate of Iran's Islamic Revolutionary Guard Corps (IRGC)". It said the IRGC, long a target of US sanctions, "has a history of attempting to circumvent sanctions by maintaining a complex network of front companies". A statement accused the I GC of "coordinating a campaign to sell Iranian oil in an effort to evade international sanctions". "NIOC now is also... an agent or affiliate of the IRGC whose property or interests in property are blocked," it added. "Foreign financial institutions determined to knowingly facilitate significant transactions or provide significant financial services for NIOC will be subject to... sanctions."The West claims Tehran is using its nuclear program to secretly develop a bomb but the Islamic republic says it is purely for civilian purposes.

Yet despite the Iranian Risk bounce oil seems more fixated with Europe. Oil seemed unmoved by an ok but not great Spanish auction. The Spanish Treasury sold 3.983 billion euros of their three-month and six-month treasury bills at auction and while they all sold the yield was higher than the previous auction. Yet in Italy, a much better than expected auction is rising hopes that things might not be as bad as some things seem.  Dow Jones reported that the Italian treasury sold 3.94 billion euros ($5.09 billion), the top end of its 3 to 4 billion euros target range, of a new series of 24-month zero-coupon notes at a debt auction on Tuesday, according to Dow Jones Newswires. Borrowing costs dropped sharply, with the average yield on the auction at 2.53%, which was the lowest level since a March auction. The bid-to-cover ratio came in at 1.65. The treasury also sold the maximum targeted 1.5 billion euros of 4-year and 9-year bonds indexed to inflation. In the secondary market, yields on 10-year Italian benchmark government bonds increased 7 basis points to 5.11%, according to electronic trading platform Tradeweb. Government debt in ailing European countries has been in focus since the European Central Bank launched an unlimited bond-buying program due to surging borrowing costs for those nations.

German Chancellor Angela Merkel said Tuesday at an event with the BDI Federation of German Industry that financial markets were worried about the ability for some countries to repay their debt, Reuters reported.

As far as global demand India imports India's crude-oil imports in August were almost flat at 14.28 million metric tons, or 3.38 million barrels a day, preliminary government data showed.

This comes as many analysts see an increase again in US oil supply. According to the Dow Jones Survey Crude-oil inventories are expected to rise by 1.6 million barrels. That comes the week after analysts were blindsided buy that 9 million barrel plus build last week. I actually think we may see another bearish surprise but I think that largely that may be already priced in.

As far as gasoline inventories the Dow Jones survey expects an increase of 300,000 barrels and stocks of distillates, a category that includes heating oil and diesel fuel, are expected to rise by 1 million barrels.  Refinery use is expected to rise 0.2 percentage point to 89.1% of capacity.

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