Oil and fuel oil hedging market update

By the Oil Desk at Freight Investor Services Ltd.

Commentary

Brent closed down $1.38 on Friday to $55.62 and WTI closed at $49.29, down $1.50. Extraordinary. Quite an adjective. One that I feel is used to often. Especially when it comes to OPEC. Mr Barkindo, the current Head of OPEC has said that "Some extraordinary measures may be needed in 2018 to rebalance the oil market". OK thanks. What does that mean though? That the next OPEC meeting you will address the press for an hour whilst hopping on one leg? Or throughout the whole of 2018 at every conference you will perfect the art of rubbing your belly with one hand and tapping your head with the other? That would be extraordinary. Quite what other "steps" OPEC will take? Well, I think they've perhaps played their hand too early. I mentioned last week that the first ever visit by a Saudi monarch to Russia was important. And the fact that both H.E. Salman bin Abdulaziz Al Saud and Mr Putin were talking about the oil market last week in the hope of waking the bulls up perhaps was a trump card played too early. We shall see what these "extraordinary" steps are, I suppose. Until the OPEC meeting in November, I think we can safely assume that the market will react to even the quietest of whispers about what will happen. What else is going on? Well another Hurricane is bashing its way through the US Atlantic Coast. As tragic as each of these storms are, I don't think this one will particularly have much of an impact on production. I think it will only halt it for a time. What will be impacted, though, is the refining sector. It seems that last week's drop in refinery runs can be attributed to the fact that maintenance season has started. With US crude exports surging and US demand falling seasonally, we could see the refining margins start to fall sooner rather than later.

Fuel Oil Market (October 6)

*The front crack opened at -8.15, weakening to -8.20, before strengthening to -7.85. The Cal 18 was valued at - 8.20.

*Asia's 180 cash premium to Singapore quotes rose 7 cents to a three-session high of 50 cents supported by traders' expectations of lower availability of cargoes this month.

*Total fuel oil flows into East Asia for October are expected to close at below average levels for a second straight month.

*No fuel oil cargoes were seen headed towards Singapore from the ARA region in the week ended Oct. 5.

*This was despite fuel oil inventories in Singapore having hit a near three-month low of 22.56 million barrels in the week to Oct. 4, official data showed.

Economic Data/Events: (UK times)

*7am: German industrial production SA m/m for August, est. 0.9% (prior 0%)

*1:30pm: Bloomberg forecast of U.S. waterborne LPG exports

*Today

**Bloomberg proprietary forecast of Cushing crude inventory change plus weekly analyst survey of crude, gasoline, distillates inventories before Wednesday

**India Energy Forum by CERAWeek, New Delhi. Speakers include Amin Nasser, CEO of Aramco, OPEC Secretary General Mohammad Barkindo, IHS Market Vice Chairman Daniel Yergin, India Petroleum Minister Dharmendra Pradhan, among others, 1st day of 2

**India Sept. oil demand data expected either Monday or Tuesday

**BTC crude program for November

*U.S. Columbus Day holiday

Singapore 380 cSt

Nov17 - 318.00 / 320.00

Dec17 - 316.50 / 318.50

Jan18 - 314.50 / 316.50

Feb18 - 313.00 / 315.00

Mar18 - 312.25 / 314.25

Apr18 - 311.50 / 313.50

Q1-18 - 313.25 / 315.25

Q2-18 - 310.50 / 312.50

Q3-18 - 307.25 / 309.75

Q4-18 - 305.00 / 307.50

CAL18 - 309.00 / 312.00

CAL19 - 292.75 / 297.75

CAL20 -276.75 / 283.75

Singapore 180 cSt

Nov17 - 323.00 / 325.00

Dec17 - 321.75 / 323.75

Jan18 - 320.75 / 322.75

Feb18 - 319.75 / 321.75

Mar18 - 319.25 / 321.25

Apr18 - 318.50 / 320.50

Q1-18 - 319.75 / 321.75

Q2-18 - 317.00 / 319.00

Q3-18 - 313.50 / 316.00

Q4-18 - 312.25 / 314.75

CAL18 - 316.00 / 319.00

CAL19 - 301.50 / 306.50

CAL20 - 286.00 / 293.00

Rotterdam 380 cSt

Nov17 299.50 / 301.50

Dec17 296.00 / 298.00

Jan18 295.75 / 297.75

Feb18 295.50 / 297.50

Mar18 295.25 / 297.25

Apr18 294.75 / 296.75

Q1-18 295.50 / 297.50

Q2-18 294.00 / 296.00

Q3-18 291.00 / 293.50

Q4-18 286.75 / 289.25

CAL18 293.25 / 296.25

CAL19 275.75 / 280.75

CAL20 257.75 / 264.75

Founded in 2002, Freight Investor Services is a specialist in dry bulk and commodity derivatives, including cargo freight, iron ore, fertilizer and bunker fuel. The company has offices in London, Dubai, Singapore and Shanghai.

For further details about fuel oil swaps or to discuss trading opportunities, please contact Andrew Cullen, Client Relations & Development Manager, on +44 207 090 1126, or email AndrewC@freightinvestor.com.


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Oil and fuel oil hedging market update

By the Oil Desk at Freight Investor Services.

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