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Oil and fuel oil hedging market update

13 Oct 2017 08:49 GMT

By the Oil Desk at Freight Investor Services.



By the Oil Desk at Freight Investor Services Ltd.

Commentary

Brent closed down $0.69 last night to $56.25 and WTI closed at $50.60, down $0.70. Here's a quote for you: "Let me be that I am and seek not to alter me". You know what that's from? And no, it's not from Hello! It's from Much Ado About Nothing, and both the quote and the famous play sum up this market fairly well at the moment. Week-on-week, we are down 1%. Wow. Kick the tyres and light the fires, big daddy. Bored. Yes, perhaps there have been some dramatic moments but in this market they seem to be forgotten quicker than when everyone thought Brexit would be a straight forward process. However, I did read one article where it seemed someone agreed with me (point of order - I had to search high and low for it, but that's by the by). It was about China: this year so far has shown that local Chinese commodity trading has dropped 30%. It has dropped 10% alone in the last 2 months. China's economy is shifting away from that of a commodity super cycle and into one that is services oriented. The market has reacted this morning on the back of China's demand increasing, but it seems the majority of this is SPR buying, not consumer demand. China should not be looked at as a lynchpin for commodity demand, but it seems as if it is, and I fear for the day the market realizes it. In other news, API data proved about as accurate as the claim that Saddam Hussein had WMDs. API were wrong by about 5mn bbls as EIA data proved last night, and yet next week same again once more into the breech dear friends. Instead of a build on crude, there was a draw. Good job guys. Let's invade the API offices, as they are clearly weapons of mass misinformation for the market. However, with US exports still at record levels the market reacted to this fairly supportive news with the same happiness as Melania did when she saw some recent texts from Ivana.

Fuel Oil Market (October 10)

The front crack opened at -7.60, strengthening to -7.50 , before weakening to -7.55. The Cal 18 was valued at - 8.10.

Asia's 380-cst high-sulphur fuel oil cash premium FO380- SIN-DIF slipped to a one-month low on Thursday, weighed down by rising Singapore fuel oil inventories and weaker offers for physical cargoes from physical suppliers in the Platts window.

Singapore inventories rose to a total of 3.54 million tonnes in the week to Oct. 11, up 5.3% or 179,000 tonnes from the previous week. This came as weekly net imports into Singapore rose 21% from a week earlier to a 2-week high of 551,000 tonnes. Fuel oil stocks are now 0.2%higher year-on-year.

More than 75 percent of ships will switch away from heavy high-sulphur fuels to lower-sulphur middle distillates by 2020 when the IMO sulphur cap from 3.5 percent to 0.5 percent comes into effect.

Economic Data/Events: (UK times)

* 1:30pm: U.S.

** CPI m/m for Sept., est. 0.6% (prior 0.4%)

** Retail sales advance m/m for Sept., est. 1.7% (prior -0.2%)

* 3pm: U.S. U. of Michigan consumer sentiment index for Oct., prelim., est. 95 (prior 95.1)

* 6pm: ICE weekly commitments of traders report

* 6pm: U.S. Baker Hughes weekly oil, gas rig counts

* 8:30pm: U.S. CFTC weekly Commitments of Traders report on U.S. futures and options contracts

Singapore 380 cSt

Nov17 - 329.75 / 331.75

Dec17 - 328.00 / 330.00

Jan18 - 326.25 / 328.25

Feb18 - 324.50 / 326.50

Mar18 - 323.25 / 325.25

Apr18 - 322.25 / 324.25

Q1-18 - 324.75 / 326.75

Q2-18 - 321.00 / 323.00

Q3-18 - 317.25 / 319.75

Q4-18 - 314.25 / 316.75

CAL18 - 319.75 / 322.75

CAL19 - 300.00 / 305.00

CAL20 - 281.00 / 288.00

Singapore 180 cSt

Nov17 - 334.75 / 336.75

Dec17 - 333.50 / 335.50

Jan18 - 332.50 / 334.50

Feb18 - 331.25 / 333.25

Mar18 - 330.25 / 332.25

Apr18 - 329.25 / 331.25

Q1-18 - 331.50 / 333.50

Q2-18 - 327.75 / 329.75

Q3-18 - 323.75 / 326.25

Q4-18 - 321.75 / 324.25

CAL18 - 326.75 / 329.75

CAL19 - 309.00 / 314.00

CAL20 - 290.25 / 297.25

Rotterdam 380 cSt

Nov17 311.50 / 313.50

Dec17 307.25 / 309.25

Jan18 306.75 / 308.75

Feb18 306.50 / 308.50

Mar18 306.00 / 308.00

Apr18 305.50 / 307.50

Q1-18 306.50 / 308.50

Q2-18 304.50 / 306.50

Q3-18 301.00 / 303.50

Q4-18 295.75 / 298.25

CAL18 303.00 / 306.00

CAL19 279.00 / 284.00

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.


Image: Freight Investor Services (FIS) logo. Image credit: Freight Investor Services (FIS)




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