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Oil and fuel oil hedging market update

20 Oct 2017 08:00 GMT

By the Oil Desk at Freight Investor Services.



By the Oil Desk at Freight Investor Services Ltd.

Commentary

Brent closed down $0.92 last night to $57.23 and WTI closed at $51.29, down $0.75. Well, it's all looking a bit rosy isn't it? Brent is up around 1.7%. Lovely. Or is it? I've read this week that people think "Our expectation is that OPEC (and partners including Russia) will extend production cuts through the end of 2018." Gee thanks, Sherlock. Of course they will! I think the market has already priced it in as well to be honest. When they do announce the extension, however, it will be like one of those cringe surprise birthday parties but the person being surprised knew of the plans all along. "Get up from behind the sofa, I know you've been planning this for months". OPEC have been backed into a corner and have no option but to extend the cuts and hope everyone joins in with them. Across the pond, and the story of the week seems to be US crude exports. Now I'm not being funny, but it doesn't take an ophthalmologist to work out that with Brent/ WTI at $-5.71 and the US producing more crude than ever that US crude traders are going to look at taking out some of the shorts that were previously supplied by the more expensively priced Brent. Trading 101. What else are they going to do with all the crude as well? Keep it in storage? Oh yeah, that will do the guys who think this market is rebalancing a world of good, won't it. Look, I know it seems like I'm permanently bearish but we have been stuck in this 55 - 60 range on Brent for about 5 weeks; before that we were in a range of 50 - 55 for 5 weeks. I don't see any real signs that will cause us to break out of the top of the range (geopolitics aside), so I think we could be heading back down pretty soon - but then again, the volatility of the international scene at the moment could throw up anything.

Fuel Oil Market (October 19)

The front crack opened at -8.20, strengthening to -8.00, before weakening to -8.10. The Cal 18 was valued at -8.35.

Asia's 380-cst fuel oil cash premiums edged higher to a three-session high on Thursday amid stronger deal values in the Platts trading window, while the 380-cst Nov/Dec time spread held steady for a fourth consecutive session.

Singapore onshore fuel oil inventories rose to a total of 3.634 million tonnes in the week to Oct. 18, up 2.5 percent or 90,000 tonnes from the previous week, official data showed.

This came as weekly imports into Singapore were up 2 percent from a week earlier at 1.47 million tonnes while exports were down 43% to 507,000 tonnes. Fuel oil stocks are now 3.3% higher year-on-year.

Economic Data/Events: (UK times)

* 1:30pm: Canada

* CPI NSA m/m for Sept., est. 0.3% (prior 0.1%)

** CPI y/y for Sept., est. 1.7% (prior 1.4%).

* 3pm: U.S. existing home sales for Sept., est. 5.3m (prior 5.35m)

* 6pm: ICE weekly commitments of traders report

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

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

** Russia 10-day Urals program for November

** Bloomberg-compiled weekly snapshot of key U.S. refinery outages with offline capacity projections for CDU, FCC units

Singapore 380 cSt

Nov17 - 331.00 / 333.00

Dec17 - 329.50 / 331.50

Jan18 - 327.50 / 329.50

Feb18 - 325.75 / 327.75

Mar18 - 324.25 / 326.25

Apr18 - 323.00 / 325.00

Q1-18 - 326.00 / 328.00

Q2-18 - 322.00 / 324.00

Q3-18 - 317.50 / 320.00

Q4-18 - 313.50 / 316.00

CAL18 - 319.75 / 322.75

CAL19 - 292.75 / 297.75

CAL20 - 269.75 / 276.75

Singapore 180 cSt

Nov17 - 335.75 / 337.75

Dec17 - 334.75 / 336.75

Jan18 - 333.50 / 335.50

Feb18 - 332.00 / 334.00

Mar18 - 330.75 / 332.75

Apr18 - 329.75 / 331.75

Q1-18 - 332.25 / 334.25

Q2-18 - 328.75 / 330.75

Q3-18 - 324.00 / 326.50

Q4-18 - 321.00 / 323.50

CAL18 - 326.50 / 329.50

CAL19 - 301.75 / 306.75

CAL20 - 279.00 / 286.00

Rotterdam 380 cSt

Nov17 311.00 / 313.00

Dec17 307.50 / 309.50

Jan18 307.00 / 309.00

Feb18 306.75 / 308.75

Mar18 306.25 / 308.25

Apr18 305.75 / 307.75

Q1-18 306.75 / 308.75

Q2-18 305.00 / 307.00

Q3-18 300.50 / 303.00

Q4-18 293.75 / 296.25

CAL18 301.50 / 304.50

CAL19 273.25 / 278.25

CAL20 247.75 / 254.75



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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