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Oil and fuel oil hedging market update

23 Oct 2017 08:19 GMT

By the Oil Desk at Freight Investor Services.



Commentary

Brent closed up $0.52 on Friday to $57.75 and WTI closed at $51.84, up $0.55. I read this morning that the Brent crude volatility index is at its lowest since 2014. And on 23 Oct 2014 Brent was $84.71. Could 2017 be a repeat? Quite a bit has changed since 2014 and if you were put to sleep and you woke up now and someone told you that Donald Trump was President of the USA, Theresa May is UK Prime Minister and is negotiating the UK exit from the EU, and the crude oil price is $57.75, you would probably tell me to not be so bloomin' ridiculous and ask to be put back to sleep. Which of those ridiculous facts is the most ridiculous though? They are all the truth, but the only one that makes real sense to me is the crude oil price. Brent is flirting dangerously near $60 per bbl and if it keeps on its current trajectory, then we could hear mutings of $70 per bbl crude before too long. It seems the bulls are supporting the market based on last week's EIA data, a falling rig count and tensions in the Middle East. All three of which are dangerous facts to be bullish, however, as I touched on last week.

Fuel Oil Market (October 20)

The front crack opened at -8.10, strengthening to -7.85, before weakening to -7.90. The Cal 18 was valued at -8.35.

The Nov/Dec time spread of Asia's 380 cSst fuel oil slipped to a one-week low on Friday as inventories across key storage hubs remain elevated.

Fuel oil inventories in the ARA slipped to a four-week low in the week to Oct. 19 but were still nearly double last year's levels. Fuel oil stocks in the ARA fell 14%, or 205,000 tonnes, to 1.257 million tonnes in the week to Oct. 19 However, compared to the same time last year, ARA fuel oil inventories are up 98%.

The back-end of the northwest Europe high-sulphur fuel oil forward crack curve has started to price in the IMO sulphur shift, effective from 2020, said JBC Energy. The high-low sulphur spread is also seen widening steadily as of late 2018 - JBC

Economic Data/Events: (UK times)

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

* 1:30pm: Chicago Fed national activity index in Sept., est. -0.1 (Prior -0.31)

* 3pm: Eurozone consumer confidence for Oct., advance, est. -1.1 (prior -1.2).

* Today:

** OPEC Board of Governors meet, Vienna, 1st day of 2

** Africa Oil Week, Cape Town, including senior officials from oil ministries of Angola, Nigeria, Egypt, Equatorial Guinea, South Africa and executives from Exxon, Tullow, Oando, Shell, BP, Total, Eni, others

** Singapore International Energy Week, speakers include IEA Exec Director Fatih Birol, 1st day of 5, including Singapore Energy Summit

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

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

** Earnings: Halliburton

Singapore 380 cSt

Nov17 - 336.25 / 338.25

Dec17 - 334.50 / 336.50

Jan18 - 331.75 / 333.75

Feb18 - 330.00 / 332.00

Mar18 - 328.50 / 330.50

Apr18 - 326.75 / 328.75

Q1-18 - 330.00 / 332.00

Q2-18 - 326.00 / 328.00

Q3-18 - 321.75 / 324.25

Q4-18 - 316.50 / 319.00

CAL18 - 324.50 / 327.50

CAL19 - 293.25 / 298.25

CAL20 - 264.00 / 271.00

Singapore 180 cSt

Nov17 - 341.00 / 343.00

Dec17 - 339.75 / 341.75

Jan18 - 337.75 / 339.75

Feb18 - 336.25 / 338.25

Mar18 - 335.00 / 337.00

Apr18 - 333.50 / 335.50

Q1-18 - 336.25 / 338.25

Q2-18 - 332.75 / 334.75

Q3-18 - 328.25 / 330.75

Q4-18 - 324.00 / 326.50

CAL18 - 331.25 / 334.25

CAL19 - 302.25 / 307.25

CAL20 - 273.25 / 280.25

Rotterdam 380 cSt

Nov17 316.50 / 318.50

Dec17 312.50 / 314.50

Jan18 312.00 / 314.00

Feb18 311.75 / 313.75

Mar18 311.50 / 313.50

Apr18 311.00 / 313.00

Q1-18 311.75 / 313.75

Q2-18 310.25 / 312.25

Q3-18 306.25 / 308.75

Q4-18 299.75 / 302.25

CAL18 306.50 / 309.50

CAL19 274.50 / 279.50

CAL20 243.75 / 250.75



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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