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Oil and fuel oil hedging market update

02 Nov 2017 09:10 GMT

By the Oil Desk at Freight Investor Services.



Brent closed down 0.45 last night to $60.49 and WTI closed at $54.30, down $0.08. So even with EIA data not reflecting the melodramatic forecasts of API, stats showed draws on crude and products in the USA last week. However, the market greeted this news with the same comedown as most children did yesterday morning after a night on the trick or treat sugar. Everyone is now talking about US exports. US oil production is up 1mn bpd or 12% year on year. Granted, the production figures for August were retrospectively adjusted for August by the EIA, but let's not forget that Hurricane Harvey was the costliest natural disaster to ever hit the USA; the majority of those damages were in the oil producing regions. Apparently, US oil production is going through a 'midlife' crisis. US oil production is so dependent on the price of oil that surely prices at a two-year high would manifest themselves into becoming a sugar daddy, not the start of a midlife crisis? I think this US oil production/exports data is one to keep a particularly close eye on. What else is going on apart from news from over the pond? Well of course all eyes are on OPEC, and especially what rumours are emanating from Saudi Arabia. It is obvious that the cuts are going to be extended, but I am still to be convinced that demand is rising as much people say it is to offset increased production from elsewhere. The market structure for crude has changed, which no longer deems floating storage to be economically viable, we are in a "get rid of it as quick as possible" market, so if this drawdown of products from storage is proving to be the indicator that demand is on the up then I'll eat my trilby.

Fuel Oil Market (November 1)

The front crack opened at -7.60, weakening to -7.85, before strengthening to -7.30 across the day. The Cal 18 was valued at -7.70.

Asia's front-month fuel oil crack rose to its highest since Sept. 20 on expectations of sustained low output due to refinery outages in Latin America and upgrades in Russia as well as firm overall demand for the industrial fuel..

Rising fuel oil inventories and stronger crude prices last week helped drag fuel oil cracks to a three-week low. Total fuel oil flows into East Asia for October were at below-average levels for a second consecutive month, at 5.75-6.00 million tonnes, weighed down by lower Western arrivals.

Fujairah fuel oil inventories rose 163,000 barrels (or about 24,000 tonnes) to 9.384 million barrels (1.4 million tonnes) in the week to Oct. 30, and now at a five-week high.

Economic Data/Events: (UK times)

* 9am: Eurozone Markit manufacturing PMI for Oct., final, est. 58.6 (prior 58.6)

* 12pm: Bank of England bank rate, est. 0.5% (prior 0.25%)

* 12:30pm: U.S. initial jobless claims for week ended Oct. 28, est. 235k (prior 233k)

* Today:

** Russian refining maintenance schedule from ministry

** Total SA CEO Patrick Pouyanne speaks at Chatham House in London

* Earnings:

** Shell, Enbridge, Enterprise Products Partners, EOG

Singapore 380 cSt

Dec17 - 353.25 / 355.25

Jan18 - 351.25 / 353.25

Feb18 - 349.50 / 351.50

Mar18 - 347.75 / 349.75

Apr18 - 346.25 / 348.25

May18 - 344.75 / 346.75

Q1-18 - 349.50 / 351.50

Q2-18 - 344.50 / 346.50

Q3-18 - 339.00 / 341.50

Q4-18 - 333.75 / 336.25

CAL18 - 338.75 / 341.75

CAL19 - 322.25 / 327.25

CAL20 - 295.75 / 302.75

Singapore 180 cSt

Dec17 - 358.25 / 360.25

Jan18 - 356.75 / 358.75

Feb18 -355.00 / 357.00

Mar18 - 353.75 / 355.75

Apr18 - 352.75 / 354.75

May18 - 351.50 / 353.50

Q1-18 - 355.00 / 357.00

Q2-18 - 351.00 / 353.00

Q3-18 - 345.50 / 348.00

Q4-18 - 341.25 / 343.75

CAL18 - 345.50 / 348.50

CAL19 - 331.25 / 336.25

CAL20 - 305.25 / 312.25

Rotterdam 380 cSt

Dec17 332.75 / 334.75

Jan18 331.00 / 333.00

Feb18 330.25 / 332.25

Mar18 329.50 / 331.50

Apr18 328.50 / 330.50

May18 327.25 / 329.25

Q1-18 330.25 / 332.25

Q2-18 327.50 / 329.50

Q3-18 322.50 / 325.00

Q4-18 314.50 / 317.00

CAL18 321.75 / 324.75

CAL19 282.75 / 287.75

CAL20 239.75 / 246.75



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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