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Oil and fuel oil hedging market update

By the Oil Desk at Freight Investor Services.



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


Updated on 03 Nov 2017 08:44 GMT

Brent closed up $0.13 last night to $60.62 and WTI closed at $54.54, up $0.24. Well, once again, it's all rather rosy. Brent is up 2% on the week. On the month it's up 7.5% and on the year it is up 16%. I'm sure everyone who is at OPEC is giving themselves a massive pat on the back. The question is: will these levels be able to sustain themselves? Well, let's talk about that, shall we? Let's have OPEC in the Brent corner and the USA in the WTI corner for a second. OPEC production has been capped and Brent has risen 16% since that magical meeting. US production has risen by about 1.1mn bpd and prices have risen about 10% on WTI. So let me ask you this my fellow oilanauts, which one has the ability to maintain higher prices and higher production? I fear that the start of my commentary will soon lead with the price of WTI and not Brent. Has Brent had its day as the global benchmark? Perhaps not, perhaps it's even irrelevant, but let me tell you this: China have ramped up crude purchases in 2017 by 13% so far. The US are exporting more and more and are now starting to sell to the Chinese. The Middle East (OPEC really) has seen a sizeable drop in the number of cargoes purchased by China. Apparently, demand is increasing but pfff to that, this "increased demand" is nothing, but buyers making hay whilst WTI is $6 cheaper than Brent. Doesn't take a rocket scientist to work that out, does it? I wish you all a wonderful weekend.

Fuel Oil Market (November 2)

The front crack opened at -7.40, weakening to -7.50, strengthening to -7.45, ending the day at -7.55. The Cal 18 was valued at -7.55.

Asia's front-month East-West arbitrage spread slipped to a near-three week low on Thursday as Singapore onshore inventories of the industrial fuel climbed to an eight-week high.

The December arbitrage spread was also weighed down by recent strength in the Rotterdam market relative to Singapore, making fuel oil imports into Singapore from the European oil hub less economical, sources said.

Singapore inventories rose for a fourth straight week, up 2.5%, or 94,000 tonnes, from the previous week to 3.84 million tonnes in the week to Nov. 1. Weekly net imports into Singapore were down 31% from a week earlier to 0.88 million tonnes, a three-week low. Fuel oil stocks are now 12.6% higher year on year.

Economic Data/Events: (UK times)

* 12:30pm: U.S.

** Change in nonfarm payrolls for Oct., est. 313k (prior -33k)

** Unemployment rate for Oct., est. 4.2% (prior 4.2%)

** Trade balance for Sept., est. -$43.2b (prior -$42.4b)

* 2pm: U.S.

** Factory orders for Sept., est. 1.2% (prior 1.2%)

** Durable goods orders for Sept., final, est. 2% (prior 2.2%)

* 5pm: U.S. Baker Hughes weekly oil, gas rig counts

* 6pm: ICE weekly commitments of traders report for Brent, gasoil

* 7:30pm: U.S. CFTC weekly commitments of traders report on futures and options contracts

Singapore 380 cSt

Dec17 - 355.50 / 357.50

Jan18 - 353.25 / 355.25

Feb18 - 351.50 / 353.50

Mar18 - 349.75 / 351.75

Apr18 - 348.25 / 350.25

May18 - 346.75 / 348.75

Q1-18 - 351.50 / 353.50

Q2-18 - 346.75 / 348.75

Q3-18 - 341.25 / 343.75

Q4-18 - 336.00 / 338.50

CAL18 - 343.00 / 346.00

CAL19 - 307.75 / 312.75

Singapore 180 cSt

Dec17 - 360.25 / 362.25

Jan18 - 358.75 / 360.75

Feb18 - 357.00 / 359.00

Mar18 - 355.75 / 357.75

Apr18 - 354.75 / 356.75

May18 - 353.50 / 355.50

Q1-18 - 357.25 / 359.25

Q2-18 - 353.25 / 355.25

Q3-18 - 347.75 / 350.25

Q4-18 - 343.50 / 346.00

CAL18 - 349.75 / 352.75

CAL19 - 316.75 / 321.75

Rotterdam 380 cSt

Dec17 335.00 / 337.00

Jan18 333.00 / 335.00

Feb18 332.00 / 334.00

Mar18 331.00 / 333.00

Apr18 330.00 / 332.00

May18 328.75 / 330.75

Q1-18 332.00 / 334.00

Q2-18 329.00 / 331.00

Q3-18 323.50 / 326.00

Q4-18 315.25 / 317.75

CAL18 325.00 / 328.00

CAL19 286.00 / 291.00



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
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