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Oil and fuel oil hedging market update

06 Nov 2017 09:28 GMT

By the Oil Desk at Freight Investor Services.



Brent closed up $1.45 on Friday to $62.07 and WTI closed at $55.64, up $1.10. Wow, I can't keep up. Bulls everywhere, it's like being in Pamplona. But how much longer will it last? Well, judging by the ferocity of this climb over the last month it really is anyone's guess. The last month we have seen a 11% rise on Brent. From the same time a year ago, the price of WTI crude has climbed 25%, while Brent has jumped by 34%. Nice. What is actually causing this rally though? A drop in US oil rigs? Well yes, they dropped last week but they are up 329 from a year prior. US oil production is now 9.5mn bpd, 1mnbpd higher than last year. Demand? Well, yes, China's oil demand has increased owing to a rise in SPR buying, but overall product demand is pretty negligible year on year. Stocks being drawn? Well fuel oil stocks in ARA are up 137% since last year. 137%!! I really don't know actually why we are rallying. And I'm not sure Goldman's do either. Goldman's attribute the current rally to something rather mundane. Cycles. And not one of those new fancy carbon fibre road-going cycles. A "maturing business cycle". I can see us very quickly turning in to a technical market, one which is devoid of any emotion or fundamental driven headlines. Watch the critical support and resistance points with caution.

Fuel Oil Market (November 3)

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

Cash premiums for Asia's 380-cst high-sulphur fuel oil cargoes rose to a near one-month high on Friday amid higher deal values when compared to the previous session. Bids for 380-cst fuel oil cargoes were higher relative to Thursday in the Platts windowbut still failed to attract many suppliers, keeping traded volumes of physical fuel oil low on Friday

Meanwhile, the front-month 180-cst fuel oil crack to Dubai crude widened its discount further from a near sixweek high seen on Wednesday as rising inventories in key storage hubs weighed. Fuel oil stocks in ARA oil hub rose for a second straight week, up 2%, or 22,000 tonnes, to 1.356 million tonnes in the week to Nov. 2. Compared to last year, ARA inventories are up 137% and are well above the five-year average of 851,000 tonnes for this time of year.

Economic Data/Events: (UK times)

* New York Fed Executive Vice President Simon Potter speaks at a closed-press ECB workshop on Implementing Monetary Policy with the Balance Sheet, Frankfurt

* Bloomberg forecast of U.S. waterborne LPG exports

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

* Platts gasoline, naphtha and LPG conference, Rotterdam, 1st day of 2

Singapore 380 cSt

Dec17 - 365.75 / 367.75

Jan18 - 363.50 / 365.50

Feb18 - 361.50 / 363.50

Mar18 - 359.75 / 361.75

Apr18 - 358.00 / 360.00

May18 - 356.50 / 358.50

Q1-18 - 361.50 / 363.50

Q2-18 - 356.25 / 358.25

Q3-18 - 350.25 / 352.75

Q4-18 - 344.25 / 346.75

CAL18 - 352.00 / 355.00

CAL19 - 316.75 / 321.75

Singapore 180 cSt

Dec17 - 370.50 / 372.50

Jan18 - 369.00 / 371.00

Feb18 - 367.00 / 369.00

Mar18 - 365.75 / 367.75

Apr18 - 364.50 / 366.50

May18 - 363.25 / 365.25

Q1-18 - 367.25 / 369.25

Q2-18 - 362.75 / 364.75

Q3-18 - 356.75 / 359.25

Q4-18 - 351.75 / 354.25

CAL18 - 358.75 / 361.75

CAL19 - 325.75 / 330.75

Rotterdam 380 cSt

Dec17 345.25 / 347.25

Jan18 343.25 / 345.25

Feb18 342.25 / 344.25

Mar18 341.25 / 343.25

Apr18 340.25 / 342.25

May18 339.00 / 341.00

Q1-18 342.25 / 344.25

Q2-18 339.00 / 341.00

Q3-18 333.50 / 336.00

Q4-18 324.75 / 327.25

CAL18 334.00 / 337.00

CAL19 295.00 / 300.00



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.


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




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