Oil and fuel oil hedging market update

Commentary

Brent closed down $0.58 last night to $63.69 and WTI closed at $57.20, down $0.15. Another day, another OPEC headline. Oh, and don't forget, API numbers of course, which I shall come on to later. So I don't know about you, but it wasn't long ago that I read that demand for OPEC crude will be pretty healthy for 2018. Apparently not. OPEC released their 2017 outlook yesterday (quite why it's called an 'outlook', by the way, I don't know; the year is nearly over.). The outlook wasn't particularly great for the bulls. Demand over the next two years will apparently not rise as much as previously thought. Oh and OPEC are "surprised" that US shale oil has grown by over 1mn bpd in the past year. Mr Barkindo might as well have walked into the room yesterday, held his hands up and said "It's all been a big mistake, I'm sorry. However, thanks for buying to my forecasts, which have proved to be inaccurate". I fear we could witness something of a correction in the oil price before OPEC pull out their trump card and hint towards an extension of the cuts for another 12 months. Then up we go again. Anyway, moving on. API numbers: apparently there are draws on crude and distillates, but a rise in gasoline bbls. However, I think the market will ignore the actual numbers and concentrate on Cushing stocks (supposed 850kb build) and, of course, US exports. The crude structure has changed a little over the last couple of days with the backwardation narrowing and the Brent/WTI spread coming in a touch. Whether we are starting to witness another shift in the market or that the funds who have bought into this rally are starting to take some profit, only time will tell.

Fuel Oil Market (November 7)

The front crack opened at -8.00, strengthening to -7.90, before weakening to -8.20. The Cal 18 was valued at -7.60.

Elevated crude oil prices continued to weigh on Asia's fuel oil crack for a third consecutive session on Tuesday. Still, some industry sources viewed fuel oil cracks as elevated at current levels given the recent rise in crude oil prices to their highest since mid-2015, as well as ample inventory levels in Singapore and northwest Europe.

The front-month 180 cSt fuel oil crack to Brent crude widened its discount to minus $4.10 a barrel, down 39 cents a barrel from the previous session. Meanwhile, lower supplier offers and a limited buying interest for 380 cSt fuel oil cargoes weighed on cash premiums of the fuel, snapping three straight sessions of gains.

Marine fuel services group Transocean Oil has lost its licences to operate in Singapore, making it the third provider this year to have its licences revoked.

Economic Data/Events: (UK times)

* 12pm: U.S. MBA mortgage applications, Nov. 3 (prior -2.6%)

* 3:30pm: EIA weekly oil inventory report

** TOPLive blog coverage begins 3:25pm

** Genscape weekly ARA crude stockpiles report

** President Donald Trump travels to Beijing where he'll meet with President Xi Jinping.

Singapore 380 cSt

Dec17 - 367.50 / 369.50

Jan18 - 365.75 / 367.75

Feb18 - 364.25 / 366.25

Mar18 - 362.75 / 364.75

Apr18 - 361.25 / 363.25

May18 - 359.50 / 361.50

Q1-18 - 364.25 / 366.25

Q2-18 - 359.25 / 361.25

Q3-18 - 353.25 / 355.75

Q4-18 - 347.50 / 350.00

CAL18 - 358.50 / 361.50

CAL19 - 318.25 / 323.25

Singapore 180 cSt

Dec17 - 372.00 / 374.00

Jan18 - 370.75 / 372.75

Feb18 - 369.75 / 371.75

Mar18 - 368.75 / 370.75

Apr18 - 367.50 / 369.50

May18 - 366.25 / 368.25

Q1-18 - 369.75 / 371.75

Q2-18 - 365.25 / 367.25

Q3-18 - 360.00 / 362.50

Q4-18 - 354.25 / 356.75

CAL18 - 364.75 / 367.75

CAL19 - 327.00 / 332.00

Rotterdam 380 cSt

Dec17 347.75 / 349.75

Jan18 346.75 / 348.75

Feb18 346.00 / 348.00

Mar18 345.25 / 347.25

Apr18 344.25 / 346.25

May18 343.00 / 345.00

Q1-18 346.00 / 348.00

Q2-18 343.00 / 345.00

Q3-18 337.25 / 339.75

Q4-18 329.25 / 331.75

CAL18 340.50 / 343.50

CAL19 296.50 / 301.50


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Oil and fuel oil hedging market update

By the Oil Desk at Freight Investor Services.

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