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Oil and fuel oil hedging market update

01 Dec 2017 10:31 GMT

By the Oil Desk at Freight Investor Services.



Brent closed up $0.10 last night to $62.63 and WTI closed at $57.40, up $0.10. So after about a million hours deliberating over countless cups of coffee, OPEC extended the cuts out until end 2018. Shock. Well, no not at all really. The market reacted in the way I guessed it would - flat. The extension of the cuts had already been priced in and it has woken up with the same enthusiasm as Mr Novak's translator had throughout yesterday's meeting. The people who will be waking up with extremely sore heads this morning are the US producers. Gee did they get an early Christmas present. I bet they've all woken up this morning with a little finger next to their mouth like Dr Evil from Austin Powers. It's quite simple really: OPEC have, and were always going to, throw them a lifeline for another year. For OPEC to leverage any hope on the fact that the US will 'play ball' is, quite frankly, incredibly naive, but I don't see what other choice they had. WTI/Brent is still at a discount, so the historic OPEC shorts will look further afield for the finest black stuff. Economics 101. With refining margins in Asia still healthy and everyone pinning hopes on that China and India will drive demand for the foreseeable future, I think Trump Airways may be making a few more trips to Asia.

Fuel Oil Market (November 30)

The front crack opened at -8.50, weakening to -8.85, before strengthening to -8.80. The Cal 18 was valued at -8.05.

Fuel oil cracks firmed on Thursday, albeit limited trade activity, amid falling Singapore inventories and ahead of the OPEC meeting later in the day, trade sources said

The December 380 cSt Rotterdam barge crack to Brent crude narrowed its discount by as much as 50 cents a barrel in early trade but gave up some of those gains to trade at about minus $8.70 a barrel by 1630 Singapore time (0830 GMT).

Singapore weekly onshore fuel oil inventories fell 1.9%, or 450,000 barrels (about 67,000 tonnes), to 23.034 million barrels (or 3.44 million tonnes) in the week to Nov. 29. Onshore Singapore fuel oil have declined for four weeks straight and are now at an eight-week low.

Economic Data/Events: (UK times)

* 2:45pm: U.S. Markit Manufacturing PMI, Nov. (final)

* 3pm: U.S. ISM Manufacturing, Nov.

* 6pm: Baker Hughes rig count

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

* 8:30pm: Commodity Futures Trading Commission weekly scheduled report on futures and options positions

Singapore 380 cSt

Jan18 - 360.00 / 362.00

Feb18 - 359.50 / 361.50

Mar18 - 359.00 / 361.00

Apr18 - 358.50 / 360.50

May18 - 357.50 / 359.50

Jun18 - 356.50 / 358.50

Q1-18 - 359.50 / 361.50

Q2-18 - 357.50 / 359.50

Q3-18 - 352.50 / 355.00

Q4-18 - 347.25 / 349.75

CAL18 - 353.25 / 356.25

CAL19 - 318.50 / 323.50

Singapore 180 cSt

Jan18 - 364.50 / 366.50

Feb18 - 364.50 / 366.50

Mar18 - 364.25 / 366.25

Apr18 - 364.25 / 366.25

May18 - 363.25 / 365.25

Jun18 - 362.25 / 364.25

Q1-18 - 364.50 / 366.50

Q2-18 - 363.25 / 365.25

Q3-18 - 358.75 / 361.25

Q4-18 - 353.75 / 356.25

CAL18 - 359.25 / 362.25

CAL19 - 327.25 / 332.25

Rotterdam 380 cSt

Jan18 343.75 / 345.75

Feb18 344.00 / 346.00

Mar18 344.00 / 346.00

Apr18 343.50 / 345.50

May18 342.50 / 344.50

Jun18 341.50 / 343.50

Q1-18 343.75 / 345.75

Q2-18 342.25 / 344.25

Q3-18 337.00 / 339.50

Q4-18 328.50 / 331.00

CAL18 337.25 / 340.25

CAL19 298.25 / 303.25



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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