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Home » News

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 09 Feb 2018 09:22 GMT


Brent futures were down 44 cents or 0.7%, at $64.37 a barrel by around 07:00 GMT. U.S. WTI crude was down 62 cents, or 1%, at $60.53 a barrel, having settled down 1% in the previous session at its lowest close since Jan. 2. I saw a great quote this morning: 'Bets on further rising oil and metals prices, for example by hedge funds, have climbed to excessively bullish levels'. Excessively bullish. I can see why this kind of comment would come from an oil end user; anything above $0 is excessively bullish. But from a bank analyst, with hedge funds up to their armpits in long oil positions, after a technical pull back, with high OPEC compliance, growing China demand - they have the power to push this back up again. The only excessive thing this morning is the use of excessive. Excessivity is rife. Looking at a more macro level, I don't think it presumptuous to assume that generally for commodities we are in a long term bull trend. The growing world economy, political dangers, uncertainty, there's also the practical implications of the new arms race that could occur. There is an Asian race between U.S. allies (eg Japan, South Korea) against China and North Korea, there's NATO against Russia, and I don't think it too implausible for the Trump administration to try for a 'Falklands moment' - a quick war that the whole country is behind to boost popularity. Let's just hope it doesn't turn into another Vietnam or Cuban Missile Crisis. But before you send all your thoughts on why this market is going to collapse, just bear in mind that over the last year and a half, people have been saying it's going to collapse, and in that time it has gone from $26 to over $70. Just think that small players with their little exposure and trading capacity aren't going to outweigh the ability of big market players to move this upwards. Yes, over a longer time period you may be proved right, but that will be in the terms of the long positions, when they have had enough of holding them and sell out for a tidy profit.

Fuel Oil Market (February 8)

The front crack opened at -10.45, strengthening to -10.15, before weakening to -10.30. The Cal 19 was valued at -14.00.

Rising Singapore fuel oil inventories weighed on Asia's fuel oil market sentiment on Thursday, dragging time spreads, fuel oil cracks and cash differentials of the fuel lower, trade sources said.

In a sign of growing prompt supplies, the March/April time spread for 380 cSt fuel oil flipped to a contango of about 30 cents a tonne on Thursday, down from a backwardation of about 10 cent per tonne in the previous session.

Singapore fuel oil inventories rose for a fourth straight week, climbing 6% to a 2018 high of 23.782 million barrels (about 3.55 million tonnes) in the week ended Feb. 7.

China's crude oil imports in January rose 20% year-on-year to a record 40.64 million tonnes, or 9.57 million barrels per day (bpd).

Economic Data and Events

* 3pm: U.S. Wholesale Inventories for Dec. M/M, est. 0.2%, (prior 0.2%)

* 6pm: Baker Hughes rig count

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

* 8:30pm: CFTC weekly commitments of traders report on various U.S. futures and options contracts

Singapore 380 cSt

Mar18 - 353.75 / 355.75

Apr18 - 353.75 / 355.75

May18 - 353.75 / 355.75

Jun18 - 353.25 / 355.25

Jul18 - 352.25 / 354.25

Aug18 - 351.00 / 353.00

Q2-18 - 353.75 / 355.75

Q3-18 - 351.25 / 353.25

Q4-18 - 346.50 / 349.00

Q1-19 - 338.50 / 341.00

CAL19 - 309.50 / 312.50

CAL20 - 241.75 / 246.75

Singapore 180 cSt

Mar18 - 359.50 / 361.50

Apr18 - 359.75 / 361.75

May18 - 360.00 / 362.00

Jun18 - 359.25 / 361.25

Jul18 - 358.50 / 360.50

Aug18 - 357.25 / 359.25

Q2-18 - 359.75 / 361.75

Q3-18 - 357.50 / 359.50

Q4-18 - 353.25 / 355.75

Q1-19 - 346.75 / 349.25

CAL19 - 318.50 / 321.50

CAL20 - 252.50 / 257.50

Rotterdam Barges

Mar18 340.75 / 342.75

Apr18 340.75 / 342.75

May18 340.50 / 342.50

Jun18 340.00 / 342.00

Jul18 338.75 / 340.75

Aug18 336.75 / 338.75

Q2-18 340.25 / 342.25

Q3-18 337.00 / 339.00

Q4-18 328.75 / 331.25

Q1-19 320.50 / 323.00

CAL19 286.50 / 289.50

CAL20 227.25 / 232.25

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.

Related Links:

Oil and fuel oil hedging market update
Freight Investor Services Ltd.

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