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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 15 Mar 2018 09:37 GMT

Commentary

Brent closed last night at $64.89 up $0.25, WTI closed up $0.25 to $60.96. Yesterday, the OPEC report wasn't particularly encouraging if you're a bull, but, again, it was ignored like in the same awkward way as when someone accidentally passes wind in a busy elevator. The IEA report is out today and this should give us more of an idea on where demand actually is. What is obvious though is that, once again, there is an increasing amount of oil. So even if demand forecasts are increased, there is an increasing concern that it still won't be enough to absorb all the black stuff we have floating around. Breaking news! EIA reported a build in crude oil inventories - which should come as no surprise to anyone seeing how US crude oil production is soaring. However, product draws meant that the gas cracks would have roofed, so at least something salvageable. How did crude react to yet another week of builds and soaring production, I hear you ask? Well, taking into account the product draws, the market was as indecisive as recovering alcoholic sitting in a pub after having seen an M Night Shyamalan film (eg. Signs) on a good deal of unidentifiable pills. It is clear for all to see that US oil production is going to have a serious effect on the demand/supply balance, but the elephant in the room to me is Venezuela. There is no way that when OPEC met in Nov 2016, they would have assumed that Venezuelan oil production would drop by approx 1mn bpd to now. I am still sceptical they are even producing that much to be honest, but if they weren't in such turmoil then this market really would be up the creek. Alas, circumstances Dear Watson, the devil is in the detail.

Fuel Oil Market (March 14)

The front crack opened at -9.95, weakening to -10.30, before strengthening to -10.15, closing at -10.30. The Cal 19 was valued at -14.90.

Asia's prompt-month viscosity spread extended its losses on Wednesday for a second straight session, slipping further away from Monday's 10-month high.

The March viscosity spread, the price differential between March 180 cSt and 380 cSt fuel oil swaps, settled at $7.75 a tonne on Wednesday, down from $8.25 on Tuesday and a multi-month high of $8.50 a tonne on Monday

South Korea's move to shut coal-fired generators to control air pollution at the same time as nuclear reactors are going into scheduled maintenance is resulting in surging fuel oil imports, as utilities burn the dirty feedstock to meet power demand.

Fujairah fuel oil inventories climbed for a second week straight, rising 13% to an eight-week high of 7.355 million barrels (about 1.097 million tonnes) in the week to March 12

Economic Data and Events

* 8am: Singapore onshore oil-product stockpile data

* 9am: IEA monthly Oil Market Report

* 12:30pm: U.S. Initial Jobless Claims, March 10

* 12:30pm: U.S. Continuing Claims, March 3

* 1:45pm: Bloomberg Consumer Comfort, March 11

Singapore 380 cSt

Apr18 - 356.25 / 358.25

May18 - 355.50 / 357.50

Jun18 - 354.50 / 356.50

Jul18 - 353.00 / 355.00

Aug18 - 351.00 / 353.00

Sep18 - 349.00 / 351.00

Q2-18 - 355.50 / 357.50

Q3-18 - 351.50 / 353.50

Q4-18 - 344.75 / 347.25

Q1-19 - 336.25 / 338.75

CAL19 - 309.00 / 313.00

CAL20 - 246.00 / 254.00

Singapore 180 cSt

Apr18 - 364.00 / 366.00

May18 - 363.25 / 365.25

Jun18 - 362.25 / 364.25

Jul18 - 361.00 / 363.00

Aug18 - 359.25 / 361.25

Sep18 - 357.25 / 359.25

Q2-18 - 363.25 / 365.25

Q3-18 - 359.25 / 361.25

Q4-18 - 352.75 / 355.25

Q1-19 - 344.75 / 347.25

CAL19 - 322.25 / 326.25

CAL20 - 270.00 / 278.00

Rotterdam Barges

Apr18 343.75 / 345.75

May18 343.00 / 345.00

Jun18 341.75 / 343.75

Jul18 340.00 / 342.00

Aug18 338.00 / 340.00

Sep18 335.25 / 337.25

Q2-18 343.00 / 345.00

Q3-18 338.00 / 340.00

Q4-18 328.50 / 331.00

Q1-19 320.75 / 323.25

CAL19 289.50 / 293.50

CAL20 234.50 / 242.50



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 the company on +44 20 7090 1120.






Related Links:

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

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