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By the Oil Desk at Freight Investor Services Ltd.

Commentary

Brent closed down $0.20 last night to $55.80 and WTI closed at $49.98, down $0.44. So, another strange reaction from the market last night when API data was confirmed by EIA that everything except for gasoline (shock) was drawn quite substantially last week. If you take the numbers at face value then yes, even the most schizo of oil traders would see them as an encouraging sign and rightly buy the market, and fairly aggressively; but the market is no longer reacting straight away off the immediate numbers, it is looking closer in to them, and this week we saw US crude exports jump to record levels. Look, it can't really come as any surprise, US production is steady at around 9.5mn bpd and demand in the US itself is hardly enough to support this uptick in production, so the barrels have to go somewhere. And with Brent/WTI trading at -5.50, why wouldn't people want some of Texas's finest? The market share battle is being written about, but this was always on the agenda when the market started to realize that not only is US production rising and reacting quickly off the back of rises in flat price, but that the US production system is becoming more efficient. Even Mr Putin wasn't enough to be the catalyst yesterday when he spoke about the OPEC/Non-OPEC cuts being extended until end 2018. To be frank, I think the market has already this extension priced in, and as I mentioned a few weeks ago, when does a "cut" stop being a "cut"? It surely is now just OPEC/Non-OPEC policy to a) have some kind of collusion with regards to output and b) to keep production at a level that the market isn't going to drowning in oil. All the extension rhetoric achieves is strengthening of the crude structure further down the curve, which allows Captain America and his barrel of Thunder Horse to eat 78lb steaks out til mid-2019. The semantics of using the option of a cut may continue to help OPEC in their goal to support prices, but this is a policy with a sell-by date fast approaching.

Fuel Oil Market (October 4)

The front crack opened at -7.95, weakening to -8.10, -7.95, before ending at -7.85, ending the day at -8.00. The Cal 18 was valued at -8.15.

Cash premium's of Asia's mainstay 380-cst fuel oil fell to a two-week low on Wednesday as suppliers lowered their asking price for physical cargoes in the Platts window, sources said.

The lower supplier offers also helped boost trade activity in the Platts window to a near one-month high. Meanwhile, selling pressure continued to weigh on the 380-cst Oct/Nov time spread which extended losses for a second consecutive session to a three week low of $1.50 a tonne.

Fujairah inventories fell 20% to a near four-month low of 9.285 million barrels (about 1.39 million tonnes) in the week to Oct. 2. The 2.384 million barrel (356,000 tonnes) drop in inventories from a week earlier marked the second largest weekly volume change since records began.

Economic Data/Events: (UK times)

*9am: Singapore onshore oil-product stockpile data

*12:30pm: U.S. Challenger job cuts, September (prior 5.1%)

*1:30pm: August U.S. trade balance, est. -$42.7b (prior -$43.7b)

*1:30pm: U.S. initial jobless claims, Sept. 30, est. 265k (prior 272k)

*1:30pm: U.S. continuing claims, Sept. 23, est. 1950k (prior 1934k)

*2:45pm: Bloomberg consumer comfort, Oct. 1 (prior 51.6)

*3pm: U.S. factory orders, August, est. 1% (prior -3.3%)

*3pm: U.S. durables goods orders, August final, est. 1.7% (prior 1.7%)

*No exact timing

**Russian Energy Week, 3rd day of 4

**Russian refining maintenance schedule from ministry

**U.S. Census Bureau releases crude-export data through August

Singapore 380 cSt

Nov17 - 321.00 / 323.00

Dec17 - 319.25 / 321.25

Jan18 - 317.25 / 319.25

Feb18 - 315.75 / 317.75

Mar18 - 314.75 / 316.75

Apr18 - 314.00 / 316.00

Q1-18 - 315.75 / 317.75

Q2-18 - 313.00 / 315.00

Q3-18 - 310.25 / 312.75

Q4-18 - 308.25 / 310.75

CAL18 - 311.75 / 314.75

CAL19 - 296.50 / 301.50

CAL20 -280.25 / 287.25

Singapore 180 cSt

Nov17 - 325.75 / 327.75

Dec17 - 324.50 / 326.50

Jan18 -323.50 / 325.50

Feb18 - 322.50 / 324.50

Mar18 - 321.75 / 323.75

Apr18 - 321.00 / 323.00

Q1-18 - 322.50 / 324.50

Q2-18 - 319.75 / 321.75

Q3-18 - 316.75 / 319.25

Q4-18 - 315.75 / 318.25

CAL18 - 318.75 / 321.75

CAL19 - 305.25 / 310.25

CAL20 - 289.50 / 296.50

Rotterdam 380 cSt

Nov17 302.00 / 304.00

Dec17 299.25 / 301.25

Jan18 299.00 / 301.00

Feb18 298.75 / 300.75

Mar18 298.50 / 300.50

Apr18 298.25 / 300.25

Q1-18 298.75 / 300.75

Q2-18 297.75 / 299.75

Q3-18 295.75 / 298.25

Q4-18 291.50 / 294.00

CAL18 296.00 / 299.00

CAL19 279.75 / 284.75

CAL20 262.25 / 269.25

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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.