Oil and fuel oil hedging market update

Commentary

Brent crude for December delivery was up $10 cents at $57.47 a barrel by 0651 GMT after settling down $38 cents on Monday, and U.S. crude for December delivery was up $6 cents at $51.96. Iraq production is down more than 200,000 bpd, the rig count is down, we have the highest compliance on cuts at 120%, and yet the market is currently trading in negative territory? "But why?" I hear you shout... stage fright. We are in a comfortable range, with an ability of those who desire it to keep prices at a suitable level. Higher as the market dips its toes into the high $50s and looking at $60 it breaks new uncharted ground for U.S. production and its makes it even harder to keep OPEC cut parties in line. It's like leaving chocolate in front of a child - you turn your back for too long and it will be gone. Brent is coming down and going to test the support levels around $57.12; let's see if it has the support to recover from that level once again.

Fuel Oil Market (October 23)

The front crack opened at -7.75, strengthening to -7.70, -7.80, ending at -7.75. The Cal 18 was valued at -8.10.

Asia's fuel oil crack rose to multi week highs, boosted by expectations of tighter supplies by the end of the year partly because of limited arbitrage bookings and lower output from key producers, including Russia and Venezuela. The Nov/Dec time spread of Asia's 380 cSst fuel oil slipped to a one-week low on Friday as inventories across key storage hubs remain elevated.

In addition to higher freight rates making arbitrage flows into Asia less profitable, some of the sources pointed to the reluctance of suppliers to import more cargoes as the current fiscal year draws to an end.Nov 180 crack to Dubai crude narrowed to -$1.91 a barrel, its narrowest discount since Sept. 21. Nov 180 discount to Brent crude narrowed by 26 cents a barrel from Friday to -$3.90, narrowest since Sept. 25.

Russian refinery runs were 5% down in September from the previous month and down 0.9% from the same time last year, down 8.3% from August.

Economic Data/Events: (UK times)

* 8am: France Markit manufacturing PMI SA for Oct., prelim., est. 56 (prior 56.1)

* 8:30am: Germany Markit/BME manufacturing PMI SA for Oct., prelim., est. 60 (prior 60.6)

* 9am: Eurozone Markit manufacturing PMI for Oct., prelim., est. 57.8 (prior 58.1)

* 2:45pm: U.S. Markit manufacturing PMI for Oct., prelim., est. 53.5 (prior 53.1)

* 3pm: U.S. Richmond Fed manufacturing index for Oct., est. 17 (prior 19)

* 9pm: Gustavo Coronel, former member of PDVSA Board of Directors, speaks about Venezuela's oil industry, at Cato Institute, Washington

* 9:30pm: API issues weekly U.S. oil inventory report

* Today:

** OPEC Board of Governors meet, Vienna, final day

** Africa Oil Week, 2nd day of 5

** Bloomberg-compiled weekly snapshot of key U.S. refinery outages with offline capacity projections for CDU, FCC units

** Singapore International Energy Week, 2nd day of 5, including Singapore IEA Forum

Singapore 380 cSt

Nov17 - 332.50 / 334.50

Dec17 - 330.75 / 332.75

Jan18 - 328.75 / 330.75

Feb18 - 327.00 / 329.00

Mar18 - 325.50 / 327.50

Apr18 - 324.00 / 326.00

Q1-18 - 327.25 / 329.25

Q2-18 - 323.25 / 325.25

Q3-18 - 319.00 / 321.50

Q4-18 - 315.00 / 317.50

CAL18 - 321.00 / 324.00

CAL19 - 289.75 / 294.75

CAL20 - 260.50 / 267.50

Singapore 180 cSt

Nov17 - 337.25 / 339.25

Dec17 - 336.00 / 338.00

Jan18 - 334.75 / 336.75

Feb18 - 333.25 / 335.25

Mar18 - 332.00 / 334.00

Apr18 - 330.75 / 332.75

Q1-18 - 333.50 / 335.50

Q2-18 - 330.00 / 332.00

Q3-18 - 325.50 / 328.00

Q4-18 - 322.50 / 325.00

CAL18 - 327.75 / 330.75

CAL19 - 298.75 / 303.75

CAL20 - 269.75 / 276.75

Rotterdam 380 cSt

Nov17 313.00 / 315.00

Dec17 309.00 / 311.00

Jan18 308.50 / 310.50

Feb18 308.25 / 310.25

Mar18 307.75 / 309.75

Apr18 307.25 / 309.25

Q1-18 308.25 / 310.25

Q2-18 306.75 / 308.75

Q3-18 302.75 / 305.25

Q4-18 296.25 / 298.75

CAL18 303.00 / 306.00

CAL19 271.00 / 276.00

CAL20 240.25 / 247.25


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Oil and fuel oil hedging market update

By the Oil Desk at Freight Investor Services.

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