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Commentary

Brent closed last night down $0.42 to $65.25, WTI closed at $61.90, up $0.22. Well here we are, floating around the $65 level whilst the market lazily makes its way through IP week. I was fearful a couple of weeks ago that the correction in Brent we have seen in February so far was perhaps a little too much too soon. A 10% drop surprised most people and it was never going to continue that steep downward trajectory; the bulls were far too entrenched after the rally on Brent since December. So float around the $65 mark we will for a while yet, I think. EIA data will be published tomorrow after the holiday in the US on Monday, but I'm pretty sure we will see another build in both crude and products. I do think, though, that the market is looking less and less at EIA data as the weekly pivot point for flat price. And indeed it should. The US, as I have been harping on recently, is now the second biggest oil producer in the world. The LOOP in the USGC can now load VLCCs. US crude oil exports averaged almost 1.4 million bpd for the four weeks ending January 26, compared to around 700,000 bpd on average in January last year. 40% of US exports are now heading to Asia. Someone is losing market share if these figures are to be believed - and why wouldn't Asia import US oil? Freight is cheaper as the historical flow for tankers was to discharge in the US, not load so the backhaul on the freight is cheaper. Just look at how TC14 for clean products has gained traction over the last couple of years compared to TC2. Couple that with the fact that WTI is still 3.50 per bbl cheaper than Brent and close to 50c per bbl cheaper than Dubai. 50c per bbl on a VLCC is $1mn. I think we could see the Brent/WTI spread maintained at these kind of levels, the US exporters need to be as competitive as possible to nick shorts that have historically been supplied for the Middle East, so keeping that Brent/WTI at a suitable number will be imperative if US oil exports are going to continue to work.

Fuel Oil Market (February 20)

Cracks weakened today after opening -9.95 and closing at -10.20.

Cash differentials of Asia's 380 cSt high sulphur fuel oil extended gains today despite the absence of trade in physical cargoes. Cash premiums of the mainstay 380 cSt fuel oil climbed for a second session to a two-week high of 86 cents a tonne above Singapore quotes, up from 26 cents a tonne on Monday. Asia's fuel oil market this month has been weighed down by sluggish demand and expectations of plentiful near-term supplies.

PRODUCTION CUTS - OPEC and non-OPEC oil producers including Russia will discuss extending their cooperation for many more years when they meet in June as they seek to avoid major market shocks.

No cargo trades were reported in the Singapore trading window on Tuesday.

Economic Data and Events

* 2:45pm: U.S. Markit Manufacturing PMI, Feb. (prelim)

* 3pm: U.S. Existing Home Sales, Jan.

* 7pm: FOMC Meeting Minutes

* 9:30pm: API weekly U.S. oil inventory report, delayed by one day due to U.S. Presidents Day holiday

* IP week, 2nd day of 3, today including IEA Executive Director Fatih Birol

* Nigeria Petroleum Summit in Abuja, 3rd day of 5

* Genscape weekly ARA crude stockpiles report

* See OIL WEEKLY AGENDA for this week's events

Singapore 380 cSt

Mar18 - 356.00 / 358.00

Apr18 - 355.75 / 357.75

May18 - 355.50 / 357.50

Jun18 - 354.75 / 356.75

Jul18 - 353.25 / 355.25

Aug18 - 352.00 / 354.00

Q2-18 - 355.25 / 357.25

Q3-18 - 352.25 / 354.25

Q4-18 - 347.00 / 349.50

Q1-19 - 338.75 / 341.25

CAL19 - 309.50 / 313.00

CAL20 - 236.25 / 242.75

Singapore 180 cSt

Mar18 - 362.50 / 364.50

Apr18 - 362.25 / 364.25

May18 - 362.00 / 364.00

Jun18 - 361.50 / 363.50

Jul18 - 360.00 / 362.00

Aug18 - 358.75 / 360.75

Q2-18 - 361.75 / 363.75

Q3-18 - 359.00 / 361.00

Q4-18 - 354.00 / 356.50

Q1-19 - 346.50 / 349.00

CAL19 - 318.75 / 322.25

CAL20 - 252.00 / 258.50

Rotterdam Barges

Mar18 343.50 / 345.50

Apr18 343.25 / 345.25

May18 342.25 / 344.25

Jun18 341.25 / 343.25

Jul18 339.50 / 341.50

Aug18 337.50 / 339.50

Q2-18 342.25 / 344.25

Q3-18 337.25 / 339.25

Q4-18 327.75 / 330.25

Q1-19 319.00 / 321.50

CAL19 286.00 / 289.50

CAL20 222.50 / 229.00