Oil and fuel oil hedging market update

By the Oil Desk at Freight Investor Services.



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Updated on 03 Jan 2018 09:28 GMT

Commentary

Brent closed last night at $66.57 down $0.30, WTI closed at $60.37, down $0.05. I think the crude oil market isn't too sure about what this year will bring. I read yesterday that Russia has increased its crude oil production for the 9th year in a row. Last year, Russia produced 10.98mn bpd of crude oil. A 30-year high. Compare that to 1999 when Russia produced 6.1mnbpd; it is quite a jump. But hang on, I hear you cry, aren't Russia part of the OPEC/Non-OPEC pact? If so, why has their production increased? Ah ha my dear Poirot, the plot thickens. You see, it was in October 2016 that Russia agreed to cut production. During that month, they produced a whopping 11.25mnbpd and they agreed to shave 300kbpd off that number. So even though they have reduced that astronomical number, they are still producing more. Clever. I can't really see Russia slowing down production, either; why would they? Prices are up, so why not cash in. The US also had a bumper year in terms of crude oil exports - 1.1mn bpd, double that of 2016. So, in essence, two of the three biggest oil producing countries are ramping up production. Ahhh, but don't worry, demand is there to pick up the pieces. Is it really?

Fuel Oil Market (January 2)

The front crack opened at -9.25, weakening to -9.35, before strengthening to -9.20. The Cal 19 was valued at -11.50.

Cash discounts for Asia's 180-cst high-sulphur fuel oil hit their widest level since Dec. 6 on Tuesday, as suppliers offered more cuts for the fuel in the Singapore trading window.

Mercuria offered 180-cst fuel oil cargoes at a discount ranging from $0 at the back of the trading window to minus $1.25 a tonne to Singapore quotes at the front of the window.

On Friday, offers for 180-cst cargoes were made at premiums of about 50 cents a tonne to Singapore quotes by Hin Leong

Last month, Mercuria was the main buyer of 180-cst fuel oil cargoes in the Platts window, snapping up about 420,000 tonnes of the 500,000 tonnes traded.

Economic Data and Events

* ~4pm: API issues wkly U.S. oil inventory report

* Bloomberg OPEC Survey

* Bloomberg-compiled refinery snapshot for U.S. and Canada, and providing offline capacity projections for crude units and FCCs

* See OIL WEEKLY AGENDA for this week's events

Singapore 380 cSt

Feb18 - 373.50 / 375.50

Mar18 - 373.00 / 375.00

Apr18 - 372.50 / 374.50

May18 - 372.25 / 374.25

Jun18 - 371.25 / 373.25

Jul18 - 370.00 / 372.00

Q2-18 - 372.00 / 374.00

Q3-18 - 368.75 / 370.75

Q4-18 - 364.00 / 366.50

Q1-19 - 356.00 / 358.50

CAL19 - 333.75 / 336.75

CAL20 - 287.00 / 292.00

Singapore 180 cSt

Feb18 - 377.25 / 379.25

Mar18 - 377.50 / 379.50

Apr18 - 377.25 / 379.25

May18 - 377.00 / 379.00

Jun18 - 376.25 / 378.25

Jul18 - 375.50 / 377.50

Q2-18 - 377.00 / 379.00

Q3-18 - 374.25 / 376.25

Q4-18 - 369.75 / 372.25

Q1-19 - 364.00 / 366.50

CAL19 - 342.25 / 345.25

CAL20 - 295.75 / 300.75

Rotterdam Barges

Feb18 359.25 / 361.25

Mar18 359.25 / 361.25

Apr18 359.00 / 361.00

May18 358.25 / 360.25

Jun18 357.25 / 359.25

Jul18 355.75 / 357.75

Q2-18 358.25 / 360.25

Q3-18 353.75 / 355.75

Q4-18 345.00 / 347.50

Q1-19 337.00 / 339.50

CAL19 313.25 / 316.25

CAL20 267.25 / 272.25




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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.