Oil and fuel oil hedging market update

By the Oil Desk at Freight Investor Services.



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Updated on 05 Jan 2018 09:07 GMT

Commentary

Brent closed last night up $0.23 to $68.07, WTI closed at $62.01, up $0.38. Well it's certainly a lovely start to the year if you're a producer. Crude is climbing ever closer to $70 per bbl and I wonder when the rumours of crude at three digits will start? Based on the relentless rally, it could be as soon as next week. Personally, I think crude has got about as much chance of getting to $100 per bbl as I have of being invited to Meghan Markle's hen do. EIA data last night showed a substantial 7.419mn bbl draw but products were up a combined 13.7mn bbls. 13.7mn!! "Don't worry, demand is up," he says. Where? I can't see it. This is like the hardest Where's Wally ever! Okay, I know it's cold in the US at the moment, but 13.7mn bpd is not down to unforeseen weather shutting ports. Refinery utilisation is 96.7%. That's a 12-year high. When is the market going to realize that the US is banging out as much crude and as many products as they possibly can? Until OPEC decide to stop the production cuts and then everyone will take their hands off their eyes and say "Wow! Look how much the US are producing!" I mentioned a few weeks ago that the market will start looking less and less at EIA data as the weekly pivot point for where prices should be heading directionally, and I think this has now been evidenced. I would be interested to see the number of trades going through five minutes after EIA data is released in December 2017 compared to 2016, though. The new weekly pivot point is going to be the US rig count; and with WTI comfortably above $60, who can see it falling?

Fuel Oil Market (January 4)

The front crack opened at -10.00, strengthening to -9.70, before weakening to -9.90. The Cal 19 was valued at -11.00.

Asia's January visco spread fell to its lowest in 1-1/2 years on Thursday amid falling demand for low-viscosity fuel oils, traders said.

Demand for low-viscosity fuel oils was hit at the end of 2017 when Pakistan said it had indefinitely suspended fuel oil imports, significantly reducing demand for the fuels which are used in power generation.

Singapore fuel oil inventories fell 10%, or 2.462 million barrels , to a two-week low of 22.728 million barrels in the week ended Jan. 3.

This came despite a 149% jump in fuel oil net imports into Singapore, which climbed to a 33-week high of 1.457 million tonnes, as imports climbed to a 10-week high and exports fell to a seven-week low.

Economic Data and Events

* 6pm: Baker Hughes U.S. Rotary Oil Rigs, period Jan 5, prior 747

* 6pm: ICE weekly commitments of traders report for Brent, gasoil

* 8:30pm: CFTC weekly commitments of traders report on various U.S. futures and options contracts

* Today: Venezuela Crude Oil Basket CNY, period Jan 5

Singapore 380 cSt

Feb18 - 376.50 / 378.50

Mar18 - 376.75 / 378.75

Apr18 - 376.75 / 378.75

May18 - 376.50 / 378.50

Jun18 - 376.00 / 378.00

Jul18 - 374.75 / 376.75

Q2-18 - 376.25 / 378.25

Q3-18 - 373.75 / 375.75

Q4-18 - 369.25 / 371.75

Q1-19 - 361.50 / 364.00

CAL19 - 340.50 / 343.50

CAL20 - 289.50 / 294.50

Singapore 180 cSt

Feb18 - 380.25 / 382.25

Mar18 - 381.25 / 383.25

Apr18 - 381.25 / 383.25

May18 - 381.25 / 383.25

Jun18 - 381.25 / 383.25

Jul18 - 380.25 / 382.25

Q2-18 - 381.25 / 383.25

Q3-18 - 379.25 / 381.25

Q4-18 - 375.25 / 377.75

Q1-19 - 369.25 / 371.75

CAL19 - 349.00 / 352.00

CAL20 - 298.25 / 303.25

Rotterdam Barges

Feb18 363.25 / 365.25

Mar18 364.00 / 366.00

Apr18 364.00 / 366.00

May18 363.75 / 365.75

Jun18 362.75 / 364.75

Jul18 361.50 / 363.50

Q2-18 363.50 / 365.50

Q3-18 359.50 / 361.50

Q4-18 350.75 / 353.25

Q1-19 342.75 / 345.25

CAL19 320.00 / 323.00

CAL20 268.00 / 273.00



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.