Oil and fuel oil hedging market update

By the Oil Desk at Freight Investor Services.



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Updated on 10 Jan 2018 09:41 GMT

Commentary

Brent closed up $1.04 last night to $68.82, WTI closed at $62.96, up $1.23. Crude is pushing forwards with the same ferocity as a Harvey Weinstein harassment case. I read yesterday that US oil production is going to hit 11mn bpd by the end of the year. US oil production in 2016 was 8.39mn bpd. End 2018 it is going to be 11mn bpd. That is 2.61mn bpd higher in 2 years, or 31%. OPEC/Non OPEC cuts are taking off 1.8mn bpd by the end of 2018. The OPEC production was initially made at the end of 2016. So since that cut was announced by the end of 2018, even if everyone fulfils the cuts, the oil market will still be oversupplied by 810,000 barrles per day. Yet we are at three-year highs. Ummmm. The 11mn bpd forecast wasn't written by some spotty teenager sitting in a coffee shop either. It was the EIA's actual forecasts. You remember those people, right? The same ones who publish weekly data that the market goes cock-a-hoop about? It looks like if there's enough stories about draining stocks and the hedge funds get behind it, prices rise - look what happened after the OPEC meeting in November. As the Yazz song goes: The only way is up.

Fuel Oil Market (January 9)

The front crack opened at -10.20, weakening to -10.55, before strengthening to -10.45, ending -10.50. The Cal 19 was valued at -11.75.

Ex-wharf premiums lower on sluggish demand for bunkers. Advanced demand for delivered bunker fuels has so far been limited as China-based shippers have yet to stock up ahead of the Chinese New Year celebrations in mid-February, three bunker fuel traders said. In a sign of slow demand and ample supplies, 380 cSt ex-wharf premiums this week have traded at $2.00-$2.50 a tonne to Singapore quotes, down from around $3.00 a tonne in the previous week, trade sources said. Traders, however, expect bunker demand to pick up by mid-January as buyers fill their requirements.

UML, Socar's shipping arm, has chartered a very large crude carrier, Happiness I, to load up to 270,000 tonnes of fuel oil from Rotterdam around Jan. 15 for discharge into Singapore by end-February for a $3 million fee.

Economic Data and Events

* 12am: MBA mortgage applications, Jan. 5

* 1:30pm: U.S. import price index, Dec.

* 3pm: U.S. wholesale inventories m/m, Nov. (final)

* 3:30pm: EIA weekly oil inventory report; TOPLive blog coverage also begins then

Singapore 380 cSt

Feb18 - 375.75 / 377.75

Mar18 - 376.50 / 378.50

Apr18 - 377.00 / 379.00

May18 - 377.00 / 379.00

Jun18 - 376.75 / 378.75

Jul18 - 376.00 / 378.00

Q2-18 - 377.00 / 379.00

Q3-18 - 374.75 / 376.75

Q4-18 - 371.00 / 373.50

Q1-19 - 363.25 / 365.75

CAL19 - 344.25 / 347.25

CAL20 - 292.50 / 297.50

Singapore 180 cSt

Feb18 - 380.25 / 382.25

Mar18 - 381.00 / 383.00

Apr18 - 381.50 / 383.50

May18 - 381.75 / 383.75

Jun18 - 382.00 / 384.00

Jul18 - 381.50 / 383.50

Q2-18 - 381.75 / 383.75

Q3-18 - 380.25 / 382.25

Q4-18 - 377.00 / 379.50

Q1-19 - 371.00 / 373.50

CAL19 - 352.50 / 355.50

CAL20 - 301.50 / 306.50

Rotterdam Barges

Feb18 363.25 / 365.25

Mar18 364.50 / 366.50

Apr18 365.25 / 367.25

May18 365.25 / 367.25

Jun18 365.00 / 367.00

Jul18 364.00 / 366.00

Q2-18 365.25 / 367.25

Q3-18 362.25 / 364.25

Q4-18 354.25 / 356.75

Q1-19 347.00 / 349.50

CAL19 323.50 / 326.50

CAL20 272.50 / 277.50



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.