Oil and fuel oil hedging market update

By the Oil Desk at Freight Investor Services.



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Updated on 12 Feb 2018 09:59 GMT

Commentary

Brent closed Friday down 2.02 to $62.79, WTI closed at $59.20 down 1.95. It's that time again - The Winter Olympics. The Winter Olympics comes around every four years. This time four years ago, Brent was trading at $108.79 per bbl. $46 per bbl higher than we are today. What followed in the winter of 2014 was certainly the winter of discontent, and one year after the Sochi Olympics Brent was trading nigh on exactly where are now. I wonder if the turn of PyeongChang to host the Winter Olympics will bring with it a turnaround in fortune? Well, in the same way Mike Pence dismissed a dinner invitation, I think I will dismiss the notion that Brent will go back up to the levels we saw Brent trading in Sochi. The US rig count jumped substantially last week - up 26 oil rigs - which should be no surprise to anyone. US oil production is climbing as I and many others predicted it would, and I don't see how that really will change considering the monumental shift in trading agenda the US oil market in general has showed us over the last 12 months. I am frankly amazed at the level of headline space that has been given considering US are now the second biggest crude oil producer in the world. They have over taken Saudi Arabia in the same astonishing way that Norwegian bloke did yesterday when he won the cross-country skiathlon gold medal. In fact, I am going to call the increase in US oil production the "Kruger" effect. They have come from way behind the pack, in a very short amount of time to pretty much close to the top. Kruger I salute you. Both of you.

Fuel Oil Market (February 9)

The front crack opened at -10.20, weakening to -10.25, before strengthening to -9.95. The Cal 19 was valued at - 14.50.

Asia's fuel oil market was muted on Friday but ended the week lower as inventories of the residual fuel across key global storage hubs posted weekly gains.

An absence of buying interest for 380 cSt fuel oil cargoes in the Singapore trading window saw cash premiums of the fuel slip for a fourth session straight on Friday to 17 cents a tonne to Singapore quotes, down from a $1.12 a tonne premium on Monday.

The 380 cSt prompt-month time spread was steady on Friday at a premium of 25 cents a tonne, but lower from Monday's premium of 50 cents a tonne.

Fuel oil in the ARA rose 3%, or 25,000 tonnes, from the previous week to a two-week high of 932,000 tonnes in the week ended Feb. 8.

Economic Data and Events

* ~11am-12pm: OPEC releases Monthly Oil Market Report

* 7pm: EIA releases monthly Drilling Productivity Report

* Bloomberg proprietary forecast of Cushing crude inventory change plus weekly analyst survey of crude, gasoline, distillates inventories before Wednesday's EIA report

* Caspian CPC, Azeri Supsa crude programs for March

* Egypt Petroleum Show in Cairo, with speakers including OPEC Secretary General Mohammad Barkindo, Eni SpA CEO Claudio Descalzi, BP CEO Bob Dudley, among others, 1st day of 3

* World Government Summit, Dubai, 2nd day of 3

Singapore 380 cSt

Mar18 - 351.50 / 353.50

Apr18 - 351.25 / 353.25

May18 - 351.25 / 353.25

Jun18 - 350.75 / 352.75

Jul18 - 349.75 / 351.75

Aug18 - 348.50 / 350.50

Q2-18 - 351.00 / 353.00

Q3-18 - 348.50 / 350.50

Q4-18 - 343.75 / 346.25

Q1-19 - 335.75 / 338.25

CAL19 - 303.50 / 306.50

CAL20 - 235.75 / 240.75

Singapore 180 cSt

Mar18 - 357.00 / 359.00

Apr18 - 357.00 / 359.00

May18 - 357.25 / 359.25

Jun18 -356.50 / 358.50

Jul18 - 355.75 / 357.75

Aug18 - 354.50 / 356.50

Q2-18 - 357.00 / 359.00

Q3-18 - 354.75 / 356.75

Q4-18 - 350.50 / 353.00

Q1-19 - 344.00 / 346.50

CAL19 - 312.25 / 315.25

CAL20 - 246.25 / 251.25

Rotterdam Barges

Mar18 337.75 / 339.75

Apr18 338.00 / 340.00

May18 337.75 / 339.75

Jun18 336.75 / 338.75

Jul18 335.50 / 337.50

Aug18 333.75 / 335.75

Q2-18 337.50 / 339.50

Q3-18 334.00 / 336.00

Q4-18 325.50 / 328.00

Q1-19 317.00 / 319.50

CAL19 280.00 / 283.00

CAL20 219.00 / 224.00



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.