Oil and fuel oil hedging market update

By the Oil Desk at Freight Investor Services.



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Updated on 08 Aug 2018 08:31 GMT

Commentary

Brent closed last night at $74.65, up $0.90, and WTI closed up $0.16 to settle at $69.17. Crude had a choppy day yesterday on the back of the US imposing new sanctions on Iran. Quite why the market decided to react yesterday to this is beyond me. The whole market priced this in the minute that Trump announced sanctions back in May, so yesterday was a typical example of headline trading. But then again, he does yoyo from one opinion to the other more than my French mate Philipe Fillop. We're in the middle of August, oil sanctions officially kick in by November and that will be for every single drop of oil; so if you're a delivered buyer in Japan, for example, then you are already planning on a September cargo really being the last one you can load without being pointed at and being told "you're fired" - like how Trump used to in The Apprentice. Anyway, on to API data. We can apparently expect a sizeable crude draw, but builds on both gasoline and distillates. Crude draws this time of year should be expected, but so should products - in fact especially on products. Gasoline inventories in the US are comfortably above the 5-year average and builds in the middle of driving season don't bode particularly well for this apparent supply crunch. Happy 53rd birthday to Singapore tomorrow. Enjoy your day off.

Fuel Oil Market (Aug 7)

The front crack opened at -8.80, before strengthening to - 8.60. The Cal 19 was valued at -14.25

Cash premiums, cracks and time spreads extended losses, as fresh spot supply from the Middle East helped relieve concerns of a persistent tightness in Singapore fuel oil supplies over the near term, trade sources said. Fresh spot tenders from Bahrain and Kuwait emerged this week, raising prospects of increased fuel oil shipments from the Middle East into Singapore after months of below average flows, the sources said.

With peak seasonal demand for fuel oil in the Middle East due to ease around end of August, some trade sources now estimate Middle East fuel oil exports to Singapore to total about 1.6-1.8 million tonnes in August. The higher Middle East exports in August are also supported by high inventories of the fuel in the Fujairah oil hub, currently at a 2018 high, and a steeply backwardated market structure which encourages reducing volumes held in storage, the sources said.

Economic data/events (Times are London.)

* 3:30pm: EIA weekly U.S. oil inventory report

* Azeri BTC loading program for September expected

Singapore 380 cSt

Sep18 - 442.75 / 444.75

Oct18 - 437.25 / 439.25

Nov18 - 433.50 / 435.50

Dec18 - 430.50 / 432.50

Jan19 - 427.50 / 429.50

Feb19 - 424.75 / 426.75

Q4-18 - 433.75 / 435.75

Q1-19 - 424.75 / 426.75

Q2-19 - 415.25 / 417.75

Q3-19 - 395.25 / 397.75

CAL19 - 397.00 / 400.00

CAL20 - 326.75 / 332.75

Singapore 180 cSt

Sep18 - 451.00 / 453.00

Oct18 - 446.75 / 448.75

Nov18 - 443.50 / 445.50

Dec18 - 440.75 / 442.75

Jan19 - 438.50 / 440.50

Feb19 - 435.75 / 437.75

Q4-18 - 443.75 / 445.75

Q1-19 - 435.75 / 437.75

Q2-19 - 427.75 / 430.25

Q3-19 - 411.75 / 414.25

CAL19 - 412.25 / 415.25

CAL20 - 346.75 / 352.75

Rotterdam 3.5%

Sep18 - 421.25 / 423.25

Oct18 - 416.25 / 418.25

Nov18 - 412.50 / 414.50

Dec18 - 409.00 / 411.00

Jan19 - 406.75 / 408.75

Feb19 - 404.50 / 406.50

Q4-18 - 412.50 / 414.50

Q1-19 - 404.25 / 406.25

Q2-19 - 395.25 / 397.75

Q3-19 - 374.25 / 376.75

CAL19 - 375.25 / 378.25

CAL20 - 309.75 / 315.75



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