Oil and fuel oil hedging market update

By the Oil Desk at Freight Investor Services.



Image credit: Freight Investor Services (FIS)


Updated on 10 Oct 2018 9:17 GMT

Commentary

Brent crude futures were down 21 cents at $84.79 a barrel by 04:34 GMT, after a 1.3 percent gain on Tuesday, and U.S. WTI crude was down by 34 cents, or 0.5 percent, at $74.62 a barrel, after rising nearly 1 percent in the previous session. It's getting a bit windy down in the U.S. Gulf and precautions have been made with a 40% reduction shutdown of crude output with 75 platforms having been evacuated. There's a strong prevailing wind coming from the U.S. as Trump rains down some more tweets in how unacceptably high crude oil prices are. It's becoming a pretty heated topic, as the cold front of OPEC meets the hot air of Trump, resulting in a precipitation of angry statements, misleading growth forecasts, and mystery supply figures. Surely Trump sees that the solution to his problem is the U.S. oil market itself rather than the Middle East. There is definitely an air of disdain from OPEC when Trump demands higher production to lower prices. Why would they ever do that? At $85-90, the flotation of Aramco looks very attractive, but because the U.S. says so, they need forsake that dream... I don't think so. The power of Russia and China is growing in the world, and Russia definitely benefits from high oil prices, China much less so. Perhaps Trump should work on getting China onside instead of his tariff war with them. All the while, the domestic U.S. oil market has a great potential, with news this morning predicting a further 4 million bpd from the country in exports by 2020. Sorry to rain on OPEC's parade, but the Americans are coming, perhaps that's why they are being so stubborn to squeeze prices up as much as they can now. Make hay while the sun shines, as they say. Good day.

Fuel Oil Market (Oct 09)

The front crack opened at -9.50, weakening to -9.70, before strengthening to -9.65, closing -9.80. The Cal 19 was valued at -15.05.

The front-month EW arbitrage climbed to its widest in at least three years on Tuesday as near-term supply constraints and firm demand in Singapore forced the spread higher, trade sources said

A total of 3-3.5 million tonnes of Western fuel oil supplies are expected to arrive in Singapore in October, down from about 3.5-4 million tonnes in September.

While the widening arbitrage spread could boost Western arrivals in November, the gains could be capped by higher freight rates, the sources said.

The 380 cSt East-West arbitrage spread for November climbed to $28.75 a tonne, its highest since records began in late-2015, according to Refinitiv data on Eikon. This compared with $28 a tonne on Monday.

Economic data/events (Times are UK)

* noon: MBA Mortgage Applications, Oct. 5

* 1:30pm: U.S. PPI Final Demand, Sept.

* 3pm: U.S. Wholesale Inventories, Aug. (final)

* 9:30pm: API weekly U.S. oil inventory report (day later than usual due to U.S. Holiday)

* EIA monthly Short-Term Energy Outlook, or STEO, and Winter Fuels Outlook

* Calgary Energy Roundtable, with speakers including Encana CEO Doug Suttles, LNG Canada CEO Andy Calitz, Canada Natural Resources Minister Amarjeet Sohi

* Basra Mega Projects conference, final day

* Oil & Money conference, 2nd day of 3, including BP CEO Bob Dudley, Vitol CEO Ian Taylor and senior leaders of Glencore, Gunvor and Trafigura, Adnoc CEO Sultan Ahmed Al Jaber, Libya's NOC chairman Mustafa Sanalla

Singapore 380 cSt

Nov18 - 499.50 / 501.50

Dec18 - 493.50 / 495.50

Jan19 - 487.25 / 489.25

Feb19 - 481.75 / 483.75

Mar19 - 476.50 / 478.50

Apr19 - 472.00 / 474.00

Q1-19 - 481.75 / 483.75

Q2-19 - 467.25 / 469.25

Q3-19 - 445.25 / 447.75

Q4-19 - 406.75 / 409.25

CAL19 - 450.50 / 453.50

CAL20 - 376.00 / 382.00

Singapore 180 cSt

Nov18 - 506.75 / 508.75

Dec18 - 502.00 / 504.00

Jan19 - 497.50 / 499.50

Feb19 - 491.75 / 493.75

Mar19 - 486.75 / 488.75

Apr19 - 482.50 / 484.50

Q1-19 - 492.00 / 494.00

Q2-19 - 478.25 / 480.25

Q3-19 - 459.25 / 461.75

Q4-19 - 428.00 / 430.50

CAL19 - 464.50 / 467.50

CAL20 - 398.50 / 404.50

Rotterdam 3.5%

Nov18 - 470.50 / 472.50

Dec18 - 464.75 / 466.75

Jan19 - 460.50 / 462.50

Feb19 - 456.50 / 458.50

Mar19 - 452.50 / 454.50

Apr19 - 448.25 / 450.25

Q1-19 - 456.50 / 458.50

Q2-19 - 443.50 / 445.50

Q3-19 - 420.50 / 423.00

Q4-19 - 380.50 / 383.00

CAL19 - 426.00 / 429.00

CAL20 - 357.25 / 363.25



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 call +44 20 7090 1120 or email info@freightinvestor.com.