Oil and fuel oil hedging market update

By the Oil Desk at Freight Investor Services.



Image credit: Freight Investor Services (FIS)


Updated on 17 Oct 2018 09:00 GMT

Commentary

The API reported a surprise draw of 2.13 million barrels of U.S. crude oil inventories for the week ending October 12, compared to analyst expectations that this week would see a build in crude oil inventories of 2.167 million barrels. This contradicted an analysts poll as well as a Reuters poll that put the expected figure at a smallish build in stocks. It explains the algo trade at 9.30pm UK time last night when the data was released, as well as the positive territory trading that we are seeing this morning. I'm sure the bulls in the market feel as warm and fuzzy as everyone watching the video of Prince Harry getting a hug from the child on his tour of New Zealand and Australia. Equities up, markets up, stocks down, Iran production down. I'm sure there's many a person ordering the champagne for the Christmas party as they sit on their new long positions, hoping a $100/barrel will pay for the presents for all of the step children. However, it's expected that supply shortages will become less acute and we will see a weakening of spreads. With these higher prices, it seems that Iran isn't too concerned about the cuts to their exports, as higher prices mean that income from oil sales hasn't had the impact probably intended by the Trump administration. Checkmate!. What would have really annoyed Iran and help the U.S. would be a government investment in U.S. oil infrastructure, releasing oil reserves, exemptions on oil exports for Iran, pushing OPEC to increase supply, and Trump will be on top of a cheaper gasoline market for his voters, destruction of a large part of the Middle East's income, as well as Russia, force producers to supply more to keep up with current incomes. Then, when it comes to the 2020 reelection, he'll look like a hero; and then, just before, he can put sanctions back on again. I wonder if he reads this report... maybe we should tweet it. Good day.

Fuel Oil Market (Oct 16)

The front crack opened at -9.05, strengthening to -8.95, before weakening to -9.10. The Cal 19 was valued at -14.00

The front-month 380 cSt barge fuel oil crack on Tuesday widened its discount to Brent crude from a two-month high in the previous session but was still considered by market participants to be trading at strong levels relative to crude.

The crack discount was trading at about minus $8.94 a barrel to Brent crude on Tuesday, down from minus $8.36 a barrel in the previous session; its narrowest discount since Aug. 15.

This came despite weaker oil prices on Tuesday which fell on evidence of higher U.S. oil production and increasing U.S. crude inventories. But reports of a fall in Iranian oil exports helped limit losses.

Economic data/events (Times are UK)

* 12pm: MBA Mortgage Applications, Oct. 12

* 1:30pm : U.S. Housing Starts, Sept.

* 3:30pm: EIA weekly U.S. oil inventory report; Top Live blog starts 3:20 pm

* 7pm: Fed Meeting Minutes

* Argus Global Crude conference, 2nd day of 3

** Speakers: Trafigura Co-Head of Oil Trading Ben Luckock, Repsol Chief Economist Pedro Merino Garcia, BB Energy Global Head of Crude Trading Alessandro Liberati, OMV Supply Trading Head Vladimir Langhamer

* Genscape weekly ARA crude stockpiles report

* EARNINGS: Reliance Industries, Kinder Morgan

Singapore 380 cSt

Nov18 - 488.00 / 490.00

Dec18 - 481.75 / 483.75

Jan19 - 475.50 / 477.50

Feb19 - 469.50 / 471.50

Mar19 - 464.75 / 466.75

Apr19 - 460.00 / 462.00

Q1-19 - 469.75 / 471.75

Q2-19 - 454.75 / 456.75

Q3-19 - 435.00 / 437.50

Q4-19 - 400.00 / 402.50

CAL19 - 440.75 / 443.75

CAL20 - 371.25 / 377.25

Singapore 180 cSt

Nov18 - 495.25 / 497.25

Dec18 - 490.25 / 492.25

Jan19 - 485.50 / 487.50

Feb19 - 479.25 / 481.25

Mar19 - 474.75 / 476.75

Apr19 - 470.25 / 472.25

Q1-19 - 480.00 / 482.00

Q2-19 - 465.75 / 467.75

Q3-19 - 449.00 / 451.50

Q4-19 - 421.25 / 423.75

CAL19 - 454.50 / 457.50

CAL20 - 388.00 / 394.00

Rotterdam 3.5%

Nov18 - 456.25 / 458.25

Dec18 - 450.75 / 452.75

Jan19 - 446.75 / 448.75

Feb19 - 443.00 / 445.00

Mar19 - 439.25 / 441.25

Apr19 - 435.25 / 437.25

Q1-19 - 443.00 / 445.00

Q2-19 - 431.25 / 433.25

Q3-19 - 409.50 / 412.00

Q4-19 - 371.50 / 374.00

CAL19 - 415.50 / 418.50

CAL20 - 350.50 / 356.50



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