Oil and fuel oil hedging market update

By the Oil Desk at Freight Investor Services.



Image credit: Freight Investor Services (FIS)


Updated on 18 Oct 2018 09:00 GMT

Commentary

Brent crude also dipped below $80 a barrel but ended at $80.05, $1.36 or 1.7 percent lower. The global benchmark is trading nearly $7 below a four-year high of $86.74 reached on Oct. 3, and U.S. crude oil slumped $2.17, or 3 percent, to settle at $69.75 a barrel. Well, that was a bit of a difference between the API predictions and then the actual EIA data. Apart from being totally the wrong direction (predicting a draw instead of a build), which was priced in since 9.30pm the previous day, it gave the market all the justification to correct the levels below $80. This can be explained by the fall in U.S. production coupled with a fall in exports. US crude production fell 300,000 barrels to 10.9 million b/d in the week from a record high of 11.2 million b/d the week before, and there was a sharp decline in exports, down 30.8% on week to 1.78 million b/d. Watch for a close below $80 - a psychological point we haven’t seen for a while. Technicals-wise, we are flatter than the world’s flattest pancake, with our analysts' comments making an in-depth discussion about refinery utilisation rates sound extremely interesting. Time for a coffee. Good day.

Fuel Oil Market (Oct 17)

The front crack opened at -9.20, strengthening to -8.50, before weakening to -8.65. The Cal 19 was valued at -14.15.

The front-month East-West (EW) arbitrage spread extended gains on Wednesday, climbing to a near record high seen earlier in the month as near-term supply constraints and firm demand in Singapore continued to support

The 380 cSt East-West arbitrage spread for November was at about $31.50 a tonne on Wednesday, up from $30.25 a tonne in the previous session.

The front-month arbitrage spread was at a record $31.75 a tonne on Oct. 3, its widest premium since records began in late-2015.

Total fuel oil flows into East Asia for October are estimated at about 5.5 million tonnes, among the lowest for the year and similar to volumes seen earlier in June and July, according to Refinitiv assessments released on Tuesday.

Economic data/events (Times are UK)

* 1:30pm: U.S. Initial Jobless Claims, Oct. 13.

* 1:30pm: U.S. Continuing Claims, Oct. 6.

* 2:45pm: Bloomberg Consumer Comfort, Oct. 14.

* 2:45pm: U.S. Bloomberg Economic Expectations, Oct..

* Argus Global Crude conference, final day.

** Speakers include NNPC Group General Manager of Crude Marketing Mele Kyari, SPIMEX CEO Alexey Rybnikov, HPCL-Mittal Vice President Manu Sehgal.

* JODI monthly update of oil output and export data.

* Singapore onshore oil-product stockpile data.

* Russian refining maintenance schedule from ministry.

Singapore 380 cSt

Nov18 - 482.00 / 484.00

Dec18 - 475.50 / 477.50

Jan19 - 469.00 / 471.00

Feb19 - 462.75 / 464.75

Mar19 - 457.50 / 459.50

Apr19 - 452.25 / 454.25

Q1-19 - 463.25 / 465.25

Q2-19 - 448.25 / 450.25

Q3-19 - 428.50 / 431.00

Q4-19 - 393.75 / 396.25

CAL19 - 431.75 / 434.75

CAL20 - 362.25 / 368.25

Singapore 180 cSt

Nov18 - 489.50 / 491.50

Dec18 - 484.25 / 486.25

Jan19 - 479.25 / 481.25

Feb19 - 472.75 / 474.75

Mar19 - 467.75 / 469.75

Apr19 - 462.75 / 464.75

Q1-19 - 473.25 / 475.25

Q2-19 - 459.25 / 461.25

Q3-19 - 442.50 / 445.00

Q4-19 - 415.00 / 417.50

CAL19 - 445.75 / 448.75

CAL20 - 379.25 / 385.25

Rotterdam 3.5%

Nov18 - 450.75 / 452.75

Dec18 - 445.25 / 447.25

Jan19 - 441.25 / 443.25

Feb19 - 437.50 / 439.50

Mar19 - 433.75 / 435.75

Apr19 - 429.75 / 431.75

Q1-19 - 437.50 / 439.50

Q2-19 - 425.75 / 427.75

Q3-19 - 404.00 / 406.50

Q4-19 - 366.00 / 368.50

CAL19 - 405.75 / 408.75

CAL20 - 342.25 / 348.25



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.