Oil and fuel oil hedging market update

By the Oil Desk at Freight Investor Services.



Image credit: Freight Investor Services (FIS)


Updated on 12 Nov 2018 09:39 GMT

Commentary

Two historical events took place this weekend: the first (and probably most important) one was the 100th anniversary to the end of World War I, with the German President laying a wreath at the Cenotaph. Brilliant! The other, less important event was the informal OPEC meeting where Saudi Arabia announced plans to cut supply by 500,000 bpd in response to the 20% price falls since early October. Surprise, surprise.

Khalid al-Falih told reporters the cut represents a reduction in global oil supply of about 0.5 percent. Saudi Arabia is the de facto leader of OPEC. An official from Kuwait, also an OPEC member, on Monday said that major oil exporters over the weekend had "discussed a proposal for some kind of cut in (crude) supply next year. OPEC's second-biggest producer, Iraq, has also indicated it may join in such a move. Peter Kiernan, lead energy analyst at the Economist Intelligence Unit in Singapore, said OPEC was "focused on mitigating downside risks" after crude prices declined by around 20% over a month following a supply surge, particularly from the top three producers: the United States, Russia and Saudi Arabia.

For consumers, the 20% oil price fall since early October was a relief. "This (price fall) is great news for the externally challenged economies of Asia like Indonesia and Philippines, India too, and helps also where inflation has been a concern," Robert Carnell, chief economist and Head of Research at ING Asia, told the Reuters Global Markets Forum on Monday. Lets see how this is going to play out, but I think we all know really!

Fuel Oil Market (Nov 9)

The front crack opened at -6.15, strengthening to -5.90, before weakening to -6.20. The Cal 19 was valued at -12.55.

Ex-wharf premiums held firm on Friday as limited supplies of finished grade 380 cSt high-sulphur fuel oil for prompt deliveries continued to feed bullish sentiment, trade sources said.

The earlier the delivery dates, the higher the premiums, the sources added, reflecting the lack of finished grade bunker fuels for prompt delivery in the Singapore trading and bunkering hub.

A lack of cutter stocks and the arrival of November arbitrage supplies only in the second half of the month have contributed to already tight Singapore fuel oil supplies, following limited arbitrage inflows in October.

Weekly fuel oil stocks in the ARA soared 33 percent, or 314,000 tonnes, to a six-week high of 1.258 tonnes in the week ended Nov. 8.

Economic Events:

* Abu Dhabi International Petroleum Exhibition & Conference (Adipec), with speakers including Saudi Energy Minister Khalid Al-Falih; Russian Energy Minister Alexander Novak; OPEC Secretary-General Mohammad Barkindo, U.A.E. Oil Minister Suhail Mohammed Al Mazrouei, BP CEO Bob Dudley, ENI CEO Claudio Descalzi, 1st day of 4

* U.S. Veterans Day federal holiday, U.S. markets open

** See OIL WEEKLY AGENDA for this week's events

Singapore 380 cSt

Dec18 - 450.00 / 452.00

Jan19 - 440.25 / 442.25

Feb19 - 433.00 / 435.00

Mar19 - 427.25 / 429.25

Apr19 - 422.00 / 424.00

May19 - 416.75 / 418.75

Q1-19 - 433.50 / 435.50

Q2-19 - 416.75 / 418.75

Q3-19 - 396.50 / 399.00

Q4-19 - 365.00 / 367.50

CAL19 - 402.00 / 405.00

CAL20 - 342.50 / 348.50

Singapore 180 cSt

Dec18 - 455.00 / 457.00

Jan19 - 446.50 / 448.50

Feb19 - 440.75 / 442.75

Mar19 - 435.75 / 437.75

Apr19 - 430.75 / 432.75

May19 - 426.25 / 428.25

Q1-19 - 441.00 / 443.00

Q2-19 - 426.25 / 428.25

Q3-19 - 408.75 / 411.25

Q4-19 - 382.75 / 385.25

CAL19 - 414.00 / 417.00

CAL20 - 363.75 / 369.75

Rotterdam 3.5%

Dec18 - 412.25 / 414.25

Jan19 - 405.75 / 407.75

Feb19 - 400.75 / 402.75

Mar19 - 396.25 / 398.25

Apr19 - 392.25 / 394.25

May19 - 387.75 / 389.75

Q1-19 - 401.00 / 403.00

Q2-19 - 387.50 / 389.50

Q3-19 - 367.75 / 370.25

Q4-19 - 333.50 / 336.00

CAL19 - 372.00 / 375.00

CAL20 - 315.50 / 321.50



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.