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Commentary

Brent closed last night down $0.07 to $69.31, WTI closed at $63.95 down $0.02. So, as most people anticipated, another week of EIA and another week of crude draws. We saw another build in gasoline inventories but a drop in refining runs of some 2% yielded a draw in distillates - the only part of the barrel that is really making any sense right now. 2018 has started with some hesitation in the oil market. Don't get me wrong, the start of each year brings with it apprehension and, alas, hesitation, but funds aside, I wonder if the majority of traders believe we should really be up here? Well, you know my view, the market has just stayed for that one drink too many and now I fear it won't be able to find its way home, so will just be driven around in circles until it wakes up and remembers what it has done and where it is. This kind of greed is inevitable as the market has just been able to run away with itself without taking into account any of the real fundamentals. This was evidenced yesterday when OPEC suddenly said "Wait a minute. Hang on. Oh nooo! The US are also producing oil!!" And increased their production figures for non-OPEC members. They also reduced demand forecasts for their own crude. Then last night we witnessed a fairly sizeable drop in US refining rates and a return to increased US oil production. Couple this with the fact that the front Brent/ Barge fuel oil crack has weakened 2.60 per mt from December 19 up until yesterday as well as most of the front fuel oil spreads shifting to contango, and we can see a fairly sizeable shift in what 2018 may bring us. Then I wake up this morning and we're nigh on back to where we were a month ago.

Fuel Oil Market (January 18)

Sentiment in Asia's fuel oil market improved on Thursday with time spreads, arbitrage spreads and fuel oil cracks scaling back some of their losses this week on signs of improving demand, trade sources said.

Trade sources pointed out that traded volumes of 380 cSt time spreads were higher on Thursday, particularly for the March/April time spread which was in excess of 350,000 tonnes, when compared to trade activity since the start of the year.

This came as Singapore weekly onshore fuel oil inventories edged away from a seven-month low this week to a two-week high, the latest official data showed.

Economic Data and Events

* 9am: IEA Monthly Oil Market Report

* 6pm: Baker Hughes oil rig count, period Jan. 19, prior 752

* 6pm: ICE weekly commitments of traders report for Brent, gasoil

* 8:30pm: CFTC weekly commitments of traders report on various U.S. futures and options contracts

* See OIL WEEKLY AGENDA for this week's events

Singapore 380 cSt

Feb18 - 378.50 / 380.50

Mar18 - 378.50 / 380.50

Apr18 - 378.25 / 380.25

May18 - 377.75 / 379.75

Jun18 - 377.25 / 379.25

Jul18 - 376.00 / 378.00

Q2-18 - 377.75 / 379.75

Q3-18 - 374.75 / 376.75

Q4-18 - 369.50 / 372.00

Q1-19 - 362.25 / 364.75

CAL19 - 337.75 / 340.75

CAL20 - 286.25 / 291.25

Singapore 180 cSt

Feb18 - 383.25 / 385.25

Mar18 - 383.50 / 385.50

Apr18 - 383.25 / 385.25

May18 - 382.75 / 384.75

Jun18 - 382.25 / 384.25

Jul18 - 381.25 / 383.25

Q2-18 - 382.75 / 384.75

Q3-18 - 380.00 / 382.00

Q4-18 - 375.00 / 377.50

Q1-19 - 368.50 / 371.00

CAL19 - 346.25 / 349.25

CAL20 - 295.25 / 300.25

Rotterdam Barges

Feb18 365.75 / 367.75

Mar18 366.25 / 368.25

Apr18 366.00 / 368.00

May18 365.25 / 367.25

Jun18 364.25 / 366.25

Jul18 362.75 / 364.75

Q2-18 365.00 / 367.00

Q3-18 360.50 / 362.50

Q4-18 351.25 / 353.75

Q1-19 343.25 / 345.75

CAL19 317.25 / 320.25

CAL20 267.00 / 272.00