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Commentary

Brent closed last night at $70.11, down $0.01, WTI closed at $65.25, down $0.30 and INE closed at 426.40 yuan, or $67.88. Ummmm. I know I said I applaud China for setting up a new crude benchmark, as this should be (and I quote myself here) "...something that could stoke up some volatility", but we weren't quite expecting it to be this volatile!! INE is trading $65 per bbl at time of writing. Wow! However, this made me think - China are the world's biggest crude oil importer, so why wouldn't they offer the market down? If the idea of a local Chinese benchmark in local currency is to ensure China are paying 'fair value' for crude, then why would it be high? Let's face it, if it were to be used to price any crude exports, then why would they have only one Chinese grade listed? All the other crudes are Middle East origin. What else is going on? Well, Saudi Arabia and Russia have apparently agreed to extend the 'cut' by 10 to 20 years instead of year by year. I don't know how this can be called a 'cut' any longer; surely this is just a policy of a production cap. On the 2020 sulphur regulation front, SEB has created a ULSFO 0.5% index price given as a mix of 44% LSFO 1.0% and 56% gasoil 0.1%. Their report suggests that in 2020 the coming ULSFO 0.5% fuel grade is likely to trade close to gasoil 0.1%. The market overnight and this morning is pricing in the build in U.S. crude stocks according to the API ahead of the EIA data, although taking into account the product draws the prediction is fairly neutral.

Fuel Oil Market (March 27)

The front crack opened at -12.65, weakening to -12.95, before strengthening to -12.55, closing -12.65. The Cal 19 was valued at -15.15.

Asia's front-month time spread of 380 cst fuel oil flipped into contango during Singapore window trading hours on Tuesday but crept back into narrow backwardation after the Singapore window.

Sentiment in Asia's fuel oil market has been dampened by steady supplies and sluggish demand, but traders said they expected demand to improve in the near term as seasonal summer demand emerges.

The 380 cst April/May time spread was trading at about 5-10 cents a tonne around 5:30 pm Singapore time (0930 GMT).


Economic Data and Events

* 12pm: MBA Mortgage Applications for March 23 (prior -1.1%)

* 1:30pm: U.S. 4Q GDP q/q, est. 2.7% (prior 2.5%)

* 1:30pm: U.S. Personal Consumption for 4Q, est. 3.8% (prior 3.8%)

* 1:30pm: U.S. Wholesale Inventories for Feb. m/m (prelim), est. 0.5% (prior 0.8%)

* 3pm: U.S. Pending Home Sales for Feb. m/m, est. 2% (prior -4.7%)

* 3:30pm: EIA weekly oil inventory report

* Genscape weekly ARA crude stockpiles report

* North Sea Oseberg, Troll May loading programs

Singapore 380 cSt

Apr18 - 367.00 / 369.00

May18 - 367.25 / 369.25

Jun18 - 367.00 / 369.00

Jul18 - 366.00 / 368.00

Aug18 - 364.50 / 366.50

Sep18 - 362.75 / 364.75

Q2-18 - 367.00 / 369.00

Q3-18 - 364.50 / 366.50

Q4-18 - 358.25 / 360.75

Q1-19 - 350.50 / 353.00

CAL19 - 323.75 / 327.75

CAL20 - 266.25 / 274.25

Singapore 180 cSt

Apr18 - 376.25 / 378.25

May18 - 375.75 / 377.75

Jun18 - 375.50 / 377.50

Jul18 - 374.50 / 376.50

Aug18 - 373.00 / 375.00

Sep18 - 371.50 / 373.50

Q2-18 - 376.00 / 378.00

Q3-18 - 373.25 / 375.25

Q4-18 - 367.25 / 369.75

Q1-19 - 360.00 / 362.50

CAL19 - 337.25 / 341.25

CAL20 - 290.25 / 298.25

Rotterdam Barges

Apr18 355.00 / 357.00

May18 356.00 / 358.00

Jun18 355.75 / 357.75

Jul18 354.50 / 356.50

Aug18 352.50 / 354.50

Sep18 349.50 / 351.50

Q2-18 355.50 / 357.50

Q3-18 351.50 / 353.50

Q4-18 341.75 / 344.25

Q1-19 334.25 / 336.75

CAL19 304.75 / 308.75

CAL20 242.75 / 250.75