Plz advise : How will be hedging once Benchmark is different in sale and purchase contract ; for example cargo in MEG is sold for Singapore from fuj , purchase benchmark is " HSFO 180 CST ($/mt) PUABE00 " while Sell benchmark is " HSFO 180 CST ($/mt) PUABE00 "
That's a tricky one because middle east benchmarks are actually Singapore Fuel Oil net of freight, sing -td3 = fujairah. But mechanics are the same, you sell Singapore Fuel Oil once you have your physical price (b/l). If you want to lock the spread before loading you buy Fuj swaps and sell sing, when you load you sell the long fuj and just keep the short in Singapore. Some people just sell the freight and leave both legs open.
Is Dated Brent correlated with European crude demand? In the event of low crude inventories and high refining margins? Or can high dated Brent reflect crude demand elsewhere?
good question, it really depends on how Brent is trading vs other benchmarks, but generally Dated is a closed ecosystem, affecting only WAF and Meds crudes. Today, with Brent weaker vs Dubai we could see derived demand to ship North Sea barrels to Asia, hence affecting dated. Having said that, Dated is traded mostly by European traders, they kind of control the game
Plz advise : How will be hedging once Benchmark is different in sale and purchase contract ; for example cargo in MEG is sold for Singapore from fuj , purchase benchmark is " HSFO 180 CST ($/mt) PUABE00 " while Sell benchmark is " HSFO 180 CST ($/mt) PUABE00 "
That's a tricky one because middle east benchmarks are actually Singapore Fuel Oil net of freight, sing -td3 = fujairah. But mechanics are the same, you sell Singapore Fuel Oil once you have your physical price (b/l). If you want to lock the spread before loading you buy Fuj swaps and sell sing, when you load you sell the long fuj and just keep the short in Singapore. Some people just sell the freight and leave both legs open.
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Is Dated Brent correlated with European crude demand? In the event of low crude inventories and high refining margins? Or can high dated Brent reflect crude demand elsewhere?
good question, it really depends on how Brent is trading vs other benchmarks, but generally Dated is a closed ecosystem, affecting only WAF and Meds crudes. Today, with Brent weaker vs Dubai we could see derived demand to ship North Sea barrels to Asia, hence affecting dated. Having said that, Dated is traded mostly by European traders, they kind of control the game
Thannks, would you say the same for WTI/Brent? What about PADD 1 demand?
Thanks! That’s very helpful!
WTI is pretty much US centered, PADD1 is fed by pipelines, PADD5 is the most exposed to global markets
Pure GOLD! So impressed of how much I learned, top notch writing skills so a huge Thank You
save it for next article, is going to get ugly