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Saturday, 27 September 14
OIL MARKET CONTANGO: SPECULATION ON FUTURE PRICES CAN BE A RISKY MOVE, EVEN FOR TANKER OWNERS HELLENIC SHIPPING NEWS
.jpg) Despite the fact that tanker owners can easily use their vessels as floating storage units for oil, in a bid to exploit the current oil market dynamics, a recent analysis from Mcquilling Services noted that it could prove to be a risky move, as today’s contango is rather different that the one observed during the 2009-2010 period. Just for reminders, after the collapse of the global financial system in 2008, crude oil forward curves moved into steep contango. Fortunes were made in storage asset plays in 2009-2010, which is likely the reason that so much attention is being devoted to the topic today; however, the contango is inherently different today than it was after The Great Recession.
According to Mcquilling, “as the US energy revolution continues to develop, global crude oil supply and demand dynamics have begun to evolve. Improvements to hydraulic fracturing processes have helped the US become the world’s largest crude oil producer. However, due to a protectionist energy policy, US produced crude oil cannot be exported, apart from a few exceptions. This scenario has created a shift in crude oil trade flows and has also impacted regional crude oil pricing. The US now requires less crude imports to meet domestic demand and the new supply and demand rebalances have reduced the longstanding price interdependency between US and foreign crudes. One interesting development that has been closely monitored this summer is the price polarity between the US and European crude oil benchmarks. WTI, the US benchmark, is currently in a forward curve formation referred to as backwardation, while Brent, the European benchmark, has moved into a forward curve formation referred to as contango. In a backwardated market futures prices are lower than spot prices; and in a contangoed market, futures prices are higher than spot prices. A variety of trading strategies are developed when forward commodity curves move into these forward curve formations”.
Mcquilling Services added that “the shape and depth of the forward curve can assist the trader in developing hedging or speculative strategies. Commodity storage is a potentially lucrative strategy that is implemented when futures curves move into contango, predicated on the assumption that you can store a commodity today to sell at a higher spot price in the future. Many analysts and journalists have correctly identified the current contango phenomenon in the Brent curve, and many have begun to link the contango with cargo asset plays utilizing crude oil tankers for crude storage in the Atlantic Basin. However, there are a variety of considerations that must be taken into account when evaluating floating storage plays, which many recent reports have overlooked”.
Meanwhile, “the cost of carrying, or storing, the commodity and the perceived price the cargo can fetch in the future are critical components of a storage asset play. In the floating storage case, the cost of the vessel, financing, insurance and crew represent the bulk of the carrying costs. Storage costs are not uniform, though. For instance, if you are a tanker owner, crude oil producer or are bank with low financing costs, your cost of implementing a floating storage play will likely be lower than other non-strategic speculators. That said, current market conditions make a pretty weak case for floating storage regardless of strategic positioning”.
According to the analysts, “storage plays are normally exercised as a result of bullish sentiment; but, contango curves don’t necessarily reflect a bullish market. It is our view that the current contango is more likely a result of short-term over-supply in the Atlantic Basin, which has driven down near-term prices. The shallow Brent contango levels out by the end of 2014, not leaving much meat on the bone for speculators. In other words, we do not see a long-term increase in crude oil demand leading to higher prices in the future that would justify putting oil into storage at current prices to sell in a future spot market at a premium. Another meaningful difference between today’s contango and the contango of 2009 is the price level at which the contango curves formed, respectively. In 2009, the contango took shape as markets started to recover after the economic collapse. As the global economy weakened, so did crude oil demand. As the global economy recovered, so did crude oil demand. From the bottom of the collapse, there was abundant upside price potential that coincided with increasing crude oil demand. In contrast, today’s contango formed at the top of a multi-year rally. It is our view that we are at the top of a consolidating price range and without substantial changes to demand, prices will likely not have much room to the upside”.
Mcquilling said that “we still perceive the physical crude oil markets to be soft. When global crude oil production decreases at a slower pace than demand, some cargoes may sit on the water and wait for off-takers. We believe this is the case in Asia and the Atlantic Basin. When there is a surplus of crude oil, savvy traders could delay purchasing cargoes until the over-supply starts to dissipate and prices reach a bottom. There is some evidence hinting that this may be taking place. Last week, the US Energy Information Administration, the energy statistics arm of the Department of Energy, released inventory data revealing that US East coast refiners imported 460,000 barrels, as PADD 1 refinery utilization increased by 10.2%.
US crude oil production has been so robust that geopolitical turmoil in key producing nations like Iraq and Libya seem to have little effect on prices. While US production is expected to peak within the next several years, the one to three year global supply forecast is very strong. At the same time, global crude oil demand forecasts are being pared back. The International Energy Agency (IEA) has reduced its global demand target for 2015 to 92.6 million b/d. The revision was made after historical demand figures showed that 2Q2014 demand was the lowest in the last 10 quarters. In correlation with the IEA forecast, OPEC has also indicated that it will likely reduce production volumes by 500,000 b/d in 2015. While floating storage is an enticing strategy to consider, a meaningful shift in crude oil supply, demand and futures prices would have to transpire for this contango to be more than an interesting phenomenon”, it concluded.
Source: Nikos Roussanoglou, Hellenic Shipping News
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Tuesday, 09 September 14
PORT OF NEWCASTLE SHIPPED 13.207 MTN OF COAL IN AUGUST; TRADE VALUE AROUND $1.17 BILLION
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port, has shipped $1.17 billio ...
Monday, 08 September 14
SUB-BIT FOB INDONESIA COAL SWAP UNDERPERFORMED LAST WEEK
COALspot.com: Indonesian coal swaps for average October 2014 decreased US$ 0.20 (-0.39%) day on day and US$ 1.60 (-3.04%) per mt week on week. The ...
Monday, 08 September 14
API 8 CFR SOUTH CHINA COAL SWAP FOR DELIVERY JAN'15 CLOSED AT US$ 66.30 PMT W/E 5 SEPTEMBER 2014; LOST 5.15% M-O-M
COALspot.com: API 8 CFR South China Coal swap for delivery in October 2014 decreased US$ 0.15 (-0.23%) day on day and US$ 2.05 (-3.04%) week on wee ...
Monday, 08 September 14
CHINESE IRON ORE IMPORT DEMAND VERY STRONG - COMMODORE
COALspot.com: 30 dry bulk vessels were chartered in the spot iron ore market last week to haul iron ore import cargoes to Chinese buyers.
Acco ...
Sunday, 07 September 14
FREIGHT MARKET CONTINUED TO BE FIRM IN SPITE OF CAPE'S THIS WEEK'S WEAK PERFORMANCE
COALspot.com: BDI up by 0.7 pct week on week and closed at 1155 points this week. The Baltic Dry Index is a composite of three sub-indexes that mea ...
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- Dalmia Cement Bharat India
- Bhoruka Overseas - Indonesia
- Bukit Makmur.PT - Indonesia
- Electricity Generating Authority of Thailand
- Kumho Petrochemical, South Korea
- Vizag Seaport Private Limited - India
- Savvy Resources Ltd - HongKong
- Billiton Holdings Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Leighton Contractors Pty Ltd - Australia
- Coastal Gujarat Power Limited - India
- Energy Link Ltd, New Zealand
- Makarim & Taira - Indonesia
- Indika Energy - Indonesia
- Australian Commodity Traders Exchange
- IEA Clean Coal Centre - UK
- Aboitiz Power Corporation - Philippines
- LBH Netherlands Bv - Netherlands
- Orica Australia Pty. Ltd.
- Coalindo Energy - Indonesia
- GVK Power & Infra Limited - India
- Manunggal Multi Energi - Indonesia
- The State Trading Corporation of India Ltd
- Africa Commodities Group - South Africa
- Interocean Group of Companies - India
- Merrill Lynch Commodities Europe
- ICICI Bank Limited - India
- Meenaskhi Energy Private Limited - India
- Orica Mining Services - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Larsen & Toubro Limited - India
- Posco Energy - South Korea
- Commonwealth Bank - Australia
- The University of Queensland
- Therma Luzon, Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Bhushan Steel Limited - India
- Gujarat Electricity Regulatory Commission - India
- Holcim Trading Pte Ltd - Singapore
- Wilmar Investment Holdings
- Globalindo Alam Lestari - Indonesia
- Bharathi Cement Corporation - India
- Tamil Nadu electricity Board
- Economic Council, Georgia
- Grasim Industreis Ltd - India
- Intertek Mineral Services - Indonesia
- Banpu Public Company Limited - Thailand
- Toyota Tsusho Corporation, Japan
- Mjunction Services Limited - India
- Siam City Cement PLC, Thailand
- Rashtriya Ispat Nigam Limited - India
- Cement Manufacturers Association - India
- Gujarat Sidhee Cement - India
- CNBM International Corporation - China
- Malabar Cements Ltd - India
- Chamber of Mines of South Africa
- Planning Commission, India
- Sarangani Energy Corporation, Philippines
- Georgia Ports Authority, United States
- Sical Logistics Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Renaissance Capital - South Africa
- Samtan Co., Ltd - South Korea
- Antam Resourcindo - Indonesia
- Indian Oil Corporation Limited
- Rio Tinto Coal - Australia
- MS Steel International - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Indogreen Group - Indonesia
- Ministry of Transport, Egypt
- Electricity Authority, New Zealand
- Bulk Trading Sa - Switzerland
- SMC Global Power, Philippines
- Wood Mackenzie - Singapore
- Ministry of Mines - Canada
- Sojitz Corporation - Japan
- Standard Chartered Bank - UAE
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- Petron Corporation, Philippines
- Thai Mozambique Logistica
- GN Power Mariveles Coal Plant, Philippines
- Kaltim Prima Coal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Eastern Energy - Thailand
- Indo Tambangraya Megah - Indonesia
- Marubeni Corporation - India
- India Bulls Power Limited - India
- PNOC Exploration Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- Deloitte Consulting - India
- Metalloyd Limited - United Kingdom
- GAC Shipping (India) Pvt Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Karbindo Abesyapradhi - Indoneisa
- Price Waterhouse Coopers - Russia
- SMG Consultants - Indonesia
- Australian Coal Association
- Formosa Plastics Group - Taiwan
- Jaiprakash Power Ventures ltd
- Xindia Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- The Treasury - Australian Government
- ASAPP Information Group - India
- Central Electricity Authority - India
- Pendopo Energi Batubara - Indonesia
- Global Coal Blending Company Limited - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Minerals Council of Australia
- Directorate Of Revenue Intelligence - India
- Port Waratah Coal Services - Australia
- Straits Asia Resources Limited - Singapore
- Ambuja Cements Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Tata Chemicals Ltd - India
- Bukit Baiduri Energy - Indonesia
- Jindal Steel & Power Ltd - India
- IHS Mccloskey Coal Group - USA
- Siam City Cement - Thailand
- Romanian Commodities Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- Cigading International Bulk Terminal - Indonesia
- Barasentosa Lestari - Indonesia
- European Bulk Services B.V. - Netherlands
- Aditya Birla Group - India
- Pipit Mutiara Jaya. PT, Indonesia
- Riau Bara Harum - Indonesia
- Energy Development Corp, Philippines
- Ind-Barath Power Infra Limited - India
- Indonesian Coal Mining Association
- Simpson Spence & Young - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Anglo American - United Kingdom
- GMR Energy Limited - India
- Salva Resources Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Coal and Oil Company - UAE
- Videocon Industries ltd - India
- Sinarmas Energy and Mining - Indonesia
- Goldman Sachs - Singapore
- Ministry of Finance - Indonesia
- White Energy Company Limited
- Mintek Dendrill Indonesia
- Maheswari Brothers Coal Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Indian Energy Exchange, India
- Thiess Contractors Indonesia
- Star Paper Mills Limited - India
- SN Aboitiz Power Inc, Philippines
- Baramulti Group, Indonesia
- Altura Mining Limited, Indonesia
- Latin American Coal - Colombia
- Binh Thuan Hamico - Vietnam
- Maharashtra Electricity Regulatory Commission - India
- PTC India Limited - India
- Karaikal Port Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Power Finance Corporation Ltd., India
- Global Business Power Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- McConnell Dowell - Australia
- Trasteel International SA, Italy
- Semirara Mining and Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Agrawal Coal Company - India
- Sindya Power Generating Company Private Ltd
- Singapore Mercantile Exchange
- PetroVietnam Power Coal Import and Supply Company
- New Zealand Coal & Carbon
- Chettinad Cement Corporation Ltd - India
- Kobexindo Tractors - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- VISA Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Directorate General of MIneral and Coal - Indonesia
- Parliament of New Zealand
- San Jose City I Power Corp, Philippines
- Parry Sugars Refinery, India
- Semirara Mining Corp, Philippines
- Attock Cement Pakistan Limited
- Kideco Jaya Agung - Indonesia
- Essar Steel Hazira Ltd - India
- Central Java Power - Indonesia
- Borneo Indobara - Indonesia
- Iligan Light & Power Inc, Philippines
- Medco Energi Mining Internasional
- Vedanta Resources Plc - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Lanco Infratech Ltd - India
- Madhucon Powers Ltd - India
- Bangladesh Power Developement Board
- Krishnapatnam Port Company Ltd. - India
- Uttam Galva Steels Limited - India
- London Commodity Brokers - England
- Mercator Lines Limited - India
- South Luzon Thermal Energy Corporation
- TNB Fuel Sdn Bhd - Malaysia
- Bhatia International Limited - India
- Edison Trading Spa - Italy
- Heidelberg Cement - Germany
- Oldendorff Carriers - Singapore
- Meralco Power Generation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Carbofer General Trading SA - India
- Kohat Cement Company Ltd. - Pakistan
- TeaM Sual Corporation - Philippines
- Mercuria Energy - Indonesia
- Independent Power Producers Association of India
- PowerSource Philippines DevCo
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