We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
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
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Sunday, 07 September 14
SHIPMANAGERS SUPERVISION CONTRACT FOR NEWBUILDS - BIMCO
Shipmanagers are frequently called upon by their owner clients to supervise newbuilding projects on their behalf. The scope of the manager’s ...
Saturday, 06 September 14
SLOW COAL EXPORT REGISTRATION RAISES CONCERNS - THE JAKARTA POST
Several coal mining companies have yet to receive the go-ahead from the Energy and Mineral Resources Ministry to obtain exporting licenses, leading ...
Saturday, 06 September 14
DRY BULK MARKET'S PROSPECTS ARE IMPROVING, DESPITE WEAK SECOND QUARTER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has been rebounding during the past month, with the Baltic Dry Index (BDI) ended the week on a high note, reaching 1,155 points ...
Saturday, 06 September 14
INDONESIA WANTS TO REGULATE COAL DEALS - THE TELEGRAPH INDIA
Indonesia has raised concerns about suspected coal deals struck between overseas buyers and its unregistered domestic miners, the telegraph India r ...
Friday, 05 September 14
U.S. PRODUCED 19.2 MMST OF COAL LAST WEEK
COALspot.com – United States the world's second largest coal producer, produced approximately 19.20 million short tons (mmst) of coal in ...
|
|
|
Showing 3501 to 3505 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Kohat Cement Company Ltd. - Pakistan
- South Luzon Thermal Energy Corporation
- Ind-Barath Power Infra Limited - India
- Gujarat Electricity Regulatory Commission - India
- OPG Power Generation Pvt Ltd - India
- ASAPP Information Group - India
- Maheswari Brothers Coal Limited - India
- CIMB Investment Bank - Malaysia
- TeaM Sual Corporation - Philippines
- Rio Tinto Coal - Australia
- Energy Link Ltd, New Zealand
- Romanian Commodities Exchange
- Indian Energy Exchange, India
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Finance - Indonesia
- Straits Asia Resources Limited - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Essar Steel Hazira Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Uttam Galva Steels Limited - India
- Minerals Council of Australia
- Australian Coal Association
- Ministry of Mines - Canada
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Gujarat Mineral Development Corp Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Wood Mackenzie - Singapore
- Tata Chemicals Ltd - India
- Bhatia International Limited - India
- Sinarmas Energy and Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- Gujarat Sidhee Cement - India
- Directorate Of Revenue Intelligence - India
- Eastern Coal Council - USA
- Krishnapatnam Port Company Ltd. - India
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Rashtriya Ispat Nigam Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Trasteel International SA, Italy
- Thai Mozambique Logistica
- McConnell Dowell - Australia
- Banpu Public Company Limited - Thailand
- Baramulti Group, Indonesia
- Meenaskhi Energy Private Limited - India
- London Commodity Brokers - England
- Dalmia Cement Bharat India
- Samtan Co., Ltd - South Korea
- Wilmar Investment Holdings
- Sakthi Sugars Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Bayan Resources Tbk. - Indonesia
- Economic Council, Georgia
- India Bulls Power Limited - India
- Indian Oil Corporation Limited
- The Treasury - Australian Government
- VISA Power Limited - India
- Videocon Industries ltd - India
- Jaiprakash Power Ventures ltd
- ICICI Bank Limited - India
- Carbofer General Trading SA - India
- Parliament of New Zealand
- Mjunction Services Limited - India
- Aditya Birla Group - India
- Karaikal Port Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- GVK Power & Infra Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Cement Manufacturers Association - India
- SMG Consultants - Indonesia
- Thiess Contractors Indonesia
- Siam City Cement PLC, Thailand
- Global Green Power PLC Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- PNOC Exploration Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Eastern Energy - Thailand
- Bharathi Cement Corporation - India
- Kumho Petrochemical, South Korea
- Star Paper Mills Limited - India
- Savvy Resources Ltd - HongKong
- Petron Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Bhoruka Overseas - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Sarangani Energy Corporation, Philippines
- Anglo American - United Kingdom
- Mercator Lines Limited - India
- Central Java Power - Indonesia
- Energy Development Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Intertek Mineral Services - Indonesia
- Electricity Authority, New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Singapore Mercantile Exchange
- Grasim Industreis Ltd - India
- Indo Tambangraya Megah - Indonesia
- Orica Mining Services - Indonesia
- Coalindo Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- Georgia Ports Authority, United States
- The State Trading Corporation of India Ltd
- Renaissance Capital - South Africa
- Lanco Infratech Ltd - India
- Medco Energi Mining Internasional
- Agrawal Coal Company - India
- Tamil Nadu electricity Board
- Manunggal Multi Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Barasentosa Lestari - Indonesia
- Vizag Seaport Private Limited - India
- GMR Energy Limited - India
- Makarim & Taira - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Edison Trading Spa - Italy
- Independent Power Producers Association of India
- Bukit Makmur.PT - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Mercuria Energy - Indonesia
- Planning Commission, India
- Metalloyd Limited - United Kingdom
- Iligan Light & Power Inc, Philippines
- IHS Mccloskey Coal Group - USA
- Port Waratah Coal Services - Australia
- Attock Cement Pakistan Limited
- Sical Logistics Limited - India
- Power Finance Corporation Ltd., India
- Central Electricity Authority - India
- Parry Sugars Refinery, India
- Bangladesh Power Developement Board
- Simpson Spence & Young - Indonesia
- Standard Chartered Bank - UAE
- Chamber of Mines of South Africa
- Interocean Group of Companies - India
- Aboitiz Power Corporation - Philippines
- International Coal Ventures Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Cigading International Bulk Terminal - Indonesia
- New Zealand Coal & Carbon
- CNBM International Corporation - China
- Deloitte Consulting - India
- Marubeni Corporation - India
- Latin American Coal - Colombia
- Vedanta Resources Plc - India
- Riau Bara Harum - Indonesia
- Commonwealth Bank - Australia
- MS Steel International - UAE
- Merrill Lynch Commodities Europe
- Madhucon Powers Ltd - India
- Coastal Gujarat Power Limited - India
- Jindal Steel & Power Ltd - India
- PTC India Limited - India
- Bhushan Steel Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Goldman Sachs - Singapore
- Oldendorff Carriers - Singapore
- Global Business Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- SMC Global Power, Philippines
- Malabar Cements Ltd - India
- Antam Resourcindo - Indonesia
- Indonesian Coal Mining Association
- Kaltim Prima Coal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Australian Commodity Traders Exchange
- Jorong Barutama Greston.PT - Indonesia
- IEA Clean Coal Centre - UK
- Kalimantan Lumbung Energi - Indonesia
- Altura Mining Limited, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Siam City Cement - Thailand
- Global Coal Blending Company Limited - Australia
- PowerSource Philippines DevCo
- Mintek Dendrill Indonesia
- Indika Energy - Indonesia
- Meralco Power Generation, Philippines
- The University of Queensland
- Leighton Contractors Pty Ltd - Australia
- Larsen & Toubro Limited - India
- Posco Energy - South Korea
- Kideco Jaya Agung - Indonesia
- Kobexindo Tractors - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- Formosa Plastics Group - Taiwan
- White Energy Company Limited
- Africa Commodities Group - South Africa
- Billiton Holdings Pty Ltd - Australia
- Ministry of Transport, Egypt
- Indogreen Group - Indonesia
- Orica Australia Pty. Ltd.
- Price Waterhouse Coopers - Russia
- Xindia Steels Limited - India
- Toyota Tsusho Corporation, Japan
- Globalindo Alam Lestari - Indonesia
- Electricity Generating Authority of Thailand
- Sindya Power Generating Company Private Ltd
- Coal and Oil Company - UAE
- San Jose City I Power Corp, Philippines
- Bulk Trading Sa - Switzerland
- Sree Jayajothi Cements Limited - India
- Ambuja Cements Ltd - India
- Semirara Mining Corp, Philippines
- Sojitz Corporation - Japan
- Borneo Indobara - Indonesia
- Heidelberg Cement - Germany
- Offshore Bulk Terminal Pte Ltd, Singapore
- Salva Resources Pvt Ltd - India
|
| |
| |
|
