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.
|
|
Thursday, 04 September 14
PUNJAB STATE POWER CORPORATION LIMITED OF INDIA HAS DECIDED TO BUY IMPORTED COAL - HINDUSTAN TIMES
COALspot.com: The Punjab State Power Corporation Limited (PSPCL) has decided to buy imported coal to run its thermal plants, as reported by Hindust ...
Thursday, 04 September 14
INDONESIAN COAL MINERS MAY GET MORE TIME ON ROYALTIES - FITCH RATINGS
COALspot.com: Fitch Ratings says that coal miners in Indonesia are likely to get more time to repay the government the royalties that were set off ...
Thursday, 04 September 14
INDONESIAN COAL SWAPS SLIDE THIS PAST WEEK
COALspot.com: Indonesian coal swaps for average October 2014 decreased US$ 0.90 (-1.68%) day on day and US$ 1.80 (-3.31%) per mt week on week. The ...
Thursday, 04 September 14
CAPESIZE : SENTIMENT REMAINS POSITIVE FOR Q3/Q4 - FEARNRESEARCH
Handy
The Atlantic market has experienced more activity this week. Rates for TA´s are up about 8% w-o-w, much lead by an increasing number ...
Wednesday, 03 September 14
KOREA MIDLAND POWER CO. LTD INVITES BIDS FOR 1 MMT OF BITUMINOUS & SUB-BITUMINOUS COAL FOR BORYEONG POWER PLANT
COALspot.com: KOMIPO again in the market for 1 million tons of 5700 NAR and 4600 NAR coal for Jan – March 2015. South Korean state-owned util ...
|
|
|
Showing 3506 to 3510 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Anglo American - United Kingdom
- The Treasury - Australian Government
- Lanco Infratech Ltd - India
- Merrill Lynch Commodities Europe
- Bukit Baiduri Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Electricity Authority, New Zealand
- Trasteel International SA, Italy
- Bukit Makmur.PT - Indonesia
- Goldman Sachs - Singapore
- Globalindo Alam Lestari - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Borneo Indobara - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Videocon Industries ltd - India
- The University of Queensland
- Global Green Power PLC Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sindya Power Generating Company Private Ltd
- CNBM International Corporation - China
- Planning Commission, India
- Central Electricity Authority - India
- Ministry of Mines - Canada
- Salva Resources Pvt Ltd - India
- Medco Energi Mining Internasional
- Posco Energy - South Korea
- Thiess Contractors Indonesia
- Sojitz Corporation - Japan
- Chettinad Cement Corporation Ltd - India
- Makarim & Taira - Indonesia
- Directorate Of Revenue Intelligence - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Alfred C Toepfer International GmbH - Germany
- Intertek Mineral Services - Indonesia
- Georgia Ports Authority, United States
- Gujarat Sidhee Cement - India
- Commonwealth Bank - Australia
- Edison Trading Spa - Italy
- OPG Power Generation Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- Parliament of New Zealand
- Sarangani Energy Corporation, Philippines
- Dalmia Cement Bharat India
- Cigading International Bulk Terminal - Indonesia
- Grasim Industreis Ltd - India
- European Bulk Services B.V. - Netherlands
- Antam Resourcindo - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Heidelberg Cement - Germany
- Baramulti Group, Indonesia
- Madhucon Powers Ltd - India
- San Jose City I Power Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Metalloyd Limited - United Kingdom
- Independent Power Producers Association of India
- Pendopo Energi Batubara - Indonesia
- Attock Cement Pakistan Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Eastern Coal Council - USA
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Renaissance Capital - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Finance - Indonesia
- Kideco Jaya Agung - Indonesia
- South Luzon Thermal Energy Corporation
- Latin American Coal - Colombia
- New Zealand Coal & Carbon
- Bhatia International Limited - India
- Coastal Gujarat Power Limited - India
- Deloitte Consulting - India
- PTC India Limited - India
- Indian Energy Exchange, India
- Romanian Commodities Exchange
- PetroVietnam Power Coal Import and Supply Company
- Kaltim Prima Coal - Indonesia
- Tamil Nadu electricity Board
- Simpson Spence & Young - Indonesia
- Electricity Generating Authority of Thailand
- Power Finance Corporation Ltd., India
- Rashtriya Ispat Nigam Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Kohat Cement Company Ltd. - Pakistan
- Bukit Asam (Persero) Tbk - Indonesia
- Kepco SPC Power Corporation, Philippines
- White Energy Company Limited
- Kapuas Tunggal Persada - Indonesia
- Star Paper Mills Limited - India
- Mercuria Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Sinarmas Energy and Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- Meenaskhi Energy Private Limited - India
- Sical Logistics Limited - India
- Vizag Seaport Private Limited - India
- GVK Power & Infra Limited - India
- Manunggal Multi Energi - Indonesia
- India Bulls Power Limited - India
- Minerals Council of Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sakthi Sugars Limited - India
- Petron Corporation, Philippines
- Rio Tinto Coal - Australia
- Gujarat Electricity Regulatory Commission - India
- The State Trading Corporation of India Ltd
- Larsen & Toubro Limited - India
- Parry Sugars Refinery, India
- Straits Asia Resources Limited - Singapore
- Coalindo Energy - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Port Waratah Coal Services - Australia
- Standard Chartered Bank - UAE
- ASAPP Information Group - India
- Karbindo Abesyapradhi - Indoneisa
- Banpu Public Company Limited - Thailand
- Tata Chemicals Ltd - India
- Australian Commodity Traders Exchange
- AsiaOL BioFuels Corp., Philippines
- Agrawal Coal Company - India
- Indian Oil Corporation Limited
- PNOC Exploration Corporation - Philippines
- Bhoruka Overseas - Indonesia
- McConnell Dowell - Australia
- Asmin Koalindo Tuhup - Indonesia
- Mjunction Services Limited - India
- ICICI Bank Limited - India
- Bayan Resources Tbk. - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Australian Coal Association
- GN Power Mariveles Coal Plant, Philippines
- MS Steel International - UAE
- Altura Mining Limited, Indonesia
- Malabar Cements Ltd - India
- SMC Global Power, Philippines
- Maheswari Brothers Coal Limited - India
- Global Business Power Corporation, Philippines
- Aditya Birla Group - India
- Semirara Mining Corp, Philippines
- Barasentosa Lestari - Indonesia
- Toyota Tsusho Corporation, Japan
- SMG Consultants - Indonesia
- LBH Netherlands Bv - Netherlands
- Formosa Plastics Group - Taiwan
- Miang Besar Coal Terminal - Indonesia
- Carbofer General Trading SA - India
- CIMB Investment Bank - Malaysia
- Energy Development Corp, Philippines
- Savvy Resources Ltd - HongKong
- Vijayanagar Sugar Pvt Ltd - India
- Africa Commodities Group - South Africa
- Indika Energy - Indonesia
- Oldendorff Carriers - Singapore
- IEA Clean Coal Centre - UK
- Billiton Holdings Pty Ltd - Australia
- VISA Power Limited - India
- Interocean Group of Companies - India
- Semirara Mining and Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Bulk Trading Sa - Switzerland
- Ind-Barath Power Infra Limited - India
- Bharathi Cement Corporation - India
- Central Java Power - Indonesia
- Uttam Galva Steels Limited - India
- Mercator Lines Limited - India
- GMR Energy Limited - India
- Therma Luzon, Inc, Philippines
- Jaiprakash Power Ventures ltd
- Wilmar Investment Holdings
- Singapore Mercantile Exchange
- Leighton Contractors Pty Ltd - Australia
- Ambuja Cements Ltd - India
- Thai Mozambique Logistica
- Global Coal Blending Company Limited - Australia
- Orica Australia Pty. Ltd.
- Eastern Energy - Thailand
- Aboitiz Power Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Cement Manufacturers Association - India
- Indonesian Coal Mining Association
- Indogreen Group - Indonesia
- Bhushan Steel Limited - India
- Vedanta Resources Plc - India
- Kalimantan Lumbung Energi - Indonesia
- Chamber of Mines of South Africa
- London Commodity Brokers - England
- Riau Bara Harum - Indonesia
- Coal and Oil Company - UAE
- Meralco Power Generation, Philippines
- Marubeni Corporation - India
- Kartika Selabumi Mining - Indonesia
- Economic Council, Georgia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mintek Dendrill Indonesia
- Xindia Steels Limited - India
- Energy Link Ltd, New Zealand
- Wood Mackenzie - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Essar Steel Hazira Ltd - India
- Timah Investasi Mineral - Indoneisa
- Bangladesh Power Developement Board
- GAC Shipping (India) Pvt Ltd
- Gujarat Mineral Development Corp Ltd - India
- Karaikal Port Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Orica Mining Services - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Siam City Cement - Thailand
- Ministry of Transport, Egypt
- Indo Tambangraya Megah - Indonesia
- SN Aboitiz Power Inc, Philippines
- Siam City Cement PLC, Thailand
- PowerSource Philippines DevCo
|
| |
| |
|
