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.
|
|
Monday, 25 August 14
4TH ANNUAL FLOATING TERMINALS
4th Annual Floating Terminals
18-20 Nov 2014
Intercontinental Jakarta Midplaza,
Indonesia
Web Site
The Floating Terminal c ...
Monday, 25 August 14
THE BALTIC DRY IS JUMPING, BUT DON'T DRAW ANY BROAD CONCLUSIONS - NASDAQ
Those who consistently preach doom and gloom and see an economic apocalypse around every corner would make me laugh if it weren’t for the fac ...
Monday, 25 August 14
COAL CEOS: DEMISE OF COAL 'EXAGGERATED' - MARK WILCOX
By Mark Wilcox
Heads of some of the largest coal companies in Wyoming are saying the demise of coal has been exaggerated, though the industry def ...
Monday, 25 August 14
INDO COAL SWAPS W-O-W: NEGATIVE; M-O-M: POSITIVE
COALspot.com: Indonesian coal swaps for average September 2014 decreased US$ 0.15 (-0.28%) day on day and US$ 0.65 (-1.19%) per mt week on week. Th ...
Monday, 25 August 14
API 8 CFR SOUTH CHINA COAL SWAP GAINED DAY OVER DAY AND MONTH OVER MONTH
COALspot.com: API 8 CFR South China Coal swap for delivery in September 2014 increased US$ 0.30 (+0.44%) day on day and decreased US$ 0.20 (- ...
|
|
|
Showing 3526 to 3530 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Cement Manufacturers Association - India
- SMC Global Power, Philippines
- Chettinad Cement Corporation Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Bhushan Steel Limited - India
- Semirara Mining Corp, Philippines
- Essar Steel Hazira Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Kideco Jaya Agung - Indonesia
- ICICI Bank Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Wood Mackenzie - Singapore
- Savvy Resources Ltd - HongKong
- Mercator Lines Limited - India
- Energy Link Ltd, New Zealand
- San Jose City I Power Corp, Philippines
- Bulk Trading Sa - Switzerland
- Madhucon Powers Ltd - India
- Commonwealth Bank - Australia
- Ambuja Cements Ltd - India
- MS Steel International - UAE
- Banpu Public Company Limited - Thailand
- Meenaskhi Energy Private Limited - India
- Siam City Cement PLC, Thailand
- Kartika Selabumi Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Gujarat Electricity Regulatory Commission - India
- Marubeni Corporation - India
- CNBM International Corporation - China
- Coalindo Energy - Indonesia
- Jindal Steel & Power Ltd - India
- TeaM Sual Corporation - Philippines
- Thiess Contractors Indonesia
- Baramulti Group, Indonesia
- Bukit Baiduri Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- CIMB Investment Bank - Malaysia
- Therma Luzon, Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Orica Mining Services - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Romanian Commodities Exchange
- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- GMR Energy Limited - India
- Latin American Coal - Colombia
- Kohat Cement Company Ltd. - Pakistan
- Georgia Ports Authority, United States
- Bayan Resources Tbk. - Indonesia
- Indo Tambangraya Megah - Indonesia
- Tata Chemicals Ltd - India
- Planning Commission, India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Iligan Light & Power Inc, Philippines
- Merrill Lynch Commodities Europe
- Aboitiz Power Corporation - Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Electricity Authority, New Zealand
- PTC India Limited - India
- The University of Queensland
- Barasentosa Lestari - Indonesia
- Parry Sugars Refinery, India
- Vedanta Resources Plc - India
- OPG Power Generation Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Edison Trading Spa - Italy
- Formosa Plastics Group - Taiwan
- Wilmar Investment Holdings
- Indogreen Group - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Uttam Galva Steels Limited - India
- Posco Energy - South Korea
- Agrawal Coal Company - India
- PetroVietnam Power Coal Import and Supply Company
- Neyveli Lignite Corporation Ltd, - India
- Aditya Birla Group - India
- Australian Coal Association
- Orica Australia Pty. Ltd.
- Indonesian Coal Mining Association
- Binh Thuan Hamico - Vietnam
- Salva Resources Pvt Ltd - India
- Sakthi Sugars Limited - India
- Eastern Energy - Thailand
- London Commodity Brokers - England
- Oldendorff Carriers - Singapore
- India Bulls Power Limited - India
- Trasteel International SA, Italy
- White Energy Company Limited
- Maharashtra Electricity Regulatory Commission - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Thai Mozambique Logistica
- Bangladesh Power Developement Board
- Dalmia Cement Bharat India
- Global Business Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- GAC Shipping (India) Pvt Ltd
- Straits Asia Resources Limited - Singapore
- Interocean Group of Companies - India
- Bharathi Cement Corporation - India
- Kumho Petrochemical, South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Mercuria Energy - Indonesia
- Singapore Mercantile Exchange
- Rashtriya Ispat Nigam Limited - India
- Standard Chartered Bank - UAE
- Directorate Of Revenue Intelligence - India
- Sarangani Energy Corporation, Philippines
- Xindia Steels Limited - India
- Australian Commodity Traders Exchange
- Videocon Industries ltd - India
- The State Trading Corporation of India Ltd
- GN Power Mariveles Coal Plant, Philippines
- Parliament of New Zealand
- PNOC Exploration Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Meralco Power Generation, Philippines
- Karaikal Port Pvt Ltd - India
- SMG Consultants - Indonesia
- Eastern Coal Council - USA
- Pipit Mutiara Jaya. PT, Indonesia
- Manunggal Multi Energi - Indonesia
- Central Java Power - Indonesia
- Port Waratah Coal Services - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Energy Development Corp, Philippines
- Kepco SPC Power Corporation, Philippines
- Grasim Industreis Ltd - India
- New Zealand Coal & Carbon
- Star Paper Mills Limited - India
- Alfred C Toepfer International GmbH - Germany
- Riau Bara Harum - Indonesia
- Medco Energi Mining Internasional
- Attock Cement Pakistan Limited
- PowerSource Philippines DevCo
- Ministry of Mines - Canada
- Borneo Indobara - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Sojitz Corporation - Japan
- Indian Energy Exchange, India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coal and Oil Company - UAE
- Mintek Dendrill Indonesia
- Bhatia International Limited - India
- VISA Power Limited - India
- SN Aboitiz Power Inc, Philippines
- The Treasury - Australian Government
- Vizag Seaport Private Limited - India
- McConnell Dowell - Australia
- Deloitte Consulting - India
- Renaissance Capital - South Africa
- Kaltim Prima Coal - Indonesia
- Simpson Spence & Young - Indonesia
- Altura Mining Limited, Indonesia
- Petron Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Heidelberg Cement - Germany
- South Luzon Thermal Energy Corporation
- Siam City Cement - Thailand
- Goldman Sachs - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Intertek Mineral Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Karbindo Abesyapradhi - Indoneisa
- Lanco Infratech Ltd - India
- Indika Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- Malabar Cements Ltd - India
- Minerals Council of Australia
- GVK Power & Infra Limited - India
- Central Electricity Authority - India
- Ministry of Transport, Egypt
- Bhoruka Overseas - Indonesia
- Economic Council, Georgia
- Miang Besar Coal Terminal - Indonesia
- Larsen & Toubro Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- Makarim & Taira - Indonesia
- Globalindo Alam Lestari - Indonesia
- International Coal Ventures Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Krishnapatnam Port Company Ltd. - India
- Power Finance Corporation Ltd., India
- ASAPP Information Group - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Cigading International Bulk Terminal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Africa Commodities Group - South Africa
- Ministry of Finance - Indonesia
- Chamber of Mines of South Africa
- Gujarat Sidhee Cement - India
- Carbofer General Trading SA - India
- Toyota Tsusho Corporation, Japan
- Electricity Generating Authority of Thailand
- Tamil Nadu electricity Board
- Global Green Power PLC Corporation, Philippines
- Antam Resourcindo - Indonesia
- IHS Mccloskey Coal Group - USA
- European Bulk Services B.V. - Netherlands
- Metalloyd Limited - United Kingdom
- Ceylon Electricity Board - Sri Lanka
- Global Coal Blending Company Limited - Australia
- Rio Tinto Coal - Australia
- Mjunction Services Limited - India
- Sical Logistics Limited - India
- Independent Power Producers Association of India
- Indian Oil Corporation Limited
- Sindya Power Generating Company Private Ltd
- Holcim Trading Pte Ltd - Singapore
|
| |
| |
|
