Oil bubble BURST?
<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published August 23, 2008
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Oil trading slowdown brings out the musical chairs
With prices slipping, even 'Wall Street refiners' are getting to be more cautious
By RONNIE LIM
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(SINGAPORE) It's been pretty sluggish on the oil trading front in Singapore - especially since crude oil prices slid by some US$35 a barrel, or almost a quarter, from the record US$147.27 in the last month, sources said.
Quite a few traders are also playing musical chairs, transferring to new outfits. The so-called 'Wall Street refiners' - banks that had become oil market players during the commodities bull run - have also backed off and become more risk-averse.
'Nobody knows what's happening with oil prices. If the price breaks the US$110 a barrel support, it'll head down towards US$100,' one oil trader said. Speculative trades over US-Russian tensions however, saw prices jumping US$5 in New York on Thursday.
Oil product prices here have generally followed crude prices and 'trading of products has been very sluggish in the last 2-3 weeks,' added the trader. His guesstimate is that trading volumes have fallen by up to 20 per cent, but he cautioned that it's very difficult to give an exact figure.
That's also the reason why the Singapore refineries have cut runs, the trader said.
Singapore Refining Company (SRC) - the joint venture of Singapore Petroleum and Chevron - is said to have lowered processing rates at its 290,000 barrels per day (bpd) Jurong Island refinery by up to 7 per cent, while ExxonMobil could follow with an 8-10 per cent reduction at its 605,000 bpd facility, Reuters reported last week.
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</TD></TR></TBODY></TABLE>The reduced output at the Singapore refineries, mirroring those of South Korea and Thailand, comes as margins have been hit by weakening fuel demand.
The Beijing Olympics - the cause of all the current sporting excitement - has also partly been a cause of the current oil market downturn here.
Singapore is 'heavy' or oversupplied in middle distillates like gasoline and diesel, as no cargoes are moving to China, which had been stocking up supplies ahead of the games, the trader told BT.
'No way - don't even think about it. We don't expect to sell to China till the year-end, when perhaps they will start buying some diesel for heating purposes,' he added.
His comments reinforce a report in the Asian Wall Street Journal on Wednesday, which quoted a Sinopec official as saying that China has indefinitely suspended gasoline and diesel imports and would resume imports depending on market conditions.
This is expected to weigh on Asian fuel prices and aggravate an oversupply in Singapore, where the Chinese oil giant has been a major buyer, the report added.
'While middle distillates are down, fuel oil on the other hand is back from the doldrums and has seen a pick-up in the last month,' another trader said.
The trading slowdown in Singapore has been especially discernible in paper or derivative oil trades, more so than in physical oil trades.
'The 25 per cent fall in oil prices in one month, from the earlier bull market, is bound to have had some casualties,' he said.
The banks that trade oil derivatives like Morgan Stanley, Goldman Sachs, J Aron and Lehman Brothers have 'tightened their belts' and 'cooled' their market activity, the second trader said.
French bank BNP Paribas has shut its Asian oil derivatives desk in Singapore, relocating this to London, while Dutch-Belgian bank Fortis has also shelved its plans for a similar derivatives desk here, and instead moved this to Houston, a recent Reuters report said.
Trading in physicals by the 'pure oil' traders like Glencore, Vitol and Trafigura has also slowed in the last month, the trader said.
'A lot of people are also changing jobs, and the suspicion is that some have been let go,' he added.
BT reported earlier this month that due to difficult market conditions, China Aviation Oil, which had planned to resume oil trading in the second half - after coming back from US$550 million of losses from a 2004 speculative derivatives trading scandal - has decided to postpone this.
In the first half, traders earlier told BT that Singapore oil trading volumes had fallen by what they said was an unprecedented 25-35 per cent.
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<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published August 23, 2008
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Oil trading slowdown brings out the musical chairs
With prices slipping, even 'Wall Street refiners' are getting to be more cautious
By RONNIE LIM
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</TD><TD>Feedback</TD></TR></TBODY></TABLE>(SINGAPORE) It's been pretty sluggish on the oil trading front in Singapore - especially since crude oil prices slid by some US$35 a barrel, or almost a quarter, from the record US$147.27 in the last month, sources said.
Quite a few traders are also playing musical chairs, transferring to new outfits. The so-called 'Wall Street refiners' - banks that had become oil market players during the commodities bull run - have also backed off and become more risk-averse.
'Nobody knows what's happening with oil prices. If the price breaks the US$110 a barrel support, it'll head down towards US$100,' one oil trader said. Speculative trades over US-Russian tensions however, saw prices jumping US$5 in New York on Thursday.
Oil product prices here have generally followed crude prices and 'trading of products has been very sluggish in the last 2-3 weeks,' added the trader. His guesstimate is that trading volumes have fallen by up to 20 per cent, but he cautioned that it's very difficult to give an exact figure.
That's also the reason why the Singapore refineries have cut runs, the trader said.
Singapore Refining Company (SRC) - the joint venture of Singapore Petroleum and Chevron - is said to have lowered processing rates at its 290,000 barrels per day (bpd) Jurong Island refinery by up to 7 per cent, while ExxonMobil could follow with an 8-10 per cent reduction at its 605,000 bpd facility, Reuters reported last week.
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The Beijing Olympics - the cause of all the current sporting excitement - has also partly been a cause of the current oil market downturn here.
Singapore is 'heavy' or oversupplied in middle distillates like gasoline and diesel, as no cargoes are moving to China, which had been stocking up supplies ahead of the games, the trader told BT.
'No way - don't even think about it. We don't expect to sell to China till the year-end, when perhaps they will start buying some diesel for heating purposes,' he added.
His comments reinforce a report in the Asian Wall Street Journal on Wednesday, which quoted a Sinopec official as saying that China has indefinitely suspended gasoline and diesel imports and would resume imports depending on market conditions.
This is expected to weigh on Asian fuel prices and aggravate an oversupply in Singapore, where the Chinese oil giant has been a major buyer, the report added.
'While middle distillates are down, fuel oil on the other hand is back from the doldrums and has seen a pick-up in the last month,' another trader said.
The trading slowdown in Singapore has been especially discernible in paper or derivative oil trades, more so than in physical oil trades.
'The 25 per cent fall in oil prices in one month, from the earlier bull market, is bound to have had some casualties,' he said.
The banks that trade oil derivatives like Morgan Stanley, Goldman Sachs, J Aron and Lehman Brothers have 'tightened their belts' and 'cooled' their market activity, the second trader said.
French bank BNP Paribas has shut its Asian oil derivatives desk in Singapore, relocating this to London, while Dutch-Belgian bank Fortis has also shelved its plans for a similar derivatives desk here, and instead moved this to Houston, a recent Reuters report said.
Trading in physicals by the 'pure oil' traders like Glencore, Vitol and Trafigura has also slowed in the last month, the trader said.
'A lot of people are also changing jobs, and the suspicion is that some have been let go,' he added.
BT reported earlier this month that due to difficult market conditions, China Aviation Oil, which had planned to resume oil trading in the second half - after coming back from US$550 million of losses from a 2004 speculative derivatives trading scandal - has decided to postpone this.
In the first half, traders earlier told BT that Singapore oil trading volumes had fallen by what they said was an unprecedented 25-35 per cent.
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