- Joined
- Jul 24, 2008
- Messages
- 33,627
- Points
- 0
<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published September 30, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Oil traders stock up - and wait for the upturn
By RONNIE LIM
<TABLE class=storyLinks border=0 cellSpacing=4 cellPadding=1 width=136 align=right><TBODY><TR class=font10><TD width=20 align=right>
</TD><TD>Email this article</TD></TR><TR class=font10><TD width=20 align=right>
</TD><TD>Print article </TD></TR><TR class=font10><TD width=20 align=right>
</TD><TD>Feedback</TD></TR></TBODY></TABLE>
(SINGAPORE) In the last three months, oil traders have been stocking up and building inventories, especially on cheap floating storage - hoping to secure higher oil prices with the global economic recovery picking up pace.
'It's essentially been a period for regrouping,' one trader told BT, in describing oil market activity here in July-September.
With third-quarter demand still weak for physical oil products, especially jet fuel (as air travel has not recovered significantly yet), oil traders have instead been more active in the futures, or paper market, BT understands.
One oil broker said that two main factors stood out in the third quarter.
One was lower oil prices, with crude oil trading rangebound between US$65 and US$73 a barrel - or half of the record US$147 last year.
'Another was inventory play,' he said.
'With a contango market, traders took advantage of cheap storage costs, especially the low costs of using oil tankers, for this purpose,' said the broker.
A contango market is a market situation in which prices in succeeding delivery months are progressively higher than in the nearest delivery month; or the opposite of backwardation.
<SCRIPT language=javascript> <!-- // Check for Mac. var strAgent; var blnMac; strAgent = navigator.userAgent; strAgent.indexOf('Mac') > 0 ? blnMac = true:blnMac = false; if (blnMac == true) { document.write('
'); } //--> </SCRIPT><TABLE border=0 cellSpacing=0 cellPadding=4 width=300 align=right><TBODY><TR><TD vAlign=top align=middle>
<!-- AdSpace --><IFRAME height=250 marginHeight=0 src="http://ads.asia1.com.sg/html.ng/site=tbto&sec=btointhenews&cat1=bnews&cat2=btointhenewsart&size=300X250" frameBorder=0 width=300 marginWidth=0 scrolling=no bordercolor="#000000"><script language='JavaScript1.1' src='http://ads.asia1.com.sg/js.ng/Params.richmedia=yes&site=tbto&sec=btointhenews&cat1=bnews&cat2=btointhenewsart&size=300X250'></script><noscript>
</noscript></IFRAME><!-- /AdSpace-->
</TD></TR></TBODY></TABLE>'All the big traders like Vitol, Glencore and Trafigura as well as a number of banks, including Morgan Stanley, are playing the inventory game, as the contango market covers the cost of storing oil and still gives them decent margins,' a trader said.
'But, of course, the oil has to find real demand eventually,' he stressed.
Playing the futures, or paper, trade has been a more viable option than physical oil trading here in Q3, most traders agreed.
'Because of the low yields, including on the US dollar, there's been speculative money moving into equities and commodities like oil,' one said.
On average, futures trading here has risen about 20 per cent, compared to the first half, estimated the broker.
'On the other hand, liquidity in the over-the- counter physicals market here has been lousy,' another trader said.
'Physical trading of jet fuel and diesel fell in Q3. Jet fuel supplies from Singapore to Chinese airports dropped as much as 40 per cent as a result of fewer people flying,' the broker estimated.
As a consequence of the lower demand, oil refinery runs here, or throughput, are also down.
Another trader complained that 'jet fuel prices have plummeted from their high of about US$180 a barrel to US$80 today - and yet some airlines are still pricing in the same jet fuel surcharges into their ticket prices'.
On market prospects in Q4, traders said that it depends on how quickly current oil inventories are run down, as well as the coming Northern Hemisphere winter, where a harsh winter will cause a spike in oil demand.
'There is also geopolitics, like Iran's latest test- firing of missiles,' one trader added.
</TD></TR></TBODY></TABLE>
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Oil traders stock up - and wait for the upturn
By RONNIE LIM
<TABLE class=storyLinks border=0 cellSpacing=4 cellPadding=1 width=136 align=right><TBODY><TR class=font10><TD width=20 align=right>
</TD><TD>Email this article</TD></TR><TR class=font10><TD width=20 align=right></TD><TD>Print article </TD></TR><TR class=font10><TD width=20 align=right></TD><TD>Feedback</TD></TR></TBODY></TABLE>(SINGAPORE) In the last three months, oil traders have been stocking up and building inventories, especially on cheap floating storage - hoping to secure higher oil prices with the global economic recovery picking up pace.
'It's essentially been a period for regrouping,' one trader told BT, in describing oil market activity here in July-September.
With third-quarter demand still weak for physical oil products, especially jet fuel (as air travel has not recovered significantly yet), oil traders have instead been more active in the futures, or paper market, BT understands.
One oil broker said that two main factors stood out in the third quarter.
One was lower oil prices, with crude oil trading rangebound between US$65 and US$73 a barrel - or half of the record US$147 last year.
'Another was inventory play,' he said.
'With a contango market, traders took advantage of cheap storage costs, especially the low costs of using oil tankers, for this purpose,' said the broker.
A contango market is a market situation in which prices in succeeding delivery months are progressively higher than in the nearest delivery month; or the opposite of backwardation.
<SCRIPT language=javascript> <!-- // Check for Mac. var strAgent; var blnMac; strAgent = navigator.userAgent; strAgent.indexOf('Mac') > 0 ? blnMac = true:blnMac = false; if (blnMac == true) { document.write('
'); } //--> </SCRIPT><TABLE border=0 cellSpacing=0 cellPadding=4 width=300 align=right><TBODY><TR><TD vAlign=top align=middle>
<!-- AdSpace --><IFRAME height=250 marginHeight=0 src="http://ads.asia1.com.sg/html.ng/site=tbto&sec=btointhenews&cat1=bnews&cat2=btointhenewsart&size=300X250" frameBorder=0 width=300 marginWidth=0 scrolling=no bordercolor="#000000"><script language='JavaScript1.1' src='http://ads.asia1.com.sg/js.ng/Params.richmedia=yes&site=tbto&sec=btointhenews&cat1=bnews&cat2=btointhenewsart&size=300X250'></script><noscript>
'But, of course, the oil has to find real demand eventually,' he stressed.
Playing the futures, or paper, trade has been a more viable option than physical oil trading here in Q3, most traders agreed.
'Because of the low yields, including on the US dollar, there's been speculative money moving into equities and commodities like oil,' one said.
On average, futures trading here has risen about 20 per cent, compared to the first half, estimated the broker.
'On the other hand, liquidity in the over-the- counter physicals market here has been lousy,' another trader said.
'Physical trading of jet fuel and diesel fell in Q3. Jet fuel supplies from Singapore to Chinese airports dropped as much as 40 per cent as a result of fewer people flying,' the broker estimated.
As a consequence of the lower demand, oil refinery runs here, or throughput, are also down.
Another trader complained that 'jet fuel prices have plummeted from their high of about US$180 a barrel to US$80 today - and yet some airlines are still pricing in the same jet fuel surcharges into their ticket prices'.
On market prospects in Q4, traders said that it depends on how quickly current oil inventories are run down, as well as the coming Northern Hemisphere winter, where a harsh winter will cause a spike in oil demand.
'There is also geopolitics, like Iran's latest test- firing of missiles,' one trader added.
</TD></TR></TBODY></TABLE>
