UK looking at oil speculation

From the Financial Times (click here for link)

The Financial Services Authority, the UK market regulator, has called a special meeting with major oil companies, banks, hedge funds and oil brokers to review regulation in the oil and commodity market.

The meeting, scheduled for August 5, comes as US regulator have said that they intend to clamp down on financial flows into the oil and other commodities markets. The Commodity Futures Trading Commission is currently holding hearings about possible changes to position limits.

Apparently the reason for the spike in oil prices earlier this month was due to rogue trading.

The meeting organised by the FSA follows an episode of rogue trading earlier this month at PVM, the London-based oil brokerage, which triggered losses of $10m for the company and pushed oil prices to their highest level this year at $73.50 a barrel.

WTI Cushing Spot price is trading around 64 as I write this. It was down under 60 a couple of weeks ago.

OPEC has said they want the oil prices around 65 a barrel, or they would cut production, so perhaps that is the magic number.

I thought oil would fall down to around 55, but so far that hasn't happened.

Bunker Prices lower than in 2007

According to the Bunkerworld tracking for TSA, the recent bunker prices are lower than they were in 2007.

click here for link

Will Japan increase oil reserves?

Oil prices went up today. They are saying it's become militants attacked an oil pipeline in Nigeria.

I wonder if it's not because countries are now starting to stockpile oil.

China is increasing their oil reserves from 1 months supply to 3.

Now Japan is following suit.

This from Lloyd's List

JAPAN has struck a deal with an oil company in the United Arab Emirates that would see more crude oil transported to the Far East to fill an onshore reserve base.

And in May 2009, MoneyNews.com reported

Japan's business daily Nihon Keizai reported that Japan may increase its national oil reserves to the equivalent of about four months' worth of domestic consumption, or a 40 percent increase over current levels.

Government officials denied the Nikkei report.

Overall, the price should be going down. Demand is going down according to

June 29 (Bloomberg) -- The International Energy Agency, an adviser to oil-consuming nations, cut five-year forecasts for global crude demand because of the economic slump, predicting consumption won’t regain last year’s levels until 2012.

click here for article from Bloomberg

So, bunker fuel prices should be coming down too. Once all the countries are finished increasing their oil reserve stocks.

At least the good thing about this for the tanker operators is this has increased the demand for tankers. But that will be short lived.

Surplus of oil products - ships used for storage

Oil has been going up due to speculation, (as mentioned in my blog of June 14, click here) and also due to the stockpiling by China.

China's stockpile increases oil prices

Since crude oil and other commodity prices plunged last year - oil tumbled from $147 last July to nearly $33 in December - China has been rushing to build up stockpiles at bargain prices, economists say. That motive, more than a revival in actual industrial demand, has driven its recent import boom of oil, copper and other metals.

Now we are seeing such a surplus of refined oil products, that..

AN INCREASING number of very large crude carrier newbuildings are being hired to store clean petroleum products as an alternative to land-based storage.

VLCCs and suezmax tankers are being chartered straight from the delivery yard before ever taking a crude cargo, brokers have reported

Even more interesting is this comment.

“

Oil demand has been so flabby in recent months, the refiners have already run the crude and are stuck with the product,” said SSY research director Mark Jenkins.

Assuming this is true, my price target of 55.00 for oil by August may not be too far off the mark. Eventually that will lead to lower bunker fuel prices.

click here for article from Lloyd's List "VLCCS NEWBUILDS USED FOR PRODUCT TANKER STORAGE"

What price for bunker fuel?

Oil has been going up.

Personally, I think there is way too much speculation going on which is driving up the price of oil. Hedge funds and others are now buying up oil, putting them in tanker ships, and (in my opinion) manipulating the market to drive up the price.

This of course, is just my opinion.

One of my friends is investing in an oil exploration venture. I have a chance to invest, but as I think the price or oil is now artificially high, I won't be investing.

OPEC says they won't be increasing production until oil hits 100.00 a barrel.

I am guessing there will be a lot of volatility in the market in the next few months.

Maersk has a negative bunker adjustment factor

Last month I said the carriers should be offering bunker adjustment factor credits if they are truly using the price of bunker fuel as their basis.

Good news. Maersk apparently is.

I input for a container from China to West Coast USA, and these were the bunker adjustment factors for April

Current charges:
(Apr)

20'dry container USD -90
40'dry container USD -120
40'high cube dry container USD -120
45'high cube dry container USD -120


They are scheduled to go up in May to a charge of around 25.00. But this is done only because the FMC (Federal Maritime Commission) requires a carrier file any increases with 30 days notice, but decreases can be done in 1 day. So when May 1st rolls around I expect Maersk will refile their charges in line with their formula.

Good job Maersk.