The market, and the world itself, have had a strange week. Even after half a year of the coronavirus, when the world rapidly became very abnormal indeed, we suddenly have events happening that were very difficult to foresee. Now I’m not going to spend too long talking about the trader’s DNA, yes vision. If you’ve been following the U.K. news in the last week , having the ability to “see” has grabbed the attention of most of the media, some of the public, plus an awful lot of paid and unpaid satirists.
Back in my SIMON SAYS blog on 8th March, I had asked the question, “are VLGC owners about to lose control”. It might have taken over a couple of months to evolve, but I think today we are seeing the answer. As Simon Cowell, the infamous X Factor panel critic on both sides of the pond would say, “and it’s a yes from me”. It just took a little longer than I expected, and the terms of engagement have maybe changed a little from what I had originally expected. Of course it’s all tied up with the issues associated with coronavirus, and its impact on the economy, the energy and LPG markets.
Trading the LPG market is about assessing change, predominantly on a relatively short-term basis. But hold on, we shouldn’t be taking our eyes away from the base-load volumes, or “contract tons” as we more commonly refer to them. You can see the domination of the spot deals in the market reports that hit our desks on a daily, weekly, or even monthly basis. They need to have content, they need to show change, in numbers, market situations, and maybe even a little direction. The reports also rely on the information and data that’s being produced from the daily market chatter, the weekly U.S.
Days are starting to morph into weeks, and soon we’ll be forgetting which month it is. But the powers that be are starting to see divides appearing, I won’t say cracks yet, as the debate gathers pace for an easing of lockdowns, and a return to work to galvanize what is appearing to be a worsening future economic outlook. Others want the focus to remain clearly on health and the prevention of a second COVID-19 outbreak, and let’s not forget that most of us in the world are yet to get this current outbreak really under control.
As we leave a week of subdued optimism in the oil sector, as OPEC+ cuts take shape, a wave of shut-ins hit the U.S. shale patch, and WTI pops its head again above $20/ Bbl, it’s time to bang that perpetual gong of mine again, and revisit the world of the U.S. LPG exporter. Where U.S. origin, shale fuelled, propane and butane exports have seen phenomenal growth, becoming the dominant force in the global LPG industry over the past septennium, and making one company, Enterprise, the largest exporter of LPG in the world. All U.S.
This week probably produced the mother of all shocks in the oil and gas sector, seeing the price ticker for May’s WTI crude oil futures contract heading into negative territory, not just by a dollar or two but by nearly $40/ Bbl below zero. I once remember writing a cheque to a trader for $14/ Mt to lift a horrible olefinic LPG soup from our Pembroke refinery, back in the days of $10/ Bbl world crude oil prices, but come on, this is West Texas Intermediate, a staple in the U.S., maybe “as American as apple pie”.
There’s a gulf, and I’m not simply referring to the U.S. Gulf or Arabian Gulf, I’m talking about the difference between prices now and prices in the future, between LPG and crude oil, LPG and refined products, the list goes on. Everybody appears to be in-tune with the belief that we’re currently in a coronavirus led economic “Armageddon”, but the expectation is that the world will recover, and problems today will improve by tomorrow, that’s almost true when it comes to the virus, and literally from an economic perspective.
All eyes around the world have quite rightly been focused on the dramatic and increasingly depressing news related to the coronavirus, but those who are also looking at the implications for an extremely worrying world economy, will be wondering what might come out of the urgent gathering of OPEC, OPEC+, and potentially other friends of friends this weekend. The crude oil market has been severely jolted by the demand impact of coronavirus, and a spat between alleged friends, Messrs.