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.
We are being told to expect the worst, as coronavirus numbers ramp up here in the U.K. and in many countries around the world. The Hill family are reducing our exposure to the outside world, implementing our social distancing, kissing good-bye to a steady income from our restaurant as it shuts before it has even fully opened, try to home school our 3 boys who appear to be skin grafting themselves to their computers, but please spare a thought for me if you can.
Wow, it’s been a week to forget, and it looks as if there’s more bad news on the horizon, for the markets, for energy as a whole, for LPG, as well as for you and me. Last Friday the Dow Jones stood at a hundred or so points off 26,000, and in one week it had fallen to below 21,500 points, but with a degree of “dead cat bounce”, and a positive reaction to President Trump’s emergency coronavirus declaration and financial stimulus programme, it’s jumped back up to just over 23,100 by Friday’s close. Although the President announced a buying spree, whereby the U.S.
As the freight rate for the standard Houston to Chiba voyage drops into the nineties, it’s maybe time for the VLGC owners, and disponent owners alike, to buckle-up tightly as things are about to get a little more bumpy in the LPG shipping market! But it’s not time for despair, there is light at the end of the tunnel, albeit probably not until the latter part of the year. Therefore ship owners need to react, sooner rather than later, or they could easily be left again at the back of the queue.
William Shakespeare famously wrote, “All the world’s a stage, and all the men and women merely players”. It’s something that grabbed my thoughts as I wandered the Mayfair streets from meeting to meeting last week, at a somewhat abbreviated Institute of Petroleum gathering in London. A lot of the big parties had been cancelled, many players had decided to stay at home or leave earlier than normal. It definitely struck me, as individuals in the LPG industry, that we were “merely players”, and the world was starting to act-out a scene that might take us somewhere we haven’t been before.
Once you hit your late fifties, you’re supposed to start saying, “it’s not like it was in my day”, whatever that might mean. Without doubt the politicians of today are certainly different to what I can remember, as are their advisors. In the U.K. Boris Johnson has Dominic Cummings as his chief advisor, a man who orchestrated the “Leave” campaign, as well as the stonking majority Boris won at the recent General Election, and is now advising that he is adamant on getting as many “weirdos and misfits” into the avenues of government.