As the week came to an end, there was an increasing feeling that we’re actually in a dangerous place. Have we tried to kick-start the major economies too soon, especially in Europe and parts of the U.S.? Europe was starting to feel as if it had coronavirus under control, but cases are back on the up, while the rest of the world is still battling phase one, albeit in a slight time lapse. Our Boris has put a halt on lockdown easing as grim virus figures emerged in the U.K. this week.
It’s funny looking at the relationship between the antics of the crude oil market and the movement in LPG. One always seems to be following the other, but the timing appears to be out of kilter, but why? I know LPG players didn’t fall into the trap of the massive drop in WTI, heading negative in a technical “who’s left holding the baby” scenario, nor the resultant cataclysmic production forecasts, especially in the U.S., that were being rushed out as a result. In addition the U.S.
Do you remember the repetitive song by The Police, unimaginatively called “De Do Do Do De Da Da Da”, with that elegiac verse “Poets, Priests and Politicians”? Well, I’m probably not thinking of the priesthood at this particular time, but I have a few words to say about “Pundits and Politicians”! However you might be viewing the current LPG market, you’ll have to have an eye on what stage we are presently at in the chronology of coronavirus, and what’s being said.
I woke up this morning, looked quickly out of the window, and was thankfully reminded that we’re still in the middle of summer, albeit recovering from the ravages of the coronavirus pandemic, having only just survived the trauma of home schooling, and looking forward to the “new normal”, tinged with the fears of an extreme economic slowdown. It made me think that there was probably a little more to life in the unique world of LPG than the U.S./ Asia ARB, EIA numbers, the FEI, Baltic and of course the Saudi Aramco CP.
Talking of circles, I was intrigued about this oil tanker called “Willowy”. The ship’s officers were called to the bridge to be told their ship, and four others close-by, were sailing in circles, unable to use their steering, and potentially close to a collision, but why was this happening? The ships were in the South Atlantic off South Africa, an area notorious for strong currents, but not where the four ships were located. And this wasn’t the first such incident reported, previously it had occurred close to a Chinese oil facility, as well as in the Straits of Hormuz.
For a lot of internationally based LPG players the U.S. market is a somewhat intimidating place, pipelines are running here, there and everywhere, dominating the logistical landscape, there are no ships to spot moving LPG around the vast U.S. coastline sending out a clue or two about what is happening, and to top it all, it’s called NGL, then throw in this stuff called ethane, which is pronounced somewhat differently this side of the pond, and there’s natural gasoline to boot. Oh yes, they even split mixed butanes up between normal and iso.
Who would have believed it, only two months ago the price of WTI went negative, although mainly driven as a reaction to a closing date on a monthly futures contract, but it was signifying utter turmoil in the oil sector, where demand had collapsed, OPEC had buckled, and any oil related orifice available was being used to store excess barrels of crude oil. The pandemic wave of coronavirus had engulfed the western world like nothing had done before it. “V” shapes became elongated “ticks” as economists scrambled to make sense of the ever changing data and unpredictable future.
The LPG market takes pointers from a number of direct and indirect sources, not least the crude oil and overall energy scene, but also the global array of economic data and indicators. The last few months have been no different, especially as we emerge from what’s been the biggest shock to both our lives and to the world’s economy, probably in living memory. And then there’s the correlation between what we think will take place versus what is actually happening, in LPG terms, between gazing into the forward market crystal ball, against the rolling reality of physical transactions.
We all know that energy markets are fully loaded with the unrelenting volatility of price movements, the apparent boom and bust cycles, and the scaremongering of the dreaded prognosticators. All those with the words “trader” in their automated email sign-offs are supposed to love the “v” word, take it away and they end-up in a state of despair, but fully exposing themselves to the market’s precarious unpredictability has become a thing of the past. A few decades ago we found the only way to switch-off was to drink beers at night and wait for its anesthetic properties to kick-in.
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.