In yesterday’s SIMON SAYS we started to explore the Saudi Aramco Contract Price (CP) and asked the question “how do parties really make money from CP related contracts out of the Middle East?” We went a little way down memory lane, but what seemed to be the answer, maybe not the only answer, lay in the end year activities, both calendar and fiscal, of the Japanese LPG importers and the value of the product they hold in storage.
There’s nothing that makes a ship owner smile more than seeing a decent number of ships getting fixed in the market, of course the grin widens if the rates are also edging up, and if the levels are jumping up, well I’ll leave that one for you to decide. As all eyes last week were focused on the consequences of the drone attack at Saudi Arabia’s key crude oil processing facility in Abqaiq, charterers hesitated for a while, but not for that long.
Yesterday I explored the implications for LPG as a result of last week’s drone attack on the Abqaiq crude processing facility in Saudi Arabia, that the damage is probably far greater than has been explained so far, and that Saudi Arabia’s current focus is on security, crude oil and the impending IPO of Aramco.
As the geo-political world enters that post incident period of claim and counter claim, the markets are trying to gauge what this means for numbers, the direction is clearly up. But there seems to be discomfort or even distress, trying to work out how far prices could move up, and how long this will all last, not just until we get to know the true extent of the damage, but also how long it’s going to take to repair.
The power struggle in the Middle East may well have taken a new and more immediate twist, potentially sending huge shockwaves through the oil markets once the weekend is over and electronic trading commences Sunday evening. As a result, the whole international LPG complex faces a major jolt, not only on the back of any spike in crude oil pricing but also potentially as a result of production cutbacks in Saudi Arabia.