Wednesday, May 20, 2020

As Bunker Prices Fall How Many Ship Owners and Traders are Ready for a Change in the Oil Market

Webinar Reveals Lack of Mitigation Should Marine Fuel Costs Rise
Shipping News Feature

US – Headquartered in Connecticut and with offices in Texas, Paris and London, LQM provides marine fuel oil brokerage and trading, risk management and tailored, outsourced procurement solutions and this week expressed concerns that, despite the currently low cost of bunker fuel, many companies seem oblivious to potential future price rises.

Nobody should need educating when it comes to the myriad factors causing fluctuations in the price of oil, however a recent webinar in which LQM polled a range of ship owners, charterers and traders showed that despite two thirds believing the price would rise in the next twelve months, only half the participants said that they currently use risk management strategies to mitigate against this possibility, causing LQM Chief Executive Daniel Rose to comment:

“This trend reflects the wider industry’s understanding of the tools available to manage bunker price volatility. But we were encouraged by the fact that three quarters of participants on our call stated that they would be interested in locking in today’s low prices. [However] we fully understand the reluctance by some owners and charterers to enter into the fuel oil futures market.

”It’s an area which leaves some overwhelmed and those with relatively small clip sizes feeling overlooked. But we’re in the unique position of being both a broker and experienced trader. We can guide potential participants through the entire process and help clients manage their specific hedging needs.”

Rose went on to opine that the fuel swaps market has independent credible benchmark pricing, robust clearing solutions and good liquidity which he says are the fundamentals for a successful futures market. Opinions as to the duration of the current market volatility were less clear-cut. 21% of the webinar participants thought that current conditions would continue only for the next three months, 32% thought between three and six months whilst 36% felt that six to 12 months a more likely scenario.