WORLDWIDE – If anyone out there understands the complexities of the current oil market can they please comment appropriately? Whilst road haulage groups in the UK continue clamouring for a cut in duty rates Asian companies are already lowering their land based shipping rates as this week saw the fifth price fall so far this year in some states.
Pump prices in Vietnam for example have plunged 37.5% since January whilst the fuel oil intermonth swaps for July/August, the cash settlement figure traders use between the fixed price now and the floating price set at a future date, have dropped to their lowest level since the 11th June according to Bloomberg.
In the meantime US prices have only just fallen back following their recent high with concerns that the economy, and therefore demand, is slowing and the trend is apparently similar in the London market. It seems to the amateur eye that there is no continuity whatsoever in the current market. Previously OPEC made the running and the control they exercised over the global price tended to be reflected all across the world. Now, it seems local changes can have relatively major effects with the recent fire which closed a large refinery in Thailand causing a problem in that market just as a strike in Norway has caused a 15% dip in production which will doubtless affect the pump price there for a while.
Overshadowing all this is the threat that Iran will make good on its occasional threats to close the Strait of Hormuz. US and EU Sanctions are hurting the country and with up to 17 million barrels a day passing through this most important of economic waterways nerves must be frayed in many quarters. The area has seen numerous conflicts between Iranian and US forces and it is said that the US has formally warned Iran of the consequences should traffic through the Strait be impeded.
So the problem for the haulier or shipping line owner remains the same, an uncertainty around the price of fuel. Do the major companies buy their supplies with a futures contract betting that the problems will push the price higher, or should they bide their time as prices start to dip lower?
Answers on a postcard please (or add a comment below).
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