This episode of Freight Up delves into the complexities of the oil market amidst escalating tensions in the Middle East, focusing on the significant impact these events have on global oil prices. Hosts Jess and David are joined by experts to discuss the recent fluctuations in oil, including the spike in Brent crude prices following geopolitical developments and the underlying economic factors contributing to market shifts. The conversation extends to dry freight and iron ore, with insights from analysts on the latest market movements and trends, particularly in relation to China's economic landscape. Additionally, the episode addresses the implications of recent hurricanes on oil production in the U.S. Gulf Coast and how these natural events intertwine with broader market dynamics. Tune in to gain a comprehensive understanding of the current state of freight and commodity markets, highlighting the intricate relationships between geopolitics, economics, and environmental factors.
Takeaways:
- The podcast highlights the recent volatility in oil prices driven by geopolitical tensions in the Middle East.
- Iron ore prices have seen significant fluctuations, influenced by Chinese economic activity and inventory levels.
- Recent hurricanes in the US Gulf Coast have temporarily impacted oil supply and prices.
- The discussion emphasized the importance of macroeconomic indicators affecting both oil and dry freight markets.
- Market sentiment remains cautious as uncertainties around OPEC cuts and global demand persist.
- China's changing tax policies on imported oil could significantly affect refinery operations and crude demand.
Companies mentioned in this episode:
- Chevron
- BP
- Shell
This podcast uses the following third-party services for analysis:
Podder - https://www.podderapp.com/privacy-policy
00:00:00
Freight up.
00:00:04
Hello and welcome back to freight up, the freight and quality
00:00:04
podcast of freight investor services.
00:00:08
My name is Jess and together with Davidate we'll be your hosts
00:00:08
as we navigate our major freight and
00:00:08
bulk commodity markets.
00:00:14
We have a bit of a special episode as we look at one commodity
00:00:14
which has been on the headlines quite a
00:00:14
lot recently, and we are of.
00:00:21
Course talking about oil.
00:00:23
Hi Everybody, from me as well.
00:00:25
But don't worry, we won't be talking only about oil as we will
00:00:25
get a regular update on dry freight
00:00:25
with Benkleng from our Copenhagen
00:00:25
office and Aopay will tell us more about
00:00:25
what is happening in China and the
00:00:25
latest news on the iron ore.
00:00:40
But as usual, let's first look at the latest news and the index
00:00:40
movements of the last two weeks.
00:00:49
The us economy grew at an annualized rate of 3% in the second
00:00:49
quarter of this year, unchanged from
00:00:49
the second estimate and above an
00:00:49
upwardly revised 1.6% expansion in
00:00:49
the first quarter.
00:01:00
Particularly positive the non farm payrolls number as the US added
00:01:00
254 jobs in September 2024, much
00:01:00
higher than an upwardly revised 159
00:01:00
in August.
00:01:13
The market forecast was one hundred forty k.
00:01:16
The american unemployment rate fell to 4.1% in September, lowest
00:01:16
in three months, down from 4.2% the
00:01:16
previous month.
00:01:24
In Asia, the Keishin China general manufacturing PMI fell to
00:01:24
49.3 in September from August 50.4,
00:01:24
missing markets forecast of 50.5
00:01:24
and pointing to the lowest level since
00:01:24
July 2023.
00:01:40
In Japan, the Bank of Japan's index for the big manufacturer sentiment
00:01:40
stood at 13 in the q three of 2024,
00:01:40
and this was unchanged for the second
00:01:40
straight period, also in line with
00:01:40
market expectations.
00:01:52
Positive the consumer confidence index in Japan, which
00:01:52
increased to 36.9 in September from
00:01:52
August 36.7.
00:02:00
The number was, however, below market forecast of 37.1.
00:02:06
Now what about the market movements of the last two weeks?
00:02:10
Let's take a quick look on the capes front.
00:02:14
The C five TC took a bit of an up and down as it gained considerable
00:02:14
ground on the 1 October at $29, 299 and
00:02:14
has lost over five k, reaching $24
00:02:14
yesterday.
00:02:29
The P five DC instead has lost ground during the past two weeks
00:02:29
as it started at $14 and traded
00:02:29
down to $12 yesterday.
00:02:40
The S ten Tc has traded in a $500 range as yesterday was at $13
00:02:40
and on the 24 September at 14.
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Even a narrower range for the handy as the HS 70 C went slightly
00:02:52
up $100 from twelve thousand seven hundred
00:02:52
ninety five dollars to twelve thousand
00:02:52
nine hundred and eleven dollars yesterday.
00:03:04
Iron ore has gained considerable ground, going from $94.60
00:03:04
two weeks ago to $108 on the 1 October,
00:03:04
moderating slightly to $104.65 yesterday.
00:03:18
And regarding fuel oil, we'll chat about that later on.
00:03:23
Now let's talk about drive freight with Ben Klang.
00:03:25
Hi Ben, could you please talk me through the dry FFA market movements
00:03:25
for the last week?
00:03:31
Yes.
00:03:31
Hi Jeff, with pleasure on the cavesize market experience.
00:03:37
Some continued downwards momentum throughout last week.
00:03:41
On Monday last week, fresh stimulus from the chinese central
00:03:41
bank along with positive response in iron
00:03:41
ore and rebar prices trickled in
00:03:41
to the dry freight market.
00:03:52
This sentiment helped capesize contract test recent highs in a high
00:03:52
volume session, with Q four trading
00:03:52
up to 29 and November reaching 28.
00:04:06
However, with the arrival of Tuesday and the start of Golden Week
00:04:06
last week, conditions began to soften
00:04:06
in both the Atlantic and the Pacific
00:04:06
basin.
00:04:16
Capesize rates were under pressure with October dropping sharply
00:04:16
to 29, down $2.
00:04:24
This sell off accelerated into Wednesday.
00:04:27
The index plunged by $1 to 28 and October was seen trading
00:04:27
at 28 and 26 for November.
00:04:43
By Friday, October gradually pushed up to 28.
00:04:48
By the afternoon, November saw significant trading at 27, rounding
00:04:48
the week with notable volume but
00:04:48
minimal day to day movements.
00:05:01
And then if we look at the Panamax market, there were actually
00:05:01
no profound changes.
00:05:06
The market experienced decline in the first half of the week before
00:05:06
rebounding slightly by Friday, closing
00:05:06
just above Monday's opening levels.
00:05:17
Last week began with the market traded with a narrow inter
00:05:17
day range of approximately $300, with
00:05:17
October around 13 and November
00:05:17
at 14.
00:05:32
However, as the weaker Cape market and the effects of golden
00:05:32
Week weighted on the sentiment, rates
00:05:32
drifted lower by mid week, with October
00:05:32
dropping to 12 and November to
00:05:32
13, while Q four fell to 13.
00:05:52
By Thursday, the index edged back into positive territory, up
00:05:52
28 to 10, leading to reduced
00:05:52
selling pressure towards the week's
00:05:52
end.
00:06:08
By Friday, October had recovered to 1350.
00:06:13
November found resistance at 14 and and Q four traded up to
00:06:13
3600.
00:06:21
The supermax sector faced a rather challenging week marked by
00:06:21
kind of limited overall movement.
00:06:28
After a sluggish start on Monday and Tuesday last week, the
00:06:28
market managed to recoup its losses
00:06:28
towards the latter half of the week.
00:06:38
Early bid support on Monday resulted in a narrow intraday range,
00:06:38
with October closing at 14 600.
00:06:47
The same level did open at the with both the atlantic and Pacific
00:06:47
regions facing downwards pressure
00:06:47
on Tuesday, prompt rates declined, pushing
00:06:47
the October and November down to
00:06:47
14 by Friday.
00:07:01
However, some front month bid support emerged with October trading
00:07:01
up to 14 650 in November to 48, while
00:07:01
Cal 25 traded up to 13 100.
00:07:15
Overall, it was a low liquidity week for the super max
00:07:15
with minimal price movements.
00:07:21
Thanks Ben.
00:07:25
And next we have Hao Pei, our senior analyst from our Shanghai
00:07:25
office.
00:07:29
Hao, how are you doing today?
00:07:31
I'm doing fantastic.
00:07:32
How are you Davido not to vet, not to vet.
00:07:35
So it seems that iron ore was a little bit on a rollercoaster on
00:07:35
Tuesday.
00:07:40
We had a high opening and then we followed with a very low close.
00:07:43
Can you tell us a little bit more about what happened as we saw.
00:07:47
The major commodities saw a high open after China long holiday
00:07:47
which was just line up with the strong
00:07:47
overseas commodities and strong equities
00:07:47
performance.
00:07:58
Then there was taking gains from China equities after a near
00:07:58
40% of growth just over the previous
00:07:58
six trading days.
00:08:09
And it is historical speculative in any of the market
00:08:09
in any of the times.
00:08:15
And those taking gains mean a correction on iron ore as well.
00:08:20
And we think iron ore will be continuously impacted if macro market
00:08:20
saw more volatility at news flow
00:08:20
into the following weeks.
00:08:31
And so the uptick in correction during early week has
00:08:31
nothing to do with fundamental market.
00:08:37
If there is continuous like news on monetary policies or China
00:08:37
stimulus there will be something
00:08:37
we can look into it.
00:08:48
It will have a huge impact on Alan or in the following weeks.
00:08:52
I see you have mentioned the fundamental side.
00:08:55
Has there been any change in the fundamental markets at all in
00:08:55
September and now in the first days
00:08:55
of October?
00:09:02
I think iron ore there are a lot of change on the fundamental
00:09:02
market from iron ore side.
00:09:11
The early September I think the port inventories for example
00:09:11
which once reached a year high at 154 million
00:09:11
tons and it's dropping by like 40
00:09:11
million tons from the past three
00:09:11
weeks.
00:09:27
And port stocks shipped to mills but the mills inventories were
00:09:27
also dropped in a very high speed.
00:09:34
So we saw 3.7 up a steel production versus a 3.7 a decrease
00:09:34
on inventories at the same time which
00:09:34
means both supply and demand are
00:09:34
improving at the same time.
00:09:48
So normally means a fast usage of iron ore and for physical coke
00:09:48
in China in September and early October
00:09:48
which up by 500 to 650 yuan per ton
00:09:48
and at the same time the fob market
00:09:48
of coking coal which is a little bit
00:09:48
tight for the nearby lichens and
00:09:48
I reckon we start to reverse our market
00:09:48
review from slight bearish to neutral
00:09:48
by mid summer, mid September and
00:09:48
we started bullish two weeks ahead of
00:09:48
China holiday.
00:10:23
And I think the delivery played a slight bearish indicator
00:10:23
for iron ore market as there is no sign
00:10:23
on a shipment decrease for iron ore
00:10:23
through entire q four with good weather
00:10:23
and good production and good logistics
00:10:23
and everything good.
00:10:42
And as well, the mid grade domestic concentrates are something
00:10:42
the market are worrying about because
00:10:42
there are too much competitive brands versus
00:10:42
the traditional ore brands which
00:10:42
have high cost effectiveness which resist
00:10:42
the iron ore growth in a mid run.
00:10:59
That's why iron ore actually stopped growth even during the holiday
00:10:59
versus the other strong growth of
00:10:59
like coper and zinc.
00:11:07
And in future, I think the low of iron ore should be definitely
00:11:07
about $85, although it's corrected by like
00:11:07
$10 or more over the past two days
00:11:07
and then through q four.
00:11:19
However, the high was also limited.
00:11:21
Unless marginal demand or new demand come in and we have, unless
00:11:21
we see the real numbers on the improving
00:11:21
of demand or something, new projects
00:11:21
happen.
00:11:33
Otherwise, I think it's going to be traded in a narrow range compared
00:11:33
to other of the commodities.
00:11:43
We have now.
00:11:44
In the booth with us, Ricky Forman and Archie Smith.
00:11:47
Gent, thanks for joining us.
00:11:49
It's been a year now since the beginning of the escalation of the
00:11:49
tensions in the Middle east, and
00:11:49
this, of course, had an impact on
00:11:49
the oil prices.
00:11:58
As a reference, the Brent crude 52 week range has been sixty
00:11:58
eight dollars, sixty eight cents
00:11:58
to ninety three dollars seventy nine
00:11:58
cents.
00:12:06
In your opinion, what are the key moments?
00:12:09
What were the key moments or events that mostly contributed to
00:12:09
the ups and downs of the year?
00:12:14
I think the sort of obvious one, and actually where we hit that
00:12:14
range higher that you mentioned earlier
00:12:14
was around this time last year after
00:12:14
the initial Hamas attack in Israel.
00:12:26
Thats when we saw Brent spikes at that 93 level above 90.
00:12:31
Briefly.
00:12:32
Obviously, that was just the immediate reaction from a scared
00:12:32
market with regards to oil supply
00:12:32
worries.
00:12:40
That being said, Israel Gaza are not massive oil supplying nations.
00:12:47
However, they are surrounded by some more serious oil powers.
00:12:52
I think people were more worried about the involvement of
00:12:52
those sort of powers with regards
00:12:52
to oil supply.
00:12:58
Yeah, and I think that's a very good point that Archie makes
00:12:58
there.
00:13:01
I think the sentiment in the market was there was definitely a
00:13:01
concern that there could be an overspill
00:13:01
and an escalation with the war in
00:13:01
the Middle east.
00:13:09
And obviously, the point that we're at today, I think, is what
00:13:09
was initially feared a year ago, where
00:13:09
it has obviously spread out just from
00:13:09
the Gaza region into a much wider
00:13:09
field.
00:13:21
And obviously that then has a psychological as well as a practical
00:13:21
implication on the potential supplies
00:13:21
of the oil.
00:13:28
So that was where we saw that peak.
00:13:30
And then as we progressed nearer to the end of 2023, it started
00:13:30
to slide back off again.
00:13:37
The sort of war risk premium was very much priced in, and with
00:13:37
no sort of further serious escalations,
00:13:37
things started to cool back off.
00:13:46
And another thing that sort of started coming back into the minds
00:13:46
of market participants was the non compliance
00:13:46
with OPEC cuts.
00:13:55
I think there was a lot of sort of proof that a lot of the OPEC
00:13:55
nations, particularly the smaller
00:13:55
ones, so basically not saudi or Russia,
00:13:55
were not sticking to their output cut
00:13:55
quotas, basically implying that there
00:13:55
was more physical flow in the market.
00:14:11
So fears of oversupply obviously pinned with pretty weak
00:14:11
global demand.
00:14:17
There was oversupply fears and, yeah, the prices started to
00:14:17
slide back off again, then sort of
00:14:17
q one through Q 224.
00:14:27
It was pretty sideways, wasn't it, Rick?
00:14:28
It was pretty boring.
00:14:30
Range bound?
00:14:31
Yeah, there was not much excitement, I think.
00:14:34
Yeah, it was very much limbo again between is there going to be
00:14:34
escalation in the Middle east?
00:14:38
And that was sort of your supportive side, and then the downward
00:14:38
pressure was just really weak.
00:14:45
Chinese economy.
00:14:48
All the data points that were coming out weekly, monthly were pretty
00:14:48
negative for China.
00:14:52
And when Chinas economy is, id say crude demand is pretty tied with
00:14:52
chinese economy.
00:15:00
Yeah.
00:15:00
And I think that we certainly started to feel that there was a
00:15:00
fundamental shift in what the market
00:15:00
was looking at early on.
00:15:11
There was a big focus on the war in the Middle east.
00:15:14
And then obviously, as we progressed through the year, as Archie
00:15:14
has just said, the data points and
00:15:14
the weaker economic factors, I think
00:15:14
both from China and the US started
00:15:14
rumors in the market.
00:15:27
Is the US going to start going into a recession?
00:15:30
What's going to be happening with the OPEC cuts?
00:15:33
Are they going to extend this certainly into the Q four period
00:15:33
of this year?
00:15:38
So the focus from the market really did just shift and move across
00:15:38
from the panic and the concern of
00:15:38
everything spiking to essentially
00:15:38
more of a macro fundamental and economical
00:15:38
point of view saying, okay, well, this is
00:15:38
actually looking a little bit weaker
00:15:38
now.
00:15:56
And I think that was the main driver for the prices coming down.
00:16:00
Yeah, no, 100%.
00:16:01
And that kind of segues us nicely into Q three, when we really
00:16:01
started to see some softness after
00:16:01
a four or five month period of very
00:16:01
range bound prices.
00:16:10
Q three is when we actually saw some movements breaking the range.
00:16:15
And again, it was off the back of chinese data.
00:16:18
They had really weak crude import data, production data, macro
00:16:18
data, and that really acted as a
00:16:18
spearhead for prices to break that
00:16:18
range they had previously been in,
00:16:18
and really slide off into Q three,
00:16:18
and it sort of carried on going that
00:16:18
way, leveled out a little bit, and
00:16:18
then we get to sort of mid August
00:16:18
September, and that's going back
00:16:18
to your range that you mentioned at
00:16:18
the start of the podcast.
00:16:50
Mid August September period is when we really crashed and saw the
00:16:50
crude go below that 70 70 mark into
00:16:50
like the $68 per barrel.
00:16:58
There was a few things going on.
00:16:59
I think ceasefire talks at the time were looking promising between
00:16:59
Israel, Hamas.
00:17:06
There was still worries of oversupply.
00:17:08
At this point in time, OPEC had not pulled back their supply
00:17:08
increase plan, so they had introduced
00:17:08
a plan.
00:17:18
They were going to start trickling supply back into the market
00:17:18
from Q four.
00:17:22
This, as we speak, has been delayed a couple of months, but at
00:17:22
this point, when we really got to
00:17:22
that bottom of the 52 week range,
00:17:22
this hadnt happened.
00:17:32
There was all this weak demand, demand, potentially a resolution
00:17:32
in the Middle east, as well as OPEC
00:17:32
supply returning.
00:17:39
So we really, really saw the crude come off, and that was sort
00:17:39
of the first big move that we'd seen
00:17:39
in a while.
00:17:45
Obviously, this OPEC overhang into the Q four period was very much
00:17:45
in the back of the market's mind,
00:17:45
which is why then, obviously they've
00:17:45
made the announcement to delay such
00:17:45
measures until December.
00:17:59
Interestingly enough, as well, the Chinese also changed their tax
00:17:59
implications on imported oil, whereas
00:17:59
in the past, and I think this came
00:17:59
into effect on the 1 October.
00:18:11
So it's very recent.
00:18:12
But essentially this has a big impact on the independent refineries,
00:18:12
which are essentially bracing themselves
00:18:12
for the potential feedstock shortage in the
00:18:12
fourth quarter, basically because
00:18:12
they're nearing the end of their
00:18:12
crude import quota utilizations as
00:18:12
well.
00:18:29
And for those that aren't aware, obviously the teapots, the
00:18:29
independent refineries, would in
00:18:29
the past normally receive around
00:18:29
a 95% tax rebate from the government on
00:18:29
such imports.
00:18:41
But I think the implementation of this tax change, whereby they
00:18:41
can only claim back maybe around 60%
00:18:41
of rebate, is also kind of another indication
00:18:41
of the concern from the chinese demand
00:18:41
side of things.
00:18:57
So this indirectly will mean that the Chinese will be producing
00:18:57
much less because the refineries are not
00:18:57
being incentivized as much via the
00:18:57
tax rebates.
00:19:09
Yeah, 100%.
00:19:12
That's a really good point with Rick.
00:19:14
Something else that I've going to go back with that I forgot to
00:19:14
mention is in that same period, the
00:19:14
sort of end of August beginning September,
00:19:14
some of the listeners may remember
00:19:14
the equity market really, really took
00:19:14
a massive hit.
00:19:26
And that was another thing that was playing on that falling
00:19:26
crude down to that 68 level.
00:19:32
Yeah, it was a driving force, wasn't it?
00:19:34
100%.
00:19:34
Yeah, yeah, 100%.
00:19:36
Yeah.
00:19:37
My pa took quite a hit itself, actually.
00:19:40
And then now, Rick, obviously we're seeing it spike back up again
00:19:40
as we come to present day.
00:19:45
As you mentioned earlier, actually, we're now at that point
00:19:45
where we were worried about last
00:19:45
year.
00:19:50
Is this conflict going to escalate?
00:19:52
It seems like we're living that now.
00:19:54
Obviously there's sort of boots on the ground in a few surrounding
00:19:54
countries, retaliations from Iran,
00:19:54
involvement from us, and that's really
00:19:54
driven prices in the last couple
00:19:54
of weeks, ten days.
00:20:07
Yeah, absolutely.
00:20:08
And with all of these things, none of us are experts in these fields.
00:20:12
Right.
00:20:12
So where the resolution comes from and what that timeline might
00:20:12
be, it's kind of finger in the air stuff
00:20:12
no one knows.
00:20:19
And, you know, the reality is it's just an ongoing tragedy, I think,
00:20:19
to throw into the mix as well.
00:20:25
We have the us elections coming up.
00:20:27
Obviously whoever gets in power there, foreign policy might
00:20:27
dictate a slight different course
00:20:27
of action with events in the Middle
00:20:27
east.
00:20:37
But for now, certainly from an outsider's point of view, it doesn't
00:20:37
seem like there's going to be much
00:20:37
getting in the way of that event,
00:20:37
regardless of who gets into power
00:20:37
in the US.
00:20:49
It's just not a very good situation.
00:20:54
Let's now focus on the production.
00:20:56
One of the latest news about oil has been that Libya is restarting
00:20:56
its production after it has been shut
00:20:56
since August.
00:21:03
Saudi Arabia also made the news as it seems to be ready to abandon
00:21:03
an unofficial price target of dollar
00:21:03
100 a barrel for crude.
00:21:11
And this has been read as a hint that the country is fundamentally
00:21:11
ok with lower oil prices.
00:21:17
We also have the OPEC production cuts which have failed
00:21:17
to sustain prices.
00:21:23
So, gentlemen, what kind of end of 2024 or beginning of 2025
00:21:23
can we expect?
00:21:29
Yeah, all sort of very valid points.
00:21:33
The libyan production has certainly been sort of at the forefront
00:21:33
of the all news for the last month
00:21:33
or so, definitely offering support when
00:21:33
prices may have been falling.
00:21:44
And as you mentioned, the OPEC supply increases that they were planning
00:21:44
when they were announced that this
00:21:44
was getting pushed back a couple
00:21:44
of months.
00:21:55
I think the market very much shrugged it off.
00:21:58
I do find when there's bigger things at hold, for example, conflict
00:21:58
and weak global economy, you do find
00:21:58
that some OPEC decisions that are
00:21:58
announced, yes, they might have an
00:21:58
immediate reaction in the market.
00:22:12
But on more of a long course, the market does seem to shrug most
00:22:12
of these off, whether its bullish
00:22:12
or bearish, particularly in the last
00:22:12
two years that ive been in the fuel
00:22:12
market.
00:22:24
That does seem to be the case.
00:22:25
Yeah, I think they fall down the list of priorities when they
00:22:25
just dont carry as much weight.
00:22:32
When you have those other factors that are in play at that
00:22:32
point in time.
00:22:37
Obviously when if those factors aren't in play at the time
00:22:37
then they climb up the priority list.
00:22:43
But it's something that we always need to be aware of.
00:22:45
The market always factors it in and obviously something that we
00:22:45
keep an eye on.
00:22:50
Yeah, something actually that you didn't mention in the question
00:22:50
that has definitely contributed to some
00:22:50
of the short term supply support
00:22:50
to prices is the weather in the US Gulf
00:22:50
coast.
00:23:03
It was hit with a few hurricanes too in the last couple
00:23:03
of weeks and now they're gearing up
00:23:03
for a third.
00:23:10
That's meant to be pretty heavy from what I've heard.
00:23:14
I don't know how accurate it is, but the news said it was meant
00:23:14
to be like the strongest hurricane in
00:23:14
the area in the last century or something
00:23:14
like that.
00:23:20
So I mean already I know Chevron have closed one of their
00:23:20
rigs and obviously with the previous hurricanes,
00:23:20
I know there was a few majors, BP,
00:23:20
Shell, Chevron that brought offshore
00:23:20
workers back on land, closed rigs
00:23:20
again.
00:23:31
These hurricanes, they come and go, they pass, but in the short
00:23:31
term it's definitely supporting crude
00:23:31
prices.
00:23:37
Yeah, exactly.
00:23:38
It has an impact.
00:23:39
And again, I mean, just watching something on the news last
00:23:39
night, one of the actual weather
00:23:39
reporters actually choked up and
00:23:39
started crying because of the severity
00:23:39
of this storm that they're expecting
00:23:39
to hit land within the next couple of
00:23:39
days.
00:23:55
So it does seem like it's going to be a major event.
00:23:57
I mean, a couple hundred people just from the hurricane two
00:23:57
weeks ago obviously passed away,
00:23:57
unfortunately, and that storm doesn't
00:23:57
seem to be anywhere near as bad as
00:23:57
the one that's going to be hitting
00:23:57
the shore.
00:24:10
So yeah, it's something that we're going to have to keep an eye
00:24:10
on.
00:24:14
I had a look at some of the recent prices on our FIS live app
00:24:14
which shows all the main fuel oil
00:24:14
pricing and it's regularly updated
00:24:14
from your desk and the many others here
00:24:14
at FIS.
00:24:25
And I've noticed a bit of a movement recently, especially when
00:24:25
it comes to the high sulfur east
00:24:25
west spread.
00:24:31
So maybe you can tell us a little bit more about what are the
00:24:31
drivers behind these changes.
00:24:37
Yeah, so obviously we've seen quite a lot of volatility on the
00:24:37
high sulfur east west spread over
00:24:37
the last few weeks.
00:24:43
And again, if we look at the fundamentals behind that, I think
00:24:43
one of the main drivers is the weak demand
00:24:43
and the weak concerns of China.
00:24:54
There seems to have been, I wouldn't say China hasn't been awash
00:24:54
with oil, but obviously the economic
00:24:54
concerns have obviously put a negative
00:24:54
sentiment on the market, and this
00:24:54
has essentially been reflected in
00:24:54
the east west spread coming off.
00:25:12
I'd say we don't normally see that spread in negative territory.
00:25:16
I mean, obviously it does happen, but it is more of a rarity
00:25:16
than of a norm.
00:25:22
And it has traded down to, I think, -30 is that right?
00:25:29
In the front month?
00:25:30
Yeah, in the front month.
00:25:32
And again, I think it's been twofold.
00:25:35
So we've had the weakness out in Asia and China, but obviously
00:25:35
reports from some of our clients as well
00:25:35
have been talking about the limited
00:25:35
stocks and supplies that have been
00:25:35
in the european area as well.
00:25:48
So obviously, when you combine those two points together, weakness
00:25:48
in Asia, strength in Europe, you know,
00:25:48
it's really forced, it's really pushed
00:25:48
that spread out temporarily.
00:25:59
It rebounded a little bit.
00:26:00
But obviously today in October, well, November is minus
00:26:00
9.
00:26:05
October is October.
00:26:08
Exactly.
00:26:09
I mean, October is still back in, I think in the minus higher 20
00:26:09
odds.
00:26:13
Obviously, the price at the front month that we price is the
00:26:13
November, but it is still trading
00:26:13
with the, with Europe to a premium to
00:26:13
Asia, which like I said, is quite
00:26:13
unusual.
00:26:26
Yeah.
00:26:26
Just sort of going off of what Rick said, I think when it initially
00:26:26
really crashed deep into the negative
00:26:26
territory.
00:26:33
Yes, I think China was very much a driver of that.
00:26:36
But at the same time, we did hear from a few people in the market
00:26:36
that there was actually a few kind
00:26:36
of physical oil majors that hadn't
00:26:36
received cargoes or cargoes were
00:26:36
delayed in north west Europe area,
00:26:36
which again supported that high sulfur
00:26:36
european fuel oil against the singaporean
00:26:36
high sulfur fuel oil.
00:26:54
And, yeah, look, while that's not probably still a factor, it definitely
00:26:54
helped to start the snowball.
00:27:01
Gentlemen, it has been a pleasure to have you in the booth
00:27:01
today.
00:27:05
It's been a very interesting discussion.
00:27:07
I think we should do that again soon.
00:27:09
So thank you very much.
00:27:12
And that's it for this week.
00:27:13
Make sure to subscribe by clicking the subscribe button on
00:27:13
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00:27:13
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00:27:13
or get subscribed to our app FisLive.
00:27:21
And make sure you never miss any freight and commodity analysis
00:27:21
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00:27:25
Thanks again for joining us and see you in two weeks time on
00:27:25
FIS's freight and commodity podcast.
00:27:29
Freight up.
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