Total oil volumes traded here expected to plunge 30-40% this year
By RONNIE LIM 4 December 2008
The siege at Thai airports and terror attacks in Mumbai cap what now looks set to be one of the bleakest years for oil traders here. Total oil volumes traded in Singapore - the world’s third biggest energy hub - are expected to plunge by an estimated 30-40 per cent, they say.
With tourist and business travel expected to take a hit from the fallout from the Thai and Mumbai incidents, jet fuel demand for instance, is expected to fall further, said energy consultant Ong Eng Tong.
‘The usual winter flights by Europeans to Thailand will clearly be affected,’ he said, with the latest geopolitical incidents compounding already weak oil demand as global economies slow down.
Another oil broker said that ‘jet fuel was offered at a US$2 discount to the MOPs (mean of Platts, or average) price of US$65.68 on Monday, but found absolutely no takers.’ If this continues, it will certainly have an impact, he added.
Already, the year has proven to be a markedly difficult one for the oil traders here, starting with high and volatile oil prices - which reached a peak of US$147-plus in July, and which on Tuesday plunged to a three-year low of around US$47 a barrel.
The crisis on Wall Street, which led to a credit crunch among banks, also made oil trading difficult with many traders finding it more expensive (because of higher interest charges). Big swings in oil prices also resulted in huge margin calls.
Furthermore, there were also fewer counterparties to deal with, as several of the big US investment banks which were into commodities trading, fell victim to the financial crisis.
‘It’s not going anywhere, volumes are still down,’ the oil broker said of trading activity here in the final quarter.
‘Physical oil trading is definitely down, with lower (shipping) freight rates signalling less oil being carried,’ he added.
His guesstimate is that the oil trade here will fall by 30-40 per cent from last year’s official numbers of over US$300 billion in physical oil and US$600 billion in oil derivatives traded here.
Another oil trader reckons the figures will be 30 per cent down this year.
This is the first fall here in years since the steady annual growth seen from 2003, when US$104 billion of physicals and US$101 billion of derivatives was done here.
Not only have volumes come down, the number of players here has also fallen. ‘Conservatively, at least a dozen players have gone,’ the trader said.
The latest reported case was that of StatoilHydro of Norway which announced last month that it would shut its oil products trading operations in Singapore.
It joins others such as Lehman Brothers and French bank BNP Paribas which shut their derivatives desk here, while Dutch-Belgian bank Fortis also reportedly shelved plans for a similar derivatives desk here.
China Aviation Oil, which had planned to resume oil trading in the second half, has also put this on the back-burner.
On industry prospects next year, the oil broker said that ‘the first half looks just as gloomy, although things will hopefully pick up in the second half when the economic stimulus packages kick in’.
Another trader said that the economic signals from China are not looking promising right now, while India may be impacted by the Mumbai attacks. ‘But, in the end, it all depends on consumers gaining confidence, especially if they see light at the end of the tunnel.’
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For Oil Traders, Dark Year Gets Bleaker
Total oil volumes traded here expected to plunge 30-40% this year
By RONNIE LIM
4 December 2008
The siege at Thai airports and terror attacks in Mumbai cap what now looks set to be one of the bleakest years for oil traders here. Total oil volumes traded in Singapore - the world’s third biggest energy hub - are expected to plunge by an estimated 30-40 per cent, they say.
With tourist and business travel expected to take a hit from the fallout from the Thai and Mumbai incidents, jet fuel demand for instance, is expected to fall further, said energy consultant Ong Eng Tong.
‘The usual winter flights by Europeans to Thailand will clearly be affected,’ he said, with the latest geopolitical incidents compounding already weak oil demand as global economies slow down.
Another oil broker said that ‘jet fuel was offered at a US$2 discount to the MOPs (mean of Platts, or average) price of US$65.68 on Monday, but found absolutely no takers.’ If this continues, it will certainly have an impact, he added.
Already, the year has proven to be a markedly difficult one for the oil traders here, starting with high and volatile oil prices - which reached a peak of US$147-plus in July, and which on Tuesday plunged to a three-year low of around US$47 a barrel.
The crisis on Wall Street, which led to a credit crunch among banks, also made oil trading difficult with many traders finding it more expensive (because of higher interest charges). Big swings in oil prices also resulted in huge margin calls.
Furthermore, there were also fewer counterparties to deal with, as several of the big US investment banks which were into commodities trading, fell victim to the financial crisis.
‘It’s not going anywhere, volumes are still down,’ the oil broker said of trading activity here in the final quarter.
‘Physical oil trading is definitely down, with lower (shipping) freight rates signalling less oil being carried,’ he added.
His guesstimate is that the oil trade here will fall by 30-40 per cent from last year’s official numbers of over US$300 billion in physical oil and US$600 billion in oil derivatives traded here.
Another oil trader reckons the figures will be 30 per cent down this year.
This is the first fall here in years since the steady annual growth seen from 2003, when US$104 billion of physicals and US$101 billion of derivatives was done here.
Not only have volumes come down, the number of players here has also fallen. ‘Conservatively, at least a dozen players have gone,’ the trader said.
The latest reported case was that of StatoilHydro of Norway which announced last month that it would shut its oil products trading operations in Singapore.
It joins others such as Lehman Brothers and French bank BNP Paribas which shut their derivatives desk here, while Dutch-Belgian bank Fortis also reportedly shelved plans for a similar derivatives desk here.
China Aviation Oil, which had planned to resume oil trading in the second half, has also put this on the back-burner.
On industry prospects next year, the oil broker said that ‘the first half looks just as gloomy, although things will hopefully pick up in the second half when the economic stimulus packages kick in’.
Another trader said that the economic signals from China are not looking promising right now, while India may be impacted by the Mumbai attacks. ‘But, in the end, it all depends on consumers gaining confidence, especially if they see light at the end of the tunnel.’
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