MABUX: Bunker prices volatility to continue for yet another week
The Bunker Review is contributed by Marine Bunker Exchange
Oil volatility has jumped to the highest level since the financial crisis, jolting traders who had been adjusting to a period of predictable declines following a near 60 percent crude crash between June and January.
Since the start of February, trading volumes have almost doubled as prices have risen and fallen by as much as 9 percent in a single session, while the number of active positions in the North Sea Brent contract soared to an all-time high. Traders were stunned as the market snapped back to gain around 20 percent, even as many were betting that the market remains heavily oversupplied.
The reasons behind the volatility spike are numerous. The simplest is that prices briefly stabilized after hitting a low of $45.19 a barrel in the mid-January. After a few sessions of consolidation, enough traders were prepared to bet that the market had bottomed, sending prices jumping higher.
Those betting on higher prices have taken heart from news of declining rig counts in the U.S. and capital expenditure cuts by energy majors. But those betting prices still have further to fall point out that there will still be an oversupply of 1 – 2 million barrels per day for the first half of the year. These variations of opinion is causing the price
volatility.
Trading volumes and open interest (open interest = the number of oil contracts active in the market) have leapt higher. Average trading volume across the Brent futures curve is up 42 percent so far in 2015 compared with last year, while volume in U.S. benchmark WTI has jumped more than 50 percent.
Market experts caution, however, that the price may again begin to trend strongly in one direction or the other once the outlook for oil becomes clearer.
For the coming week we expect bunker prices’ volatility to continue for another week.
* MGO LS
All prices stated in USD / Mton
All time high Brent = $147.50 (July 11, 2008)
All time high Light crude (WTI) = $147.27 (July 11, 2008)
