Oil commentary - 25 March 2022
Morning all. Friday. The last Friday of March 2022, nigh on a quarter way through the year and what word would you use to sum 2022 so far??Yep.?I'll second that. Brent? David? Let's have a look. Brent is trading this morning at $118.74 down 0.29 and WTi is trading at $111.99 down 0.35. What a week. Full of yeah, nahs, mine, yours and general yelling at screens. Is it right to say that the oil market has had a "good week"? Do we all jump for joy at the fact that energy prices are edging closer to record levels? I'd argue no. Unless you have a nodding donkey in your back garden of course, and no, I'm not referring to Eeyore agreeing with whatever you're saying. Brent is up 11.57 at time of writing. 11%. Let’s bear in mind, and I do go back to where oil prices were two years ago again, just to give us some context, and also so that I can justify the rates I'm paying for my oil charts, an 11%?increase in oil prices two years ago would have yielded a rise in prices of just over 2 bucks. We are over five times that now. Just think about that for a moment. Five times. Bonkers. There are plenty of stories to digest this week and whilst we could talk about most of them, this one, which to me, could very well be the precursor to liquidity drying up in oil markets - ICE has increased the margins for May Brent crude futures by 19% effective March 25, the third margin update this year. ICE increased margins for front-month Brent crude futures to $11,902 per 1,000 barrels, from $10,030 previously, and follows updates effective Jan. 6 and March 14. It's an odd one, I am looking at that gargantuan figure for one lot of Brent futures and am thinking, how is that sustainable? If you are a trader who is working off thin margins and thin working capital, how are you going to be able to put on hedges for a simple 5kt cargo of your finest fuel oil? Put simply, you can't. I mean you can. It just means that all that margin you worked on for two weeks goes straight to Mr Banker. And what rhymes with banker? That's right.?A tanker. And here's another story for you from the Suez Canal Bugle published earlier this week (it’s not actually a paper, it should be, but it's not) " Egypt's Suez Canal Authority said on Tuesday it will temporarily increase a surcharge levied on laden crude oil tankers and petroleum products tankers transiting the canal in both directions to 15% of normal dues from 5%, effective May 1".?So that's nice. More costs for the end user. The changes come "… the improvement of ships' economics". Ermmmmm. Hang on. Let me just call my crude oil tanker Captain friend. Computer says nooooo. So do I. Enjoy the weekend. Over and out.?