Crude Oil Breaks Through USD80/Barrel
Crude oil has broken through USD80/barrel in early trade this morning on talk that Russia has, or is about to, cut supplies to Belarus. Apparently an agreement between the two parties for Russia to supply Belarus with crude oil at heavily discounted prices expired on New Year's Eve.
You'd be forgiven for getting deja vu at this point, as the pipelines through Belarus also supply more lucrative markets in the West. Sound familiar?
Hopes that a gradual US economic recovery in 2010 will boost demand for black gold, is also adding a bit of positive influence this morning, as too is the carryover impetus from last year. Front month crude posted a 78% gain year-on-year in 2009, its best performance since 1999.
However, Bloomberg reported recently that almost 6% of the world's supertanker fleet is sitting on the high seas with crude oil onboard with nowhere in particular to go. However, the huge price differentials that we saw in early in 2009 between spot and forward months that made this option attractive, appear to have been eroded significantly recently.
The spread between the first and sixth Brent crude-oil contract on 31/12/08 was 23%, today it is 3%. I can't see that a 3% return over six months will cover your ship rental, insurance and finance.
Storing oil at sea clearly isn't the lucrative money-making proposition it was at the height of the financial crisis. If I had crude sitting on a tanker somewhere in the North Sea right now, I'd be looking to take advantage of a nearby price spike and offload.
That's the fundamentals of the matter, but then again when did they have anything to do with things?
You'd be forgiven for getting deja vu at this point, as the pipelines through Belarus also supply more lucrative markets in the West. Sound familiar?
Hopes that a gradual US economic recovery in 2010 will boost demand for black gold, is also adding a bit of positive influence this morning, as too is the carryover impetus from last year. Front month crude posted a 78% gain year-on-year in 2009, its best performance since 1999.
However, Bloomberg reported recently that almost 6% of the world's supertanker fleet is sitting on the high seas with crude oil onboard with nowhere in particular to go. However, the huge price differentials that we saw in early in 2009 between spot and forward months that made this option attractive, appear to have been eroded significantly recently.
The spread between the first and sixth Brent crude-oil contract on 31/12/08 was 23%, today it is 3%. I can't see that a 3% return over six months will cover your ship rental, insurance and finance.
Storing oil at sea clearly isn't the lucrative money-making proposition it was at the height of the financial crisis. If I had crude sitting on a tanker somewhere in the North Sea right now, I'd be looking to take advantage of a nearby price spike and offload.
That's the fundamentals of the matter, but then again when did they have anything to do with things?
