FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com


Join the forum, it's quick and easy

FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com
FINANCIAL CHRONICLE™
Would you like to react to this message? Create an account in a few clicks or log in to continue.
FINANCIAL CHRONICLE™

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka

LISTED COMPANIES

Submit Post
Poll

Can there be another Covid-19 wave in Sri Lanka?

 
 
 

View results

STOCK MARKET TRAINING
ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post


CONATCT US


Send your suggestions and comments

* - required fields

Read FINANCIAL CHRONICLE™ Disclaimer


Latest topics

» ASSOCIATED MOTOR FINANCE COMPANY PLC (AMF.N0000)
by kanishkaecomm Yesterday at 10:12 pm

» TOKYO CEMENT COMPANY (LANKA) PLC
by SAGA Yesterday at 9:15 pm

» EXPOLANKA HOLDINGS PLC (EXPO.N0000)
by EPS Yesterday at 9:11 pm

» GLAS will be winner with Super Gain.
by Eranga87 Yesterday at 9:07 pm

» Top Foreign Trading today - 22/06/2021
by SAGA Yesterday at 8:50 pm

» TOP 20 LISTED COMPANIES BY FINANCIAL CHRONICLE™
by CHRONICLE™ Yesterday at 8:37 pm

» Daily Foreign Transactions update
by Pradeep90 Yesterday at 8:30 pm

» RWSL for short term profits
by madukp Yesterday at 5:17 pm

» YORK has a potential to go double ...
by Vasyan Yesterday at 5:07 pm

» United motors limited UML
by smnsam Yesterday at 2:43 pm

» dividend counters
by kanishkaecomm Yesterday at 12:43 pm

» HAYCARB PLC (HAYC.N0000)
by samaritan Yesterday at 11:33 am

» World-famous angel investor Conny enters Sri Lanka
by samaritan Yesterday at 10:00 am

» SINHAPUTHRA FINANCE PLC (SFL.N0000)
by kanishkaecomm Yesterday at 9:47 am

» ADAM CAPITAL PLC (PCHH.N0000)
by GayanKK Yesterday at 9:46 am

» New Commodity bubble. How will it impact the CSE?
by CHRONICLE™ Yesterday at 8:53 am

» MELSTACORP PLC (MELS.N0000)
by engineer Yesterday at 7:29 am

» R I L PROPERTY PLC (RIL.N0000)
by SAGA Mon Jun 21, 2021 9:57 pm

» Dividend - July/August
by High-flyer Mon Jun 21, 2021 9:41 pm

» SOFTLOGIC CAPITAL PLC (SCAP.N0000)
by madukp Mon Jun 21, 2021 9:08 pm

EXPERT CHRONICLE™

MARKET CHAT


CHRONICLE™ ANALYTICS


ECONOMIC CHRONICLE

GROSS DOMESTIC PRODUCT (GDP)


CHRONICLE™ YouTube


You are not connected. Please login or register

FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » As U.S. debates oil exports, long-term prices slump below $80

As U.S. debates oil exports, long-term prices slump below $80

Go down  Message [Page 1 of 1]

sashimaal

sashimaal
Manager - Equity Analytics
Manager - Equity Analytics
(Reuters) - Long-term U.S. oil prices have slumped to record discounts versus Europe's benchmark Brent, with some contracts dropping below $80 in a dramatic downturn that may intensify producers' calls to ease a crude export ban.

Oil for delivery in December 2016 has tumbled $3.50 a barrel in the first two weeks of the year, trading at just $79.45 on Friday afternoon, its lowest price since 2009. That is an unusually abrupt move for longer-dated contracts that are typically much less volatile than prompt crude. For most of last year, the contract traded in a narrow range on either side of $84 a barrel.

The shift in prices on either side of the Atlantic is even more dramatic further down the curve, with December 2019 U.S. crude now trading at a record discount versus the equivalent European Brent contract. The spread has doubled this month to nearly $15 a barrel, data show.

The drop in so-called "long-dated" U.S. oil futures extends a broad decline that has pushed prices as much as $15 lower in two years. It also coincided with an abrupt drop in near-term futures, which fell by nearly $9 a barrel in the opening weeks of 2014 amid signs of improving supply from Libya. (Graphic on outright prices: link.reuters.com/wam56v )

But while immediate prices have rebounded swiftly thanks to strong demand amid frigid winter weather and new pipelines that may drain Midwest stockpiles, longer-term contracts have not.

The unusual speed, severity and persistence of the decline has mystified many in the oil industry. Brokers, analysts and bankers have offered a range of possible explanations: a big one-off options trade in the Brent market; new-year hedging by U.S. oil producers; liquidation by bespoke fund investors; or even long-term speculation on a deepening domestic glut.

Regardless of the trigger, however, it may be cause for growing alarm for crude oil producers, who are increasingly concerned that falling prices will crimp profit margins if U.S. export constraints are not eased. Producers say this would hand over some of their rightful profits to refiners who can freely export gasoline and diesel at world prices.

"Why shouldn't independent producers be allowed to do the same?" Harold Hamm, chairman and chief executive of oil producer Continental Resources told a U.S. Senate Energy and Natural Resources Committee hearing on Thursday.

The shift also reflects a growing confidence that the boom in U.S. shale production will continue for some time, even while efficiency measures and energy substitution pare U.S. oil demand, pushing back old fears of growing scarcity.

"The macro oil balance is not as constrained as it used to be," said Jason Prior, managing director and head of oil trading at Barclays Capital. "I don't think the fear of spikes is there anymore. There's been a natural break on the top side of any oil price move."

OPTIONS TRIGGER

Several brokers said the drop may have been triggered by a large early January trade in $85 calendar put options for 2015 and 2016 for European Brent, which reverberated in the U.S. market.

The put option would give the holder the right to sell oil at a specific price over a specific time period, even if the price is lower at the time the contract expires, essentially setting a floor price.

It is not clear who sold the put option or why, but whoever bought the option may have sold long-term futures contracts to hedge the price risk, potentially weighing on prices.

Activity in New York Mercantile Exchange long-dated WTI oil options may have reflected some of that trade, with trading volume in otherwise illiquid December 2015 $80 put options rising to more than 200 contracts a day for several sessions, according to data from exchange operator CME Group (CME.O).

However, long-term Brent crude prices have also rebounded since the decline, unlike U.S. futures that remain low, causing a dramatically widening gap between the two benchmarks.

December 2016 Brent slipped about $2 in the first few days of January, but has since reversed those losses. The December 2016 premium for Brent over WTI has risen from near $13 a barrel to a record high of almost $16 in a month. The prompt spread has meanwhile narrowed to less than $9 in recent days.

PRODUCER HEDGING

Most trading in long-dated futures is driven by hedging activity, not the kind of fund speculation, investment flows, or short-term fundamentally driven deals that make prompt contracts more volatile, traders say.

Some suggested that the early January drop was fueled by a concentrated bout of producer hedging, in which smaller oil companies are often required to lock in prices in order to finance drilling or protect against a sudden downturn.

Once the downturn gathered pace, others may have joined in.

"Producers may have a water mark and anything below $80 WTI probably triggered some hedging," said John Gretzinger, vice president, head of energy products for INTL FCStone in Kansas City, Missouri.

Regulatory data appears to support the idea of increased forward selling by producers.

The so-called "producer, merchant, processor, consumer" category of traders, who predominantly trade in physical markets, turned net short on U.S. crude oil futures and options for the first time in a year, data from the U.S. Commodity Futures Trading Commission showed.

Lower liquidity may have also contributed to the abrupt drop in longer-term prices, with growing uncertainty over whether limitations on exports will be loosened before U.S. refiners are saturated with light, sweet shale crude.

"That creates a lot of uncertainty in the longer-term outlook," says Eric Melvin, a former trader at an investment bank who now runs boutique Houston-based risk-advisory firm Mobius Risk Group. "You would have a more stable long-term price, and more liquidity, if the United States allowed exports."

(Reporting By Jeanine Prezioso, editing by Jonathan Leff and David Gregorio)

http://www.reuters.com/article/2014/02/03/us-oil-prices-slump-analysis-idUSBREA120G020140203?feedType=RSS&feedName=businessNews

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
When I was I was told that world oil resources will run out in 30 years. But the way how it's now, it will not happen in our life time (unless you can stay another 80+ years Smile).

Middleast is no longer the most sort after place on earth for fuel. It's just a place to bridging the gap. Shale fuel will change everything.

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
I just want to live life to extend I am not a burden on others and can do my own stuff by my self.







@UKboy wrote:When I was I was told that world oil resources will run out in 30 years. But the way how it's now, it will not happen in our life time (unless you can stay another 80+ years Smile).

worthiness


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Is there a direct or indirect link between oil prices & that of precious metals?, If so, what will be the reaction of slumping the price of oil towards other commodities? Kindly produce any reference material, if available,related to the link. Thx

Hawk Eye

Hawk Eye
Expert
Expert
there is a inverse relationship. High Oil Price=High Income /wealth to oil nation= investment in precious metal

I couldnt trace the big article. But I have explained it in few words

jonny

jonny
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Just basically what I think is...would Srilanka benefited and the oil price would be dropped in near future...?? Very Happy Very Happy 

Hawk Eye

Hawk Eye
Expert
Expert
@jonny wrote:Just basically what I think is...would Srilanka benefited and the oil price would be dropped in near future...?? Very Happy Very Happy 

I dont think so. GOSL will cover the cost of corruption and inefficiencies through the falling oil prices.

Sponsored content


Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum