Free oil? Not today
Mark Waddington, Channoil Consulting,
addresses the impact on fuel prices in the UK of
WTI Futures trading at negative prices.
“The WTI futures contract is an important
global crude oil benchmark but its price is
based on market value for delivery at an
inland terminal at Cushing, Oklahoma, USA,
one of the main storage hubs in US crude oil
export. The recent demand collapse has left
it practically full but that alone is not enough
to explain why the benchmark price went
negative.
“It is also important to understand
who uses oil futures contracts. These are oil
producers who sell forward on futures market
to secure a selling price for their oil production,
consumers of oil, such as refiners, airlines,
trucking companies, and others, who buy ahead
on futures markets to guarantee the price of
the oil they are buying; and finally, investment
funds and speculators in the financial sector,
U.S. product supplied of crude oil and
petroleum products thousand barrels per day
Last year
This year
Five year
rolling average
21,500
20,500
BoilerJuice platform, peaking at around
6million litres a day. During this time, our
priority has been working with our amazing
suppliers to manage customers’ expectations
while the supply chain was stretched and
prioritising deliveries for vulnerable customers.
Our suppliers have been resolute throughout,
working around the clock to manage huge
order volumes (approx. 3x higher than we
would expect at this time of year).
Rob also comments on the appeal of
stocking up at current prices; “Prices continued
to fall through April as global oil prices fell to
record lows and many of our customers have
enjoyed significant savings, with average prices
dropping to pretty much half of what they
were 12 months ago. Demand remains very
high with customers sensibly stocking up at
exceptionally low prices.”
19,500
18,500
17,500
16,500
15,500
14,500
13,500
Oct Nov Dec Jan Feb Mar Apr May Jun
Jul Aug Sep
Source: U.S. Energy Information Administration and OMJ
who want to invest in a commodity asset class.
Mark goes on to explain the negative
price; “It is largely a technical thing: speculators
who bought futures contracts for delivery in
May found themselves holding something
that no-one wanted and were then looking
to close out their financial exposure by selling
them back. Since there were no buyers for
these long positions the speculators were at a
disadvantage and had to sell at a huge loss.
The parties on the other side of the deal are
most likely to be crude oil producers who had
sold forward.
“It is unlikely that any oil has changed
hands at negative prices. If anything, the oil
producers will have taken extra profit from
their hedging. None of these extremes has
any real bearing on the pump price or the
delivered price of fuel, even though those prices
are much lower today because of the general
collapse in oil prices.“
As Mark concludes; “It would be unwise for
customers to expect suppliers to deliver free of
charge at any point soon.”
Road Tankers Northern are able to provide a flexible, competitive hire scheme.
Offering both long term, and short term hire solutions, we have a variety of
vehicles readily available including:
•
•
•
Aviation
Rigids
Trailers
All vehicles are maintained prior to departure
and undergo extensive health checks to satisfy
the customer. Road Tankers Northern can tailor
vehicles to suit the customer.
For more information call 01226 352828 or e-mail us at [email protected]
Fuel Oil News | May 2020 19