Quarterly Market Report

From the WTI crude price movement chart we can see that crude traded in between $80 and $86 per bbl in April. This rise was attributed to an unprecedented rally in global stock markets as Chinese led demand and government economic stimulus packages boosted positive sentiment. Due to these upward influences most macroeconomic indicators were also starting to show positive sustained economic growth hinting that the world may have seen the worst of the recession and the economic crisis. Manufacturing and payrolls data were mostly positive and this was reflected in the slight drop in unemployment over the month as employers seemed fairly confident about the future of economic growth and started hiring new workers. On the supply side crude stocks seemed to be regularly going down week on week according to the EIA, suggesting increased business activity and higher domestic consumption.

The drive up to $80 per bbl clearly had an impact on the bunker markets as the graphs both show HSFO 380 & 180 products reached yearly highs. Gasoline & distillates also followed this trend and as a result MGO 0.1% was taken upward with the bullish rising market. Once again this sort of rise seemed to much too soon as fears mounted that the economy may not be ready for any extreme inflation due to the short term demand shock created by loosening credit markets. OPEC also agreed with this opinion and announced that producers would be happy trading in between $70 and $80 per bbl in order to guarantee sustained demand but also encourage future investment to cope with increasing demand from developing countries such as China, India and the Asian Tiger economies.

Towards May WTI crude oil took a further fall due to a number of bearish reasons. Builds in stock reflected the dwindling short term boom provided by the economic incentives earlier this year. This caused the fundamentals to disconnect from the equities markets and despite fairly positive macroeconomic data bought the market back down to sub $82 levels. The continued drop was mainly fuelled by worries about the Greek sovereign debt contagion, with analysts speculating that it could affect the recovery and spread towards growing U.S. and China and perhaps even leading to the start of a double dip recession as predicted in 2009. This weighed heavily on the Euro and drove the U.S. Dollar up over the month forcing traders to dump risky assets leading to the biggest one day fall of 9% ever. With weak fundamentals and worse than expected macroeconomic data traders and analysts cut long positions on the NYMEX and ICE markets leading to a wave of negative sentiment.

The BP oil spill crisis was the talk of the markets in June, as President Barrack Obama temporarily banned oil drilling in the Gulf region causing WTI to recover from lows of below $68 per barrel. With announcements from OPEC that they are happy for oil to trade in a range between $70 - $80 per barrel and no further supply cuts it appears that only extremely positive new will be able to draw WTI above the infamous $80 resistance point. Macroeconomic data shows that the economy is still improving but at a much slower rate than in earlier months suggesting that the U.S. and even China are finding it hard to shrug off the effects of 2008.