01 February 2013 15:12 [Source: ICIS news]
LONDON (ICIS)--Spot price increases this week in the European methanol market are most likely the result of trader speculation, a majority of participants said on Friday.
Although the increases are only moderate, source say there is little explanation in terms of market fundamentals, with stable demand and no new production interruptions.
Similar increases were seen last week, which many believe were triggered by a delay to a vessel bringing supplies into northwest Europe. Yet, with the impact of this delay over, some sources expressed surprise that, not only had prices not receded this week, they had continue to increase.
“In the early part of last week we had a delayed vessel… prices are continuing to increase [this week], I had expected a return to around the €315/tonne level,” said a producer, who added; “the market in balanced.”
“From a fundamental point of view it doesn’t really make sense,” a consumer said.
Several sources have pointed to the fact that few spot purchases this week have been made by suppliers, which is usually a sign that the market is short. In such a situation, suppliers often need to make spot purchases to ensure they can meet their contractual supply obligations.
Instead, this week’s buyers are reported to be traders, which sources have interpreted as a sign of speculation.
However, some players do believe the price increase is supported by fundamentals, and that the market is balanced-to-short rather than balanced-to-long, largely as a lingering consequence of the severe tightness that was seen in the fourth quarter of 2012.
Others countered that, while indeed many inventories may not have yet fully recovered, at present there is no physical shortage. Rather, this lower-than-optimal level makes the market more vulnerable to another supply interruption, which traders might factor in when betting on future prices.
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