Brent crude, oil products volatile as markets hunt for the bottom

Cuckoo James

05-Feb-2016

LONDON (ICIS)–Market participants in the Brent crude oil and refined products sectors are finding the markets highly volatile as a hunt for the bottom intensifies.

“[I am] still alive. This volatility is enormous,” said a naphtha trader.

Ole Hansen, Head of Commodity Strategy at Saxo Bank said in a note: “Crude oil has gyrated violently within a six- to eight-dollar range during the past couple of weeks. The uncertainty about where we go next has driven volatility to the highest level seen since 2009.”

Morgan Stanley in a research note released in January attributed the high volatility to fluctuations in the trade-weighted US dollar index.

“Many analysts ascribe too much of the recent move in commodity prices to changes in fundamentals, especially for oil. The truth is that there is a strong inverse correlation between the trade-weighted USD (which is rising sharply) and commodity prices, which has a fundamental basis.”

“Over the past year, a 1% move in the USD implies a 2-4% move in Brent,” the bank said.

A devaluation of China’s currency has also lifted the US dollar trade-weighted index recently, but this week a more dovish tone from the US Federal Reserve and some poor economic data from the country has led to a decline in the US dollar purchasing value against other major currencies.

On Wednesday 3 February, data from the US Energy Information Administration revealed US crude supplies jumped roughly 8m barrels last week to their highest level on record, but Brent closed the day higher on the back of a weak US dollar.

Meanwhile, US gasoline stockpiles rose by around 6m barrels last week to a record 254m barrels, the highest for the time of the year in more than a decade.

Eurobob gasoline barges closed the day sharply down to $340.50/tonne FOB (free on board) Amsterdam-Rotterdam-Antwerp (ARA) on Wednesday 3 February, but prices clawed their way back up the next day on the rise in upstream Brent crude oil.

Naphtha followed gasoline’s lead, and cargo prices remain highly volatile. Cargoes traded at $308.50/tonne CIF (cost insurance freight) NWE (northwest Europe) on Thursday 4 February.

Volatility was slightly less pronounced in mid-distillates, especially for gasoil which traded at $310.25/tonne CIF NWE on 4 February.

READ MORE

Global News + ICIS Chemical Business (ICB)

See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.

Contact us

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?