In order to stay one step ahead of Mother Nature, traders are shifting fuel tankers around the world like chess pieces.
However, while one natural disaster is difficult enough to trade around, as three hurricanes and an earthquake rattled the western hemisphere, this week, traders have been hit with not one, but four. And with potential arbitrage opportunities opening and closing with each new weather forecast, that’s upsetting the typical flows of commodities across the globe.
“The traders are trying to follow the money, but the hurricanes are getting in the way,” said Andy Lipow, president of Lipow Oil Associates in Houston. “Traders are reacting to the changing arbitrage and the weather that is forcing them to change plans on what seems like a daily basis.”
When gasoline prices are as choppy as the seas beneath them, it’s hard to know where tankers are best placed. Drawing gasoline, diesel and jet fuel from all corners of the world, prices spiked in the U.S. after Hurricane Harvey. But as prices plunged almost as fast as they soared, some prospective cargoes from Asia and Europe have been canceled. Now, after the U.S. waived the Jones Act, allowing foreign vessels to carry fuel between U.S. ports, supplying fuel to Florida after Hurricane Irma may be eased.
“In some cases, the trader may deviate from an intended destination due to a better opportunity elsewhere,” said Conor Stone, a marine transport advisor at McQuilling Services, LLC. “You have to assume that for the trader to incur the extra expense, they have identified an arbitrage opportunity offsetting the expense.”
Mexico, America’s biggest customer, quickly made alternate plans for supply when Hurricane Harvey shut down Texas refineries and ports late last month. Imports accounted for 72 percent of Mexico’s gasoline sales in July. the trading arm of Petroleos Mexicanos, PMI, booked vessels to haul fuels like gasoline and diesel from Europe, the Caribbean, Asia, Canada, with the quick route from the U.S. Gulf Coast shut off,
“Pemex was ahead of the game,” said Sandy Fielden, director of research and commodities for Morningstar Inc. “They’ve got a bunch of cargoes on hand.” But now, with the hurricane shutting ports, “they’re going to get hit with higher prices,” he said.
A magnitude 8.2 earthquake with an epicenter near its largest refinery in Salina Cruz was something that Pemex was awoken by a new nightmare on its West Coast early Friday. Pemex said that the facility was forced into a temporary shutdown after the quake and was shuttered for at least 45 days after a fire in mid-June.
Bloomberg vessel-tracking data show that there was a diversion to the U.S. for three ships full of fuel headed to West Africa from Europe. And going to Quebec instead is one of the two that were redirected to Florida.
Mason Hamilton, an analyst with the U.S. Energy Information Administration said that Florida has to depend on what tankers can get into its ports as quickly as possible after the refinery and pipeline outages starved Florida of fuel just ahead of Irma.
(Source:www.cnbc.com)
However, while one natural disaster is difficult enough to trade around, as three hurricanes and an earthquake rattled the western hemisphere, this week, traders have been hit with not one, but four. And with potential arbitrage opportunities opening and closing with each new weather forecast, that’s upsetting the typical flows of commodities across the globe.
“The traders are trying to follow the money, but the hurricanes are getting in the way,” said Andy Lipow, president of Lipow Oil Associates in Houston. “Traders are reacting to the changing arbitrage and the weather that is forcing them to change plans on what seems like a daily basis.”
When gasoline prices are as choppy as the seas beneath them, it’s hard to know where tankers are best placed. Drawing gasoline, diesel and jet fuel from all corners of the world, prices spiked in the U.S. after Hurricane Harvey. But as prices plunged almost as fast as they soared, some prospective cargoes from Asia and Europe have been canceled. Now, after the U.S. waived the Jones Act, allowing foreign vessels to carry fuel between U.S. ports, supplying fuel to Florida after Hurricane Irma may be eased.
“In some cases, the trader may deviate from an intended destination due to a better opportunity elsewhere,” said Conor Stone, a marine transport advisor at McQuilling Services, LLC. “You have to assume that for the trader to incur the extra expense, they have identified an arbitrage opportunity offsetting the expense.”
Mexico, America’s biggest customer, quickly made alternate plans for supply when Hurricane Harvey shut down Texas refineries and ports late last month. Imports accounted for 72 percent of Mexico’s gasoline sales in July. the trading arm of Petroleos Mexicanos, PMI, booked vessels to haul fuels like gasoline and diesel from Europe, the Caribbean, Asia, Canada, with the quick route from the U.S. Gulf Coast shut off,
“Pemex was ahead of the game,” said Sandy Fielden, director of research and commodities for Morningstar Inc. “They’ve got a bunch of cargoes on hand.” But now, with the hurricane shutting ports, “they’re going to get hit with higher prices,” he said.
A magnitude 8.2 earthquake with an epicenter near its largest refinery in Salina Cruz was something that Pemex was awoken by a new nightmare on its West Coast early Friday. Pemex said that the facility was forced into a temporary shutdown after the quake and was shuttered for at least 45 days after a fire in mid-June.
Bloomberg vessel-tracking data show that there was a diversion to the U.S. for three ships full of fuel headed to West Africa from Europe. And going to Quebec instead is one of the two that were redirected to Florida.
Mason Hamilton, an analyst with the U.S. Energy Information Administration said that Florida has to depend on what tankers can get into its ports as quickly as possible after the refinery and pipeline outages starved Florida of fuel just ahead of Irma.
(Source:www.cnbc.com)
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