What should you do when price drop USD100/MT tomorrow

It actually happened last month……

One of the biggest drop since 1991 on 9 March, the combo of OPEC discussion + CONV19 virus push the bunker price to another low point and probably one of the lowest ever seen for LSFO in major ports. What should bunker buyer do to make the most out of this incident ?

1. Stop waiting for “further drop” until its too late

Not surprisingly in the next 5 trading day most people wont be fixing at the lowest because once there is a steep drop most client predict it will go further down ‘ Similar to the day price go up USD100/MT, most client think if the price go up so much it must go down. i called this “Oil price always drop disregard the movement technical analysis.” Once again seeing client wait until the ETA is too close and less supplier can do , final fixing actually become higher now due to lack of options.

2. Compare different bunkering ports

Due to different cargo sourcing strategy and pricing system from oil major/ cargo supplier in different ports, price can be “abnormal” during vigorous movement. I have seen Hong Kong can do USD10 lower than Singapore ( normally Singapore is lower by 10-15USD/MT). My personal speculation is the options of purchasing spot cargo nature from HK cargo supplier or business is indeed really bad (who knows)

3. Understand “high” and “low” is relative

The low today might be high tomorrow, for some reason we all have tendency to “read” the market once there are dramatic movement , some client might rush and fix the whole year contract on a fixed price agreement but didn’t realize that the “low” today might be “high” tomorrow. Accept the fact that the market don’t give a damn on what you think and a disciplined way of risk management is always a good measure.

Until next time