Friday, January 16, 2009

Destination Nowhere

Thousand, guided by the light, restlessly climbed the hill right till the top just to fall off an abrupt edge.


  • OPEC output cuts

  • Fighting in Gaza

  • The conflict between Russia and Ukraine threatening gas supply to Europe etc.

All above proven stimuli failed to rouse the oil drum out of an epileptic fit. Demand and liquidity treading in a negative zone, are making sure that the highly volatile market, with huge intra day variations, remain down.

Price volatility has augmented the sense of shock, confusion and uncertainty. And this directionless market has resulted in closure of rigs and refiners producing less. At the same time, future of investment into E&P of new resources is now hanging in 'to be or not to be' state.

Down but certainly not out. The slowdown in oil investment is so rapid that some believe, it is a matter of time before shortages appear that will push oil prices to new heights. Driven by future market contango, companies like Vitol, Koch and Phibro are loading VLCCs for nowhere. These guys with 'V' on their index and the middle, are hiring 'V's of the tanker market left right and centre and gestating their dream in the middle of the high seas.

Hundred blind men, groping in the dark, are now trying to climb the hill.

Anybody's guess. But this short term volatility is giving everybody a chance to say, "I said so".

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