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BLOG THEMA'S : Downstream markets

Drivers of Tank Storage Demand

Gepubliceerd Jacob on 14 mei 2018 11:22:40

Demand for tank storage capacity is heavily influenced by changes in the market environment as it alters client’s requirements and its profit potential. To identify which market variables are relevant and how these influence a terminal’s commercial performance, PJK International has developed a tank terminal market model: ‘PJK Tank Terminal Commercial Performance Model’.

In this model a number of important market variables are described and analyzed thoroughly. The most relevant are touched upon below:
1. Market structure
2. Price volatility
3. Arbitrage

Market structure

An oil price for immediate delivery is called spot price or cash price while an oil price for delivery at a specified date in the future is called a forward price. When we plot these various prices and order them from short to long term delivery, a forward curve is created.

When a futures price (second month) is below a futures spot price (first or front month), the market structure is in backwardation. In this case, the forward curve is downward sloping. When the futures spot price is below the futures price, the market structure is known as contango. In this case, the forward curve is upward sloping.

In a period of contango, oil traders are encouraged to buy oil products today and sell in the future when the spread between two months covers storage, shipping and finance costs. When this opportunity presents itself, product is being sold, shipped and stored, resulting in more business for tank storage companies. This play is known as a ‘contango storage play’ but is limited by the maximum tank storage capacity available.

In some rare occasions, when the time spread is large enough even tanker vessels are chartered by trading companies to store oil products. This is known as floating storage. In this rare environment demand for tank storage is high and pushes storage rates for spot availability. Backwardation discourages storing oil products as a trader can sell oil today at a better price than in the future.

Price volatility

Volatility is applied to describe fluctuations of oil prices and it relates to the level of uncertainty in the market. Historic volatility is calculated by the standard deviation of an oil price return series, measured during a certain time frame. There are other ways to calculate volatility i.e. looking at the daily high and low range of oil prices during a trading session or the estimated volatility of an option (implied volatility). Implied volatility offers an outlook on the expected volatility and is the opposite to historic volatility that looks back into recent history. It is important to understand that there are events that can impact the level of price volatility.

Important for tank storage companies to understand is that in times of high volatility, such as described in these three cases, trading volumes on the paper market are very high. As traders are able to make bigger profits in a high volatile regime when an old saying become reality: ‘buy low and sell high’. Taking into account that every paper position is squared by a physical position, one can understand that also physical trade will increase. More physical trade will eventually lead to more demand for tank storage capacity.

Arbitrage

There are several forms of physical arbitrage:

1. Geographical arbitrage identifies temporary price anomalies between different locations;
2. Time arbitrage seeks to benefit from the shape of the forward curve for physical delivery (see our article on market structure); and
3. Technical arbitrage seeks to benefit from the different pricing perceptions for particular commodity grades and specifications

From historical analysis we have learned that in the period between 1 January 2016 till 31 May 2017, 68% of the VLCC’s left for Singapore when the arb was open. 32% of the VLCC’s still undertook the voyage to Singapore when the arb was closed. So monitoring if arbs are open (or closed) is a good indication, to understand if trade between two regions is likely to increase. A positive trading environment, ultimately will influence tank storage dynamics.

Interested to learn what market variables impact the commercial performance, read our Tank Terminal Week Report. Contact me when you would like to receive a copy or get more information.

Jacob van den Berge (Marketing&Sales)

+31-850-662505

 

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ARA Tank Terminal Market Review

Gepubliceerd Jacob on 4 mei 2018 13:45:19

The ARA (Amsterdam – Rotterdam – Antwerp) region is one of the main global commodity trading hubs. Its central location within Northwest Europe and its excellent connectivity to local and global markets have attributed to this position. When we zoom into liquid bulk markets the above statements certainly apply: ARA plays a central part in global petroleum, chemicals and vegetable oil markets. There are very few international commodity traders that do not have a presence in ARA.

In order to support liquid bulk traders a massive amount of tank storage capacity is located in ARA. A lot of that capacity is managed by independent terminal operators. These terminal operators rent out tank capacity to third parties, The majority of this capacity is rented out to traders and the biggest market segment is the petroleum products tank storage market. In this article we will examine recent developments and outlook for the ARA tank terminals market for storing oil products.

When analyzing tank terminal markets one needs to keep in mind that this business is tied closely to the trading business. Traders need tank terminals to facilitate their physical operations. So in order to gauge the tank terminal market one can best look at trader’s business model and trader’s behavior. The central question here is: what circumstances make having access terminal capacity a profitable position?

If you are interested in the answer of this question, please drop me a mail and get the complete article.

Jacob van den Berge
Marketing & Sales Manager

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Gasoil barge flows out of ARA increase

Gepubliceerd Jacob on 30 maart 2018 9:15:22

A trader who is exposed to the Northwest European oil products market information such as, changes in supply, demand and imbalances are essential to enable good market timing. With the development of the Rhine Flow Service, PJK International has developed an information tool that offers insights in the last blind spot of the ARA Supply and Demand Puzzle.

What is the Rhine Flow Service?

The Rhine Flow Service is a report that offers insights in oil product flows up and down the Rhine. Information is gathered by connecting different sources. Sources that are consulted are video footage positioned strategically near the German border along the Rhine, PJK’s internal database of barges which holds information on size and type and AIS tracking data.

Gasoil, ARA’s mostly traded commodity

The time series in our Rhine Flow Service report showed that gasoil flowing out of the region by barges more than doubled in six months and then gradually decreased. In December 2017 volumes layed around 120kt and rose to almost 250kt in March. After this upward trend, transport volumes fell back towards 142kt. The minimum level measured so far was 91kt and the maximum level stood at 247kt.

Looking at the product slate that is transported by barges ex. ARA to hinterland markets and back around in the week to 15 March (net-(ex)imports) around 70% was gasoil (see figure 1). The second largest oil product group in kt volume that week was naphtha with around 61kt followed by fuel oil with 19.5kt.

Figure 1: product slate RFS report of March 15

PJK International started gathering and reporting on the flows to and from Germany since late December 2017. Since that week historic data has been build up. As can be seen in figure 2, in the period between December 27 and February 14 volumes fluctuated around the average weekly volume which was around 146kt. After this period, volumes flowing out of the region increased and reached a high so far at 242kt on March 15. The low stood at 98kt on January 24.

Figure 2: Historic data gasoil RFS report March 15

Main benefits of Rhine Flow Service

Information on supply and demand and trade flows will lead to changes in stocks and offers a trading company insight if the region is short or long. The last piece in this ARA supply and demand puzzle is information on barge movements to and from this region. This is the extra piece of information, that will give a trading company an extra competitive edge.

To summarize, the main benefits of the Rhine Flow Service are:
a. Understanding and anticipating barge flows enables good market timing and better trading performance.
b. Info on barge flows is not available but these flows are a significant factor in ARA S/D balances and product pricing.

If you are interested to know more and experience for yourself the value which our RFS service can offer for your company, please contact me and I will send you a PowerPoint presentation with more background on the working of the Rhine Flow Service tool.

Aldo Cavalcanti, Account Executive

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ARA fuel oil stocks at a near four-month high

Gepubliceerd Jacob on 9 maart 2017 16:27:41

London, 9 March (Argus) — Oil products stored independently in the Amsterdam-Rotterdam-Antwerp (ARA) region rose this week on the back of fuel oil inventories that were up by 43pc on the week.

Fuel oil inventories rose to a level not seen since mid-November as imports volume from Finland, Poland, Russia and the UK surged. No very large crude carrier (VLCC) loaded this week as the Europe to Asia-Pacific arbitrage is barely workable. Nevertheless, two Suezmaxes left the ARA region this week with European fuel oil cargoes.

Gasoline stock edged higher despite exports to Brazil, Canada, Guinea, Nigeria, the Middle-East and Senegal. Outflows to the US remained relatively weak. Product was also imported from France, Russia and the UK.

Naphtha inventories increased on the back of inflows from Algeria, Germany, Spain, the UK and Russia. No naphtha was loaded on open-sea vessels this week, but barge demand from the hinterland remained strong on the back of slightly lower freight rates and supportive Rhine river water levels.

Gasoil stocks levels remained broadly stable on the week. Product came from Latvia and Russia. Sellers in the spot market have become keener to offer cargoes in northwest Europe, and gasoil was exported to the UK this week. Favourable barge shipping conditions maintained healthy inflows volumes to the hinterland.

Jet fuel stocks held independently in the ARA region fell as products were exported to Scandinavian countries this week. Imports from the Mideast Gulf and India arrived into other northwest European ports, including Le Havre, Milford Haven. Further imports are expected to arrive in French and UK ports over the next week. And stocks could begin to build as French Air Traffic Control strikes ground over 1,000 flights on 6-10.

Argus editor: Benoit Petre

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ARA oil product inventories fall again

Gepubliceerd Jacob on 2 maart 2017 17:04:02

London, 2 March (Argus) — Oil products stored independently in the Amsterdam-Rotterdam-Antwerp (ARA) region fell this week on the back of lower gasoline and gasoil inventories, continuing a fall from a five-month high hit in the week to 16 February.

Gasoline stock levels fell as higher exports volume were shipped to northeast Asia and west Africa. Outflows of gasoline to the US — Europe’s biggest export market — picked up as well while remaining relatively modest. Products were also exported to Gibraltar and the Middle East. On the supply side, gasoline was imported from Finland, Russia, France and Sweden.

Gasoil inventories hit a near two-month low on the back of higher exports volume to west Africa and the Mediterranean region, as well as strong barge demand from the hinterland. Gasoil cargoes delivered in the ARA region this week came from Latvia, Russia and the US.

Naphtha stocks were the highest recorded since mid-September, reflecting large import volumes from Algeria, Poland, the UK and Russia. Lower demand from the gasoline pool may have been a driver of rising inventories.

Fuel oil inventories dropped slightly on the week despite arrivals from Finland, France, Russia, the UK, the US and Latvia. No very large crude carrier (VLCC) loaded this week as Europe to Asia-Pacific arbitrage economics weakened. But trade is still profitable for smaller tankers. Suezmaxes the Lipari and the Aegean Navigator left the ARA region with Singapore discharge on 27 February and 1 March respectively.

Jet stock levels barely increased despite products being supplied from the UAE.

Argus editor: Benoit Petre

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ARA oil products stocks fall from highs

Gepubliceerd Jacob on 23 februari 2017 17:05:22

London, 23 February (Argus) — Oil products stored independently in the Amsterdam-Rotterdam-Antwerp (ARA) region — which hit a 5-month high on the week to 16 February — fell on the back of lower gasoline, gasoil and jet inventories.

Gasoil inventories levels fell for the fourth week in a row. The combination of higher Rhine river water levels with lower barges freight rate bolstered gasoil flows from the ARA region to inland destinations. While gasoil was imported from India and Russia this week, vessels loading in the ARA region sailed to Germany, Togo and the UK.

Gasoline stocks dropped on the week despite poor arbitrage economics to the US. High exports volume to Nigeria, the Middle-East and Pakistan make up for the absence of transatlantic-bound cargoes. Products came from Estonia, Finland, Russia and the UK.

Jet inventories contracted sharply despite imports from the UAE.

Naphtha stocks experienced double-digit growth rate as higher gasoline stocks weighted on naphtha demand from gasoline producers. Higher import volumes also played a role with products coming from Algeria, France and Portugal. Lastly, the surge in naphtha inventories — which mirrors the drop in gasoline stock levels — could reflect relabeling.

Fuel oil stocks inventories increased as vessels from Poland, Russia and the UK unloaded their shipments in the ARA region. One very large crude carrier (VLCC) with Singapore discharge, the New Dream, sailed on 21 February.

Argus editor: Benoit Petre

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ARA oil stocks hit fresh record high

Gepubliceerd Jacob on 6 augustus 2015 16:17:30

London, 6 August (Argus) — Independent product stocks in the Amsterdam-Rotterdam-Antwerp area reached a new record high this week as gasoil stocks increased substantially, also hitting an all-time high. Total independently held product stocks stood at 6.425mn t today, up by 285,000t from a week earlier, data from Dutch consultancy PJK International showed.

Gasoil stocks increased by 185,000t during the period to 3.368mn t, marking the highest level ever. The market remains in a contango, incentivising buying for storage, while import flows from the Baltic region and the US remain steady.

Fuel oil inventories also showed a significant increase, climbing by 172,000t to 1.042mn t. Arbitrage to Singapore remained shut during the week, but a VLCC is currently being loaded at Rotterdam. Bunkering demand in Europe remains weak.

And naphtha stocks rose by 57,000t to 267,000t during the week, despite tight supplies and firm demand for the product in Europe.

Jet fuel stocks fell marginally from a week earlier, dropping by 3,000t to 761,000t as economics still support storage over selling.

But gasoline stocks showed a notable decline during the week, falling by 126,000t to 987,000t as flows to west Africa increased and product continued to be exported to the US.
Argus Media Reporter: Sergei Balashov

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ARA gasoline stocks dropped by 37kt to 0.75Mio/t

Gepubliceerd Jacob on 11 juni 2015 18:45:49

London, 4 June (Argus) — Independent product stocks at the Amsterdam-Rotterdam-Antwerp (ARA) trading hub rose marginally in the past week. Total stocks stood at 5.553mn t today, up by 11,000t from a week earlier, data from Dutch consultancy PJK International show.

The biggest move was in jet fuel stocks, which declined by 74,000t to 642,000t as tradingactivity picked up ahead of peak demand season.

Gasoline inventories also fell, dropping by 37,000t to 751,000t during the week as booking to west Africa resumed and export flows to the US remained steady.

But fuel oil stocks rose, climbing by 59,000t to 1.019mn t as exports to the Asia-Pacific remained at a low level.

Naphtha stocks increased by 50,000t to 252,000t during the period. Supplies of light virgin naphtha in the ARA region were at a high level because of steady import flows from the Former Soviet Union (FSU), while demand remained weak.

Gasoil stocks showed a small increase, climbing by 13,000t to 2.889mn t. The gasoil marketin northwest Europe is currently balanced as supplies of the product cover demand.

Argus Media Reporter: Sergei Balashov

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Voorbereidingen voor overschakeling van zomer- naar winterkwaliteit in volle gang

Gepubliceerd Jacob on 8 september 2014 17:22:21

De vraag op de (Rijn)transportmarkt richting Duitsland, Frankrijk en Zwitserland concentreert zich op belading in de eerste helft van september.

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Dalende waterstanden hebben nog geen invloed op vrachttarieven

Gepubliceerd Jacob on 26 augustus 2014 16:19:27

De vraag op de Rijn richting Duitsland, Frankrijk en Zwitserland concentreert zich op augustus resp. begin september belading. Fundamenteel zijn er geen veranderingen op de markt te zien.

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