Friday, May 29, 2009

Oil and Singapore

Sorry readers for the lack of updates. Have been rather busy lately with work and stuff. Will be going to the US in a few weeks for a project, so am preparing for all the required adminstrative stuff.

Anyway, I saw this page in The Straits Times, money section on Wednesday May 27 2009. It is basically a page fully dedicated to oil/energy.

These are the 3 head lines
  1. S'pore set to boost status as energy hub
  2. Oil and Gas firms face difficult year
  3. PetroChina out to be price-maker with SPC deal
All which are oil related.

S'pore set to boost status as energy hub
  • This is more of converting Singapore into a leader in energy TRADING hub. Currently we are 3rd in the world. ( This will defintely help our economy in the long run. Imagine if SGX is the exchange that is used for these transactions. Its stocks will run like crazy if Singapore becomes Asia's trading hub!)
  • Having a commodity exchange based in Asia and catered to Asian's need and specifications will increase trading activity in Asia, as the time zone will be catered to us, and not follow America's one. ( I think this would encourage traders to in Asia to increase trading!)
  • The Singapore Mercantile Exchange will make its debut later this year. Offer essentially all the commodities and futures contracts. ( However I feel that if it were not publicized effectively to all the Asians countries, it will definitely fail. As the Singapore market is not big enough to provide the liquidity for such trades. And only a few more popular commodities like oil, gold will succeed. I can't imagine myself trading 'pork' just yet.)
  • Singapore Government is gather all the leading companies in trading over here. Some examples are
  1. Opet Trade
  2. Sahara Internate Koc Group
  3. Socar Trading
  4. Tricorona
  5. BP ( oil giant has also recently set up a carbon trading team )

Oil and gas firms face difficult year
  • Estimated 100 million barrels of crude may be stored on sea tankers
  • Lower demand as there is low growth
  • Price volatility
  • HOWEVER, assuming population and economies to grow, its expected the oil price to go up to US$70-US$90
Seems like a very pessimistic article. Implying that the present market rally will not be able to sustain, as most people expect the economy to be weak.

PetroChina out to be price-maker with SPC deal
  • PetroChina is bidding for SPC with US$2.2 billion
  • SPC is a major source of fuel supply where most of Asia's oil prices are determined.
  • SPC owns half of Singapore Refining Company (SRC) while the remaing is held by US major Cheveron
  • PetroChina has already long term deals to supply fuel to regional importers like Vietnam and Indonesia
  • With all this 'control' of fuel, they will have more say in setting the price in the market
We are looking at the new oil leader in Asia if PetroChina is able to follow through with its plans. However I feel that things will not be as simple. This is because its refining capacity of 2.6 million barrel per day lags behind rival Sinopec 4.3 million barrel per day. What makes you think that Sinopec will sit back and not do anything to protect its best interest. Its just a speculation of mine, but I think Sinopec will come up with new policies to challenge PeroChina once its profit margin is at risk.

Having PetroChina leading the price of oil and Singapore as the leading energy trading hub will definitely help Singapore's economy. However that is provided everything goes as plan. With the tough economic conditions presently, and my speculation of Sinopec's possible actions. We can never be too certain!

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