(30-12-2015, 10:34 PM)Art or Science Wrote: [ -> ]Ship owners gained from oil price slide..
http://www.bloomberg.com/news/articles/2...sters-rule
IMO, lower oil price should benefit shipping sector, but we saw low for both sectors now.
The low in shipping, might due to lack of demand, rather than an oversupply. With a recovery in global market, I have a view, the recovery of shipping sector shouldn't be too far away. Well, the view seems contradicting with many expect views I have read?
China downturn means steep demand drop for global commodity shipping basically. Seriously doubt any recovery in global markets at the moment, company earnings of those global company like caterpillar and alcoa is not picking up, emerging market company earnings are also still shrinking.
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Low price can shift the demand and supply curve of substitute but if is a general economic slow down, this not going to help much because there aren't demand. Every damn thing fall. Coal, Oil, palm oil ... they are just "substitute" of each other. How is low oil price going to help shipping if the ship can't leave the port ? Even if it can, the oversupply of ship will pressure your rates down.
And low oil price is probably here to stay for long time. why ? Because the Tap is already build. ie. Shale oil. Evey time the price go up, shale oil will flow again and this will push down the price. How this spiral be overcome will be interesting to find out.
One thing, which I can't understand is why the economy will be better off with high oil prices and not the other way round.
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Oil money doesn't just sit around in piggy banks of oil men... they get invested into community projects, funds, real estate, etc etc... So lower oil prices, ends up leading to less demand and affect everything else.
Theoretically lower prices should've encouraged demand with all derivatives of oil becoming cheaper... but it doesn't seem to be the case so far
(01-01-2016, 11:34 AM)sohnoname Wrote: [ -> ]One thing, which I can't understand is why the economy will be better off with high oil prices and not the other way round.
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it kinda depends how much a nation's economy depends on oil export to make money.
With low oil price, a net exporter of oil with an economy dependent on oil exports will see export dollars drop (assuming constant production) hence less profit coming into the country and a slowdown in their economy. e.g. OPEC/Norway
But a net importer of oil would benefit from lower oil prices as that would mean cheaper costs for whatever their economy produces and exports. eg. Singapore
While Singapore is a net importer, it scratches below the surface. We have numerous oil & gas support companies in our economy, who service oil majors. A fall in oil price will affect these oil major's proposed expenditure, in turn affecting our Singapore O&G support companies.
As many here are aware, these local companies have borrowed quite heavily from banks to finance themselves during the heydays. With poorer business sentiments now, be prepared to see debt impairments. So this oil crisis may affect two major industries of Singapore: the oil & gas industry and to an extent, the banking sector. Job cuts and poorer economic performance of Singapore may ensue
Once the excesses are gone, economy bottomed, low oil price will drive demand and ignite the economy. The question will be how long the process will take. Want to guess what are the excesses ?
http://www2.theedgemarkets.com/sg/articl...ipbuilders
And the fun continues for oil demand derived companies. I am interested to see how the slowdown in O&G sector will spread/be contained in our local economy. Jobs have to be preserved, otherwise property repayments cannot be met among our leveraged Singapore housholds.
My bet is that the govt will use 08 policy where they paid a portion of Singapore/PR wages during the downturn except this time, this policy will be in place for a longer duration.
US oil 'strippers' maneuver to keep pumping amid crude slump
U.S. "stripper well" operators, the nation's smallest oil producers seen as most likely to succumb to the crude price slump, are hanging in tough, reducing the chances of near-term production cuts needed to rebalance the domestic oil market.
http://www.channelnewsasia.com/news/busi...96832.html