Best party mood for oil traders since 2008 price crash
By Dmitry Zhdannikov
LONDON (Reuters) - The oil price crash has meant slashed budgets, staff layoffs and mothballed projects for big producers, but oil traders will celebrate their best market for years this week.
As hundreds of dealers flock to London for the annual International Petroleum Week, cocktail circuit talk will be of the chance of huge returns after years of low volatility.
For them the market presents near perfect conditions, mimicking the year after the 2008 oil crash when some booked their best profits in history. Then, those with the know-how and storage were able to lock-up millions of barrels of crude until prices eventually recovered.
The bumper profits on offer are reflected in the long list of IP Week parties, with no firms cancelling their events this year, even as they make cuts in other areas.
"I haven’t been more positive about trading conditions since 2009," said Torbjorn Tornqvist, head of trading house Gunvor, one of the world's largest independent oil dealers, told Reuters last month in Davos.
"I see contango in the market, I see the cost of funding going down, I see the dollar strengthening, I see strong refining margins."
Contango - industry jargon for when prices for delivery months in the future are higher than in the spot market - is key to much of the trading boom.
Any trader with access to storage, on land or at sea, can buy a barrel of oil today for $58 LCOc1 and sell it 10 months down the line for $65 LCOZ5, based on current prices. Continued...