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LQM Poll: Bunker buyers lack risk management mechanisms despite anticipated price rise

21 May 2020

Marine fuel brokerage service provider, LQM Petroleum on Tuesday (19 May) warned that despite recent low bunker prices, a significant proportion of marine fuel buyers still do not have any risk management strategies in place to mitigate anticipated price rises.   

Two thirds of LQM Petroleum Services clients polled in a webinar on 12 May thought marine fuel prices would rise in the next 12 months.

At the same time, only half the participants said they currently use risk management strategies to mitigate this risk, reported the company. 

“This trend reflects the wider industry’s understanding of the tools available to manage bunker price volatility,” said LQM Chief Executive Daniel Rose. 

“But we were encouraged by the fact that three quarters of participants on our call stated that they would be interested in locking in today’s low prices.” 

LQM Petroleum Services states that it is a hybrid bunker broker and trader which protects itself from energy price changes by entering into fuel oil swap agreements. 

“We fully understand the reluctance by some owners and charterers to enter into the fuel oil futures market: it’s an area which leaves some overwhelmed and those with relatively small clip sizes feeling overlooked,” said Rose. 

“But we’re in the unique position of being both a broker and experienced trader. 

“We can guide potential participants through the entire process and help clients manage their specific hedging needs.” 

“The fuel swaps market has independent credible benchmark pricing, robust clearing solutions and good liquidity. 

“These are the fundamentals for a successful futures market.” 

Opinions as to the duration of the current market volatility were less clear-cut with 21% of the webinar participants thought that current conditions would continue only for the next three months.

32% thought between three and six months whilst 36% felt that six to 12 months a more likely scenario.

The webinar was attended by several shipowners, charterers and traders who responded to the poll.


Photo credit:
Element5 Digital on Unsplash
Published: 21 May, 2020

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