Buy on the dips!
11th August 2014 12:48 GMT

After a career in the bunker industry spanning 40 years with well-known UK-based companies, I have been retired for over two years now.
But I do, from time to time, glance at what’s happening in the bunker world, and one thing that always intrigues me is the price guidance given by bunker pundits advising buyers to "clear their desks of all enquiries" because the market is rising.
"Market going up.. PANIC ... buy buy buy...stem stem stem".

But why? This is reverse logic, as inevitably by the next day or so the market will collapse again.

Anybody can "call" a market and by the law of averages they should expect a 50% strike rate. Good luck would get them 60% and bad luck would get them 40%.  

Most suppliers are not stupid and are going to take advantage, price-wise, on a rising market, especially if there are many enquires all put out in the market at the same time. This in itself increases the demand and hence prices. And suppliers can always pick and choose which ones to quote on.

In my experience, a market rarely continues going up more than two days in a row. It may be three to four days at the most in very exceptional circumstances. So if the market is going up, then buyers should wait for the dips, especially in this type of market which has been typically flat for some time now.

Usually on a "falling market" a buyer could get a much better price by waiting. Reading the markets, using their gut feeling and advising clients of such, should be the main critical knowledge used by all brokers /traders. But so often it's just "market going up so stem stem stem".

Most of the savvy bunker buyers should give their bunker enquiry out to a broker or trader to "advise when best to stem", not on a day so close to delivery that there is no choice but to stem or lose a delivery because it's so prompt.

Unless a prompt fixture of a ship is required, then most buyers "should" know the various ports weeks beforehand. Some buyers however, for some strange reason or another, will only give the enquiry out a few days before an ETA – resulting in having to stem straight away. This might result in getting the best price on the day, but not the best price for the ship.

A big difference.

So brokers/traders telling clients to buy on an increasing market is ludicrous, unless a caveat is advised depending on when the ship is due.

It's not buying on a "rising" market - but buying on the "dips" that gets the best deals.

And don't wait for the bottom of the market. This never comes. "Create" the bottom of the market!

Jeff Kirk,
11th August 2014 12:48 GMT

Comments on this Blog
Ivan Nielsen - Clipper Group AS
12th August 2014
Actually great points, and in addition as a Buyer u can measure this further by calculating how close to supply date u can close the deal without having an impact on your price due to lack of competition, which naturally varies from one port to another, but in order to do so u need regular requirements. In general though the investigation indicated 4 days in advance notice as a minimum to supply date was the ideal notice for procurement.
Mustafa Muhtaroglu - Enerji Petrol Denizcilik ve Ticaret A.S (Energy Petrol)
17th August 2014
Jeff, it is very nice to hear from you after long years, i remember the days we were dealing for very large accounts and volume without any info available regarding prices markets etc as we have right now, we were probably having only feelings but finding best prices, now a lot of info around on internet evertyhing is known everywhere in few seconds and i still try to find "dips" since 1986 .....
Jeff Kirk - Retired
17th August 2014
Mustafa - its nice to hear from you as well. indeed yes back in those days you had to have strong "gut" feelings and use them wisely on large accounts and volumes being entrusted to you. The only real information out there was "post" information - prices being published after the event so you had to get it right. Some say that was the Golden Age of broking and trading.. I tend to agree with them.
These days there is too much information being posted online; much of it is conflicting on price, market direction, geopolitical news, whatever.. that many players get bewildered and confused and revert back to the "herd" mentality of blindly following the leader and stem when markets start to rise... instead of using their own professional market knowledge and gut feelings. Nice to hear you are still "dipping" into the bunker market after all these years....
Ifeanyi Otisi
2nd October 2014
Good points and well appreciated.. (#More-Grace).
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3rd September 2016
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3rd September 2016

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