The unexpectedly strong crude oil prices of 1995-97 and 1999-2000
caught most analysts wrong footed. Unlike industry consensus outlooks
based on erroneous trade-press estimates of Opec production, and probable
demand, PVM monitored actual physical oil flows, and inventory behavior.
The net result: an accurate signaling of upside price movements and
market direction.
Global Crude Oil Flows
The lack of reliable information on oil production, when coupled with
incomplete demand data, poses a perpetual problem for serious market
analysts, and explains why "consensus" forecasting is so problematical.
PVM monitors global flows of sweet and sour crude from primary production
centers to end user markets. The shifts and swings in these physical
patterns have enabled early detection of the sweet crude movement into
Asia, shifting global arbitrage economics, and the dramatic impact of
supply surpluses on supply movements.
Structural Differences Between US Lease Crude Markets And Nymex
The attempt by the US Government Minerals & Management Service to determine
well-head crude oil values based on commodity prices created great
controversy. PVM assessed the issue of market price behavior for varying
classes of oil trade from the small volume lease markets to the commercial
market center for Nymex crude at Cushing. PVM's expertise in oil pricing
systems and markets was the centerpiece of the US oil industry response to
the MMS. PVM was the primary source cited by the American Petroleum Institute
in its extensive public responses to the MMS in 1997 and 1998. Underwriting
client sponsors included a substantial number of major and independent US oil
companies.
Crude Oil Formula Price Behavior And Trade Press Practices
The move to formula pricing mechanisms represented a major structural change
for the oil markets going into the early 1990s. Despite the commoditization
of crude pricing in world trade (via the Nymex and IPE) many price formulas
are still linked to traditional trade press indexes. PVM undertook a
comparative analysis of the various trade press price reports, and the
relationship between the resulting formula prices and the commodity
benchmarks.
Carbon Black Market Analysis
A major oil company requested review and profile of the international carbon
black business, with a particular emphasis on the potential for international
trade and the opening up of new channels of market distribution. The study
included a detailed profile of potential market outlets, and an analysis of
trade flows & global economics.
Refinery Audit (Commercial)
A review of the trading and operating practices of a large US regional refiner.
Going beyond a simple financial audit, PVM reviewed the business and trading
practices of the firm, its refinery operating needs, and its strategic position
in the marketplace. The objective was to redefine its operating strategy, and
redirect the company emphasis to the most profitable areas of concentration.
Large Caribbean Refinery Joint Venture
PVM was retained by a Caribbean Commonwealth's Legislature to undertake a critical
analysis of a proposed merger with an overseas producing nation. A commercial
profile of the refinery economics of the facility, its ongoing financial losses,
and the implications of the merger were reviewed. The project included an in depth
profile of each company and their commercial practices & market strategies.
Marshall Thomas and other associates provided on site advisory services on the
floor of the Legislature for 5 days of televised public hearings on the merger.
Far East Refinery Viability Study
PVM evaluated the various crude oil slates for a planned new grass roots refinery
project. The refinery economic model was pegged to indigenous crude oil grades, but
financing approvals required identification of suitable alternative imported crudes.
Analysis involved comparison of likely freight costs, crude qualities, pricing
mechanisms, and likely commercial availability. Most of the crudes in question
involved small oilfields with limited price transparency. PVM's Singapore office
assisted in many aspects of the commercial evaluation. PVM analysis was presented
to financial institutions underwriting the project.
Long Term Crude Oil Supply Alternatives For European Refinery
The pros and cons of various Middle Eastern producers as term crude suppliers were
reviewed for a European refiner. The client has a long standing contract, and was
considering the addition of Iraqi crude on its base load supply roster. The analysis
involved consideration of pricing issues, political risks in the short & long term,
supply security issues, transport costs and a detailed profile of the specific pros
and cons of dealing with certain state-run producers
Fleet Expansion Advice
A major European shipowner contemplating fleet expansion into refined product carriers
suitable for the US market contacted PVM for assessment of gasoline and heating oil
demand. Primary elements of the project included North American supply & demand for
short- and medium-term horizons, analysis of demand by product, the declining role
of residual fuel in the face of higher natural gas usage, and vessel purchases by
other ship owners.
