The “Pollyanna” Premise

The “Pollyanna” Premise

June 13, 2014

The wonderful Argus Annual summer party took place on 11th June at the Kensington Roof Gardens, giving the oil trading community a great opportunity to discuss  the horror unfolding in Iraq. Any regular readers of this blog will know that I do not “do politics”, but I note with dismay the mounting death toll.

But, like Pollyanna in Eleanor H Porter’s book, one comment kept recurring – we may now see a return to some volatility in oil prices.  The fundamental premise of the Pollyanna books was that she could find something to be glad about in even the worst situations. Welcoming an increase in oil price volatility is a very “trader” response and not one with which the upstream sector would generally concur.  But with volatility come activity and with activity comes liquidity and that is a good thing for everyone in the market.

Those who are trying to finance development projects will have noticed that some of the big names have withdrawn from the market or scaled back in their activities in response to Dodd Frank and Volcker. Where are Goldman Sachs, JP Morgan and Morgan Stanley when you are looking for project finance or to hedge your oil price exposure in order to collateralise your debt? They have gone with the wind, or hot air, of ill-advised market regulation.

And for those watching the football last night, here’s what you missed

In a desperate attempt to avoid the beautiful, but extremely tedious, game I tuned in to “Simon Evans Goes to Market “ on BBC Radio 4 Extra. The comedian, Simon Evans, was explaining the oil market to the uninitiated. Evans is always good value, but this broadcast had the added benefit of an explanation of the oil price by the market’s own Paul Horsnell of Standard Chartered. Be prepared to be disabused of any notion of Paul as a dry, academic old stick (remember him from his Oxford Energy Institute days?) Paul proved that he can talk fluently with his tongue stuck firmly in his cheek. This is well worth a listen