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9 September 2020

MACD - A Momentum indicator to predict forward prices in a volatile bunker market

MACD is a stock technical trading indicator that has proven to have an application in bunker fuel planning as current market prices can change 1-5% ($3-$15 mt) every day/week.

Forecasting 3- 15 days forward has become an essential part of the planning phase for buyers. Clearlynx recognized this and built two momentum indicators within its Price app – RSI and MACD. We recently added a new tab to our pricing screen, “MACD Movers.” The design on-screen gives easy access, revealing alerts on changes in strength, direction, momentum, and price trends. The MACD Movers screen features ports in alphabetical order, but you also have the ability to search for a particular port as well. It also is important to note that this screen notifies when a port has crossed either the 70 threshold for being overvalued, or the 30 threshold for being undervalued. More on this distinction below. 

The incorporation of a daily discipline by operators and bunker buyers, we believe, will complement current “gut feel” choices made in predicting which port and what day to stem. The example below shows Singapore from August 1st – September 8th.

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The MACD (red) line is shown above the 70 threshold the entire month of August, indicating an overvalued, overbought asset. The MACD line begins to make a sharp turn toward 30 towards the end of August / early September, indicating an undervalued, oversold asset. This turn toward 30 followed suit with a drop in crude prices as Brent fell from over $45 last week down to below $40 this week.

From the supply side, suppliers can use the trend lines to identify rising and falling markets and price accordingly. If MACD is falling, signaling a fall in the market, suppliers may look to be more competitive on deals. Doing this would allow them to get rid of inventory, opening the opportunity to replenish at a lower cargo price. Recognizing a rising market from the MACD trend would allow suppliers the flexibility to hold off and sell the next day at a higher price, or hold firm on their current offers if buyers counter lower than the initial offer.  

MACD is helpful tool that can be used by both buyers & suppliers to quickly spot trends in an increasing volatile market. Buyers can use it to identify opportunities to save, whereas suppliers can use it as a tool to aid how they respond to offers and maximize returns.

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Through our bunker procurement, pricing and analytics platform, we have unique visibility of actual and indicative pricing, product requirements, availability and completed transactions across the market. By aggregating this anonymized data, coupled with over a decade of historical data, we can provide insight into market activity, current trends and commentary on potential future outcomes. 

ClearLynx Market Insights brings you the latest thoughts and findings from our team based on real data.

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