IEA Replaces One Crude Supply-Limiting Cartel, OPEC, With Another: The TBTF Banks

Tyler Durden's picture

According to Bloomberg, instead of the crude released by the Strategic Petroleum Reserve going into circulation, "Some of the oil being released from the U.S. Strategic Petroleum Reserve to bring down prices may be held by traders for later sale rather than sent directly to refiners for processing into gasoline or other fuels." In other words, instead of being held in storage by the US government, the oil which is supposed to be used immediately to alleviate supply pressure, will be held in storage by the Too Big To Fails, most likely in storage tankers floating offshore, just like back in late 2008, early 2009, to be released only when the prevailing price is sufficiently higher (not to mention courtesy of added demand from the SPR as it seeks to refill it 5% depleted inventory). But wait, wasn't the release predicated upon it being a supply emergency with a need for immediate release?

Ironically it is JPM's own Lawrence Eagles, head of oil research, who said that "every additional barrel of oil stored in the U.S. is a barrel that does not need to be imported, ultimately freeing up barrels to move to Europe. It worked very effectively after Hurricane Katrina in 2005 and should do so this time around." What he did not specify is held by whom. And here is the kicker: "The DOE has no preference for bids from refiners versus traders and both have participated significantly in past sales,” an official from the Energy Department wrote in an e- mail. “There is nothing to stop buyers from putting the oil they have purchased into their own storage." Well in that case the DOE would be advised to know that JPM, which is expected to bid and purchase a substantial portion of the crude to be released, together with Goldman Sachs, have already been alleged to be a supply-limiting cartel when it comes to LME commodities. In its infinite stupidity, the administration and the IEA have merely moved supply constraints from one oil cartel, OPEC, to another: one led by the Too Big To Fail banks.


The U.S. Energy Department is offering 30 million barrels of light, low-sulfur crude for sale, half of the 60 million barrels to be released by International Energy Agency member nations to make up for the loss of Libyan oil exports during the civil conflict. The government closed bidding for the oil yesterday.

The sale was “substantially oversubscribed,” with more than 90 offers to purchase oil, the department said in an e- mailed statement. The department expects to award contracts by July 11 and announce purchasers and sales prices at that time.

The oversubscription indicates that supply disruption is a factor and that all 30 million barrels will be placed into the market, an administration official said. The administration will continue to monitor the oil supply and is prepared to act further, according to the official.

Representatives of trading companies including JPMorgan Chase & Co., Morgan Stanley (MS), Hess Trading Company and Koch Supply & Trading LP joined Valero Energy Corp. (VLO) and Statoil ASA in questioning Energy Department officials June 28 about shipping options and requests for waivers of the Jones Act.

The Jones Act restricts the shipment of goods between U.S. ports to American-flagged vessels. Most oil is shipped on foreign-flagged vessels.

A lack of American-flagged vessels of adequate size means a buyer of SPR oil who wants to store the oil or send it to refineries on the East Coast may require a waiver of the Jones Act. There are two available tankers, according to a list on the Department of Transportation’s Maritime Administration website, along with barges that can hold up to 233,951 barrels. The per- barrel cost to ship oil typically is lower with a larger ship.

The tankers are the Overseas Chinook, currently in Brazil, and the Overseas Cascade, anchored in the Houston Ship Channel, according to AISLive shipping data compiled by Bloomberg. Each can hold 300,000 barrels of oil, the minimum parcel that can be loaded on a ship from the SPR, according to the notice of sale.

Government officials on the conference call said that oil could be loaded on one foreign vessel and later delivered back into the U.S. on a different foreign tanker, provided that information on both ships was included in the waiver application. A waiver would not be needed if oil were loaded and then redelivered to the same berth at a particular terminal, according to the officials.

In other words, any banks winning crude, will put it on a ship somewhere with promises of future deployment, although when that future point comes, is unclear. In the meantime, as the mid-summer sun rises, WTI will pass $100 very soon again and more SPR oil will have to be transferred from the US government to JP Morgan once again.


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IBelieveInMagic's picture

This is probably to bailout banks short position in crude -- this is to rescue them from their underwater short positions that they had accumulated to suppress oil prices per bidding of the govt.. Big banks are the cat's paw.

Zedge Hero's picture

a Cluster fuck of clusterfucks, The Banks that are too big to fail, always prevail. sons of Bitches.........The SIFI's are a bad case of herpes for the global economy.


malikai's picture

More like cancer. Of the stage IV progression.

mickeyman's picture

But how else with the TBTFBs benefit from the oil if it is uselessly stored underground?

Innocent Bystander's picture

Like I suggested earlier, while we are all thinking that China is stockpiling our reserves... I had a hunch, see below


by Innocent Bystander
on Wed, 06/29/2011 - 16:03


I’m bored so here is a thought for the astute minds on ZH,

Act I àrelease stock from SPR (miniscule) -->bring down price-->

ActIIà buy back 100X volume at reduced price--> reload for the next shock and awe pre election

Act IIIà firm up $$ crash oil Obam's handler are happy in 2012.

It may not be just China stocking up at these low prices you know.. you a lot of strange acronyms ESF, GS JPM.. I don’t know what they mean..

SilverDOG's picture

Paper words.

Oil never even left the reserves.

Move along sheeple, nothing to see, move along.

dcb's picture

not really related, but interesting on a trading note. while treasuries, s and p, and currencies didn't perform as expected on chart metrics. the enire commodity sphere did following a high hourly rsi, with decreasing macd as a good short entry point. on weds at end of day. like I posted on the site the other day weird things happening and trading not following what should be going on

malikai's picture

Absolutely comical. This is indeed QE3. How much longer before Crude receipts are valid for deposits and margin on the CME and CRIMEX?

pepperspray's picture

Will help offset Timmah's sign-on bonus

Franken_Stein's picture


Down with JP Morgan !

Down with David Rockefeller !


TooBearish's picture

Is a gotdam paper trade anyhow - the SPR is never "tapped" , just debited against all the other product in said storage - more shell games with the TBTFs and GS taking out the bid/asked spread - they all should be nuked.  But than AINT GUNNA HAPPEN.

FrankIvy's picture

It does make one wonder whether any oil is actually leaving the Reserve.

In any event, this is pretty close to government authorizing open-air theft.515

Confused's picture

Agreed. Perhaps none have left the reserve.


However, if they have, this would simply be another example of the raping of the country.

Muddy1's picture

No, it makes me wonder if there is any oil in the Reserve, shades of Ft. Knox.  And while were on the subject of the SPR, why is a majority of it slated for release to foreign (read European) countries.  Fisrt we have bank bailouts and find out later that a majority of the money went to European banks that operate in the US.  Now OUR US petroleum reserves are finding their way to Europe.  BTW, the requirement for larger tanker sizes... is Soros in the oil tanker business as wel, maybe the Chineese?  Stop the fricking insanity.

Urban Redneck's picture

Eliminate the Energy Department, it not only increases dependence on questionable foreign suppliers to meet US needs, but also on TBTF banks, who make OPEC look like a charitable foundation.

Flakmeister's picture

Are you aware of the range of activities that the DOE is involved in? Their role in basic research? With regards to the energy markets, they are only tabulators of data, they have no real influence.

Broomer's picture

American nukes are managed by the Department of Energy.

Incidentally, this let the nukes be counted outside of the "defense" budget.

Urban Redneck's picture

The mission was energy independence, and the mission is a failure.

Now the failures are running oil auctions and don't even care whether or when the oil hits US markets. 

Eliminating the Department doesn't necessarily mean eliminating allfunctions, it means cutting the BS and overhead.  Data reporting could be handled by BLS, nukes by the DoD, the government shouldn't be subsidizing large-scale research with tax dollars in an industry where the market participants are of sufficient scale to self-finance such research.  Even if the function were maintained- there are plenty of other Government entities that can perform it such as the SBA at Commerce.  

Flakmeister's picture

You have no idea what you talking about.... I will leave it at that but you may want to look into the history of the WWW and related matters...

The Axe's picture

And this surprises anyone!  debit fees..oil...banks rule America

The Axe's picture

And this surprises anyone!  debit fees..oil...banks rule America

ziggy59's picture

"Urgency" is another propaganda term for manipulation of the masses. it's been done countless times

bobert's picture

Everything is under control (manipulation).

No worries, enjoy your day and keep pursuing free markets!

Bobbyrib's picture

The TBTF's are the true "owners" of this nation and any oil in its reserves.

Muddy1's picture

While were on the subject of the SPR, why is a majority of it slated for release to foreign (read European) countries.  First, we have bank bailouts and find out later that a majority of the money went to European banks that operate in the US.  Now OUR US petroleum reserves are finding their way to Europe.  BTW, the requirement for larger tanker sizes... is Soros in the oil tanker business as well, maybe the Chinese?  Stop the fricking insanity.

Xibalba's picture

wait til they have it, then raise the margins 

Freewheelin Franklin's picture

Is it me, or does the internal search engine here at ZH suck?


Anyways...I seem to recall reading an article here a few months ago where a couple execs from an oil tanker company were accused of allegedly storing oil in their tankers to drive up the prices, then dumping it all on the market to lower prices, which was coordinated with their long and short positions in the oil market. Amirite?

buzzsaw99's picture

the masters of the crymex own the gubbermint.

fockewulf190's picture

Paper gold, paper silver, paper oil...guess we´ll be seeing paper corn and wheat soon enough. Mmmm tasty.

Irwin Fletcher's picture

Pretty close - the cellulose added to many processed foods for fiber isn't much different from paper, or sawdust.

CrazyCooter's picture

Soylent White! Its papel!



monoloco's picture

Sweet deal, they can just hold it for a while then sell it back to them when the price goes up.

Muddy1's picture

Anyone want to bet how much of this will be gobbled up by the Chinese?  Of course we didn't sell at the top of the market.  No, in the infinite wisdom of the bureaucrats we're selling now when the price has begun to decline, as was predicted would happen several weeks ago.

SoNH80's picture

These clowns (TBTF) will probably figure out a way to lose money on this, but I do wonder what would happen if a long-overdue hurricane swooped up into Long Island Sound and/or New York Harbor, and mini-tankers laden with oil ended up beached on the shores of Brooklyn, New Haven, etc.

sbenard's picture

Tyranny by "those who would be kings" is now here, and it is now complete. This is centrally-planned price manipulation, and for all the reasons that articles here on ZH have enumerated in the past few weeks, they will ultimately cause prices go show sharply higher, not lower! THey have, in their hubris, created supply and demand imbalances that will, with 100% certainty, force prices to go much, much higher. The consequences will be devastating.

I wonder who is more foolish: Those who do such things, or those who continue to give power to such fools! We end up getting the leadership we deserve, which ultimately reflects on us!

Absinthe Minded's picture

If you think we've had any real say in who gets elected since electronic voting began you really are foolish. They had ways to tilt elections since the beginning. A payoff here, a favor there, mankind has a deviously criminal few and incredibly naive many.

SwingForce's picture

The difference between stupidity and genius is that genius has its limits.
Albert Einstein

Metropolis_Minx's picture

Okay, this has me steamed to the point of tears...precious metals, copper, cotton...and now oil.

If I wanted to release this steam, who would I complain to? CFTC?



oldmanagain's picture

Good grief.  9 hours of US crude are going to destroy the free markets?  This is all about Europe, not us.

For the rational.  In the near future is the gulf storm season.

Users, specs, have always been able to store in tankers.  Refiners can shut down operations.




Downtoolong's picture

The department expects to award contracts by July 11 and announce purchasers and sales prices at that time.


I wouldn't want to be holding any naked positions in the oil futures or OTC paper markets around that time. Going to be a lot of noise in the markets that day. Most likely the TBTF banks will profit from front running that action as much as they will from storing physical oil on ships, unless of course the IEA turns around and buys it back from the banks at a premium in August.


Thomas's picture

You wanna increase employment? Put a bounty on bankers. It would become quite a growth industry (and I would now officially have a second career).

Downtoolong's picture

TBTF banks to members of the physical world and main street economy – “Hear us out. We will not be shunned. We will not be excluded from your activities. We will be involved. And we will exercise our protected right to profit by manipulating and controlling your commerce and transactions for our maximum benefit by any possible means available to us, even if the cost to you exceeds our profits.”

Byronio's picture

Give me your tired, your huddled masses,
Yearning to breathe free.
The wretched refuse of your teeming shore.
— Emma Lazarus

I could never understand how it was that so many thoughtful and intelligent people bought the CAPITALISM bill of goods, nobody has said it better:

Contrary to what so many good people -- out of sheer terror of 'Communism' -- think, Capitalism is not 'free enterprise,' an incentive for success, 'a chance for all.' Capitalism is trusts, speculation, parasitical usury. Capitalism is J. P. Morgan, Rothschild's bank, ripping apart the nations like maddened swine. Capitalism is the frying pan in which culture is rendered down to the grease of money. Following it, as the night to day, is the thrice hotter fire of 'Communism.'

Metropolis_Minx's picture

This monstrosity is not Capitalism. Capitalism is a Free Market and we haven't had that for decades.

Don't confuse market manipulation and corruption with Capitalism--it is the antithesis of Capitalism and the human spirit.



Absinthe Minded's picture

To be flipped back at a profit later. Sounds like POMO. Purchases of MF'in Oil to bone the shit out of Joe taxpayer again. I am getting so sick of this shit. This Administration is fucking clueless.

Bansters-in-my- feces's picture

Must be nice to have a govt. that loves their citizens...

Bunch of Rotschilds thugs....

theprofromdover's picture


How about SIFILIS