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TI Europe, Largest Oil Tanker, Sits Off Malaysia
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Oil tankers are just sitting in the water, motionless. Floating storage vessels, like Knock Nevis, are just hanging out off the coast of Bahrain. The largest oil tanker, TI Europe, rests quietly off the coast of Malaysia.
I've highlighted that Andrew Hall bailed on his long-end-of-the-curve positions through Q3 and Q4 2014. In his place we have Vitol and Morgan Stanley apparently stashing black gold on-shore in the hopes of accumulating low priced product to be held until prices appreciate again. It's unknown what levels of oil Paul Tudor Jones is stashing or how much the Saudi Sovereign Wealth funds are storing or how much any speculators may be floating in offshore vessels.
The 'Knock Nevis' - Largest Floating Storage Vessel
The 'TI EUROPE' - Largest Oil Tanker
Aside from the vessels hanging out in Rotterdam and Singapore, the busy Port of Fourchon (aka Louisiana Offshore Oil Port) shows the tanker arrival activity is a ghost town (red bars).
Bloomberg had said in March that the industry's largest tankers could pull upward of $35K per day as the industry began to transition away from floating storage and back into charters. The dynamics of the oil game appear to be changing away from floating storage to land storage and the ships are slowly beginning to move.
TradeWinds reported a couple days ago that 1/10th of VLCC's (very large crude carriers) second-hands are available and Seatrade has reported China picked up a pair of these bad boys from Sinokor Merchant Marine for a total of ~$165M. The combined capacity of the ships is ~623,000 dwt.
The VLCC's are known for their ability to pass through Suez and are heavily used in the North Sea, Mediterranean region, and West Africa. A company called Frontline of Bermuda owns 44 of these ships and is the largest owner in the world.
Speaking of big players, Euronav which is the largest publicly traded crude tanker company is said to not be seeing any problems with its routes in the Yemen region, one of the key Middle East routes. Euronav's CEO has said there are no disruptions to routes in Yemen according to Lloyds List as of May 1, 2015. Back on February 17 Morgan Stanley initiated coverage on Euronav at Overweight saying:
"Two-thirds of its capacity comes from VLCC; the rest, from Suezmax tankers that operate heavily in the spot market. This allows investors to play the volatility of the hot crude tanker market through a well-managed and well-capitalized company."
Euronav trade-lines from their website are below.
Yemen isn't a cheap place either. VLCC's utilize hull insurance, cargo insurance, liability coverage, and war risk insurance. Rates are derived from deadweight tonnage (dwt) and the ships value overall. One group, the Int'l Group of P&I Clubs has 13 underwriting members accounting for liability coverage on 90 percent of the world's ocean-going tonnage. FYI: Rates for Bab el-Mandeb in Yemen are typical priced using various index inputs:
- BFOF - Brent - Futures, Oseberg, Ekofisk
- Gulf Coast No. 6 Fuel Oil 3.0%
- Rotterdam (FOB) - Fuel 3.5%
- Rotterdam (FOB) - Diesel 10Ppm
- Singapore - HSFO 380 CST
- Singapore - HSFO 180 CST
- Singapore - Gasoil Reg 0.5% Sulfur
The big focus on the clear turnaround in the market will come once the big tankers get moving and insurance rates along with shipping rates pick back up. Should all that oil flood at once it could cause prices to remain between $60 and $70 through 2016 especially thanks to the expected stream yet to come from all the untapped fracklog wells. Keep an on eye on the December 2016 WTI & Brent contracts.
- advertisements -
"If the government didn't tax so damn much per gallon", you wouldn't have a road to drive on. Many taxes are a bummer, but the gasoline tax isn't one of them. What is your solution to solve the problem of road maintenance / highway upkeep? (This is in response to 'Lone Star'. It somehow turned up here.... Sorry.
I think building new tank farms, at least in the US, is not happening. They can't find enough experienced welders to do the job. The ones who have the skills are already employed at astronomical rates and a "normal" welder doesn't have the skills to do it.
So what you have is existing tank farms filling to the brim or undergound storage filling up. Once they reach max, if the demand isn't there, the overflow begins. That will really depress prices since they aren't building refineries either (again, skilled craftsman aren't there). Unless they slow down the pumping, this frackfest is not going to come to a gentle landing.
Meanwhile, ships float in the water, doing nothing. Yeah, that's a great use of resources right there.
Tankers are an expensive storage site.
As the low prices stretch onward, the payoff for holding the oil till prices rise gets smaller. Till it goes negative.
I imagine there is a complex cost and ownership chain from well to ship, to shore and then to whatever refinery.
Some chains are more vertically intigrated into one company. But that tanker is still an expensive storage space.
If it is starting to come ashore, then a lot of speculators and owners have lost their hope of future profits.
Maybe unloading at break even or less. Is the next step in the storage chain already in that situation?
I wonder if some refineries are going to shut down for mainenance or whatever, to cut supply of finished products for the summer driving season to boost prices there?
Or will they have to just push through product at cheap prices to free up more storage?
When will the producers finally have no market? What locked in contracts are still sucking up this production?
Who is still buying? Who is building the tank farms?
Pushing product through does not necessarily free up storage. It creates other storage problems as the various products from the refined column have to be stored somewhere.
And once refined shelf life comes into play. War risk is another good reason to bring it ashore not to mention weather, politics, etc...
just love how this author lets his rice thoughts slip in at the last. $60/$70 oil,all while the world economies are starting to freefall or are in a state of collapse [usa anyone]. the world is awash in oil with nowhere to go and no consumers/job holders to buy.
Correct. Just look at the retail sales results.
"Frontline" is traded in the US under symbol "FRO"...
Last traded at $2.50....interesting speculation..........They own a lot of these large ships.....
let these muslims drink their oil
President suck a dick wants moar regulation.
I'm loving how the price of oil is being marginally dictated by actual S/D factors, yet the price at the pump, in Texas, is still sky high.
Drove from Bee Cave, outside Austin, to San Antonio and back again this weekend. The price of regular gasoline averaged $2.30 the entire length of the trip (~65 miles each way). Even in Sugarland, outside Houston, last weekend I don't remember seeing it less than $2.25.
If the gov wasn't taxing so damn much per gallon, maybe the consumer would be able to actually save at the pump and have some leftover funds for discretionary spending.
"If the government didn't tax so damn much per gallon", you wouldn't have a road to drive on. Many taxes are a bummer, but the gasoline tax isn't one of them. What is your solution to solve the problem of road maintenance / highway upkeep?
$3.65 in Commiefornia for a gallon of gas.
Humans are just weird. They're pumping oil out of the ground like crazy in the Middle East, transporting it thousands of miles to storage facilities where it is pumped underground again. Meanwhile they are digging gold out of the ground all over the world, transporting it to other places and storing it underground in vaults.
Humans .... mostly harmless ...
Humans? Rarely harmless!
"Mostly harmless" refered to earth, with respect to the rest of the galaxy.