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Tanker Rates Soar As China Hoards Saudi's "Cheap" Oil Amid Biggest Price Cut Since 2012
The oil patch is full of conundra currently... crude price declines globally to near 2009 lows but supertanker day-rates (demand) soaring over $100,000 for the first time since 2008. However, today's news that Saudi Arabia is slashing its price (to a $3.20 discount to the bechmark with the largest price cut since 2012) suggests in an effort to shore up tumbling reserves and capture more market share amid dwindling demand (and excess supply) - a price war has begun led by US ally Saudi Arabia... and China is hoarding crude at these low-low prices.
With crude prices stuck near multi-year lows...
Saudi Arabia cut pricing for November oil sales to Asia and the U.S. as the world’s largest crude exporter seeks to keep its barrels competitive with rival suppliers amid sluggish demand. As Bloomberg reports,
Saudi Arabian Oil Co. reduced its official selling price for Medium grade crude to Asia next month to a discount of $3.20 a barrel below the regional benchmark, compared with a $1.30 discount for October sales, the company said Sunday in an e-mailed statement.
The discount for the Medium grade to Asia, the main market for Saudi crude, widened by the most since the state-owned company made a $2 a barrel cut in February 2012, according to data compiled by Bloomberg.
“They needed to cut pricing to keep Saudi crude competitive with other grades,”Robin Mills, a Dubai-based analyst at Manaar Energy Consulting, said by phone. “Demand has been a bit weaker, leading to the cuts.”
But, the paradox is that 'demand' appears extremely high judging by the soaring rate for super-tankers...
As Bloomberg reports, the world’s biggest crude oil tankers earned more than $100,000 a day for the first time since 2008, amid speculation that a surge in Chinese bookings is curbing the number that are left available for charter.
Ships hauling 2 million barrel cargoes of Saudi Arabian crude to Japan, a benchmark route, earned $104,256 a day, a level last seen in July 2008, according to data on Friday from the Baltic Exchange in London. The rate was a 13 percent gain from Thursday.
Bookings by Chinese oil companies surged this week to collect oil from regions including the Middle East and West Africa, the world’s biggest loading areas, according to George Los, a New York-based analyst at shipbroker Charles R. Weber Co. The Asian country imported 26.6 million metric tons of crude in August, 5.6 percent more than a year earlier, according to customs data.
"China was particularly more active in the market with a record number of fixtures this week from all areas,” said Los. “I hadn’t expected that and it came as a surprise,” he said, adding that it may be difficult for rates to rise much higher.
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The bottom line appears to be that China is "buying low" and squeezing suppliers which is keeping prices suppressed even as demand appears to be soaring (from China's hoarding).
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Bullish!
Yup, Saudis slashing prices and dumping more crude onto the market is super bullish. Guess the algos haven't been booted up yet today...
Oil is the lifeblood of War. Is China hedging?
I believe so. China also needs more oil as they project more influence in the Middle East and South America.
More countries than China have topped off their tanks.
Unless there is was a recent magical explosion in Chinese PPI (that I missed)... someone is hedging, or shippers are borrowing a page from the bankster manipulation handbook.
Given the relatively open calls for a coup in Saudi Arabia, there is another option. "Transplant" oil from the ground in KSA at 100% Saud ownership to the ground in China (SPR) at @50% Saud ownership. Not a cheap hedge, but physical has certain advantages that cannot be duplicated in paper proxies.
in the new reality:
Bad news = markets rise
High demand = lower prices
Just move along now....
Oil has just come in line with equities.
I wonder when they will toss all of the free market crap out of business schools and start teaching the reality of controlled markets to new MBAs?!?
"low prices for oil"
LOL!
"Low prices" can get a lot lower! Look at China's history folks...everything they "Stockpile" turns to SHIT!
Coal, Copper, Iron, Rare Earth...long list of "stockpiling" gone bad...and now they're "stockpiling" Oil and Gold...canaries folks...
Again SA is pumping as much and as fast as they can while they can.
They know their oil production would be gone with one well place missle attack, By 'somebody'
It looks like Saudi is switching sides. Perhaps they feel safer with China and Russia now that Syria is out of American control. Makes sense too, since Mecca is the prize. This article was published the day before the invasion of Yemen:
https://atokenmanblog.wordpress.com/2015/03/25/are-the-bin-ladens-coming...
So if China is buying more crude than usual "for hoarding", but the prices remain stuck at low levels this means actual buying "for consumption" is even lower than the price level would suggest. Wouldn't that mean the Chinese & world economy is in free fall? Is nobody scared? I am. This meltdown will be epic.
IF, China is "stockpiling" oil, then it is a big factor in the price not collapsing...so what happens when they're done "Stockpiling"....hint...see copper, iron ore, coal, rare earths....
Oil is a "bargain"! Never been a better time to buy!
DON'T GET PRICED OUT! STOCKPILE TODAY!
PS. China is also "stockpiling" gold...and the price holds steady...
Soar?
http://www.harperpetersen.com/harpex/harpexRH.do?timePeriod=Years2&&data...
Not the M-word again!
This seems very easy to fix. Stop ordering cheap shit from China.
Sell UST's, buy Oil , (and Phyz?)
Sounds like they are taking physical delivery and putting it somewhere.
Maybe they are decentralizing storage, like they seem to be doing with their other physical commodities,Gold as a blaring example
http://www.reuters.com/article/2015/03/25/china-oil-idUSL3N0WR22120150325
Prudent thing to do if one is planning for conflict/disaster.
What do they know that we don't?
The oil pricing mechanism is broken. It can't be fixed. Humpty-Dumpty and all that, you know. The best thing for it is to publicly behead all the Saud princes.
Seems like they could save the tanker fees (buy more AU) by offshore storage of the oil. Just leave it in the ground in SA in exchange for pieces of paper that promise delivery, just like COMEX. It will be there waiting for them as they expand their sphere of influence/control. /s You don't own the oil unless your fingers are black.