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Something Very Strange Is Taking Place Off The Coast Of Galveston, TX
Having exposed the world yesterday to the 2-mile long line of tankers-full'o'crude heading from Iraq to the US, several weeks after reporting that China has run out of oil storage space we can now confirm that the global crude "in transit" glut is becoming gargantuan and is starting to have adverse consequences on the price of oil.
While the crude oil tanker backlog in Houston reaches an almost unprecedented 39 (with combined capacity of 28.4 million barrels), as The FT reports that from China to the Gulf of Mexico, the growing flotilla of stationary supertankers is evidence that the oil price crash may still have further to run, as more than 100m barrels of crude oil and heavy fuels are being held on ships at sea (as the year-long supply glut fills up available storage on land). The storage problems are so severe in fact, that traders asking ships to go slow, and that is where we see something very strange occurring off the coast near Galveston, TX.
FT reports that "the amount of oil at sea is at least double the levels of earlier this year and is equivalent to more than a day of global oil supply. The numbers of vessels has been compiled by the Financial Times from satellite tracking data and industry sources."
The storage glut is unprecedented:
Off Indonesia, Malaysia and Singapore, Asia’s main oil hub, around 35m barrels of crude and shipping fuel are being stored on 14 VLCCs.“A lot of the storage off Singapore is fuel oil as the contango is stronger,” said Petromatrix analyst Olivier Jakob. Fuel oil is mainly used in shipping and power generation.Off China, which is on course to overtake the US as the world’s largest crude importer, five heavily laden VLCCs — each capable of carrying more than 2m barrels of oil — are parked near the ports of Qingdao, Dalian and Tianjin.In Europe, a number of smaller tankers are facing short-term delays at Rotterdam and in the North Sea, where output is near a two-year high. In the Mediterranean a VLCC has been parked off Malta since September.On the US Gulf Coast, tankers carrying around 20m barrels of oil are waiting to unload, Reuters reported. Crude inventories on the US Gulf Coast are at record levels.A further 8m barrels of oil are being held off the UAE, while Iran — awaiting the end of sanctions to ramp up exports — has almost 40m barrels of fuel on its fleet of supertankers near the Strait of Hormuz. Much of this is believed to be condensate, a type of ultralight oil.
And unlike the last oil price collapse during the financial crisis only half of the oil held on the water has been put there specifically by traders looking to cash in by storing the fuel until prices recover. Instead, sky-high supertanker rates have prevented them from putting more oil into so-called floating storage, shutting off one of the safety valves that could prevent oil prices from falling further.
A widening oil market structure known as contango — where future prices are higher than spot prices — could make floating storage possible.The difference between Brent for delivery in six months’ time and now rose to $4.50 last week, up from $1.50 in May. Traders estimate it may need to reach $6 to make sea storage viable.
JBC Energy, a consultancy, said in many regions onshore oil storage is approaching capacity, arguing oil prices may have to fall to allow more to be stored profitably at sea.
“Onshore storage is not quite full but it is at historically high levels globally,” said David Wech, managing director of JBC Energy.“As we move closer to capacity that is creating more infrastructure hiccups and delays in the oil market, leading to more oil being backed out on to the water.”Patrick Rodgers, the chief executive of Euronav, one of the world’s biggest listed tanker companies, said oil glut was so severe traders were asking ships to go slow to help them manage storage levels.“We are being kept at relatively low speeds. The owners of the oil are not in a hurry to get their cargoes. They are managing their storage capacity by keeping ships at a certain speed.”
As a result of all this, something very unusual going on off the coast of Galveston, where more than 39 crude tankers w/ combined cargo capacity of 28.4 million bbls wait near Galveston (Galveston is area where tankers can anchor before taking cargoes to refineries at Houston and other nearby plants), vessel tracking data compiled by Bloomberg show, which compares w/ 30 vessels, 21 million bbls of capacity in May. Vessels wait avg of 5 days, compared w/ 3 days May.
As AP puts it, "a traffic jam of oil tankers is the latest sign of an unyielding global supply glut."
More than 50 commercial vessels were anchored outside ports in the Houston area at the end of last week, of which 41 were tankers, according to Houston Pilots, an organization that assists in navigation of larger vessels. Normally, there are 30 to 40 vessels, of which two-thirds are tankers, according to the group.Although the channel has been shut intermittently in recent weeks because of fog or flooding, oil traders pointed to everything from capacity constraints to a lack of buyers.“It appears that the glut of supply in the global market is only getting worse,” said Matt Smith, director of commodity research at ClipperData. Several traders said some ships might have arrived without a buyer, which can be hard to find as ample supply and end-of-year taxes push refiners to draw down inventories.
And here, courtesy of MarineTraffic is the interactive snapshot (readers can recreate it here):
All of which explains why this is happening:
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a complete flop, too!
If the "free market" were aloud to exist, the price of a gallon of gas would be around $1.00. Let them eat their oil. Storage of the oil, whether on ships or on land, will cost those holding it millions.
There's 42 gallons in a barrel of oil. Not all of that oil can get turned into gasoline and diesel. They get about 12 gallons of diesel and 19 gallons of gasoline from a barrel of oil. The rest are heavier oils and a few lighter products.
Plus cost of storage, transportation, refining, distribution and retailing and of course TAXES.
If you think you can sell gasoline for $1 why don't you do it? You will be a gazzionaire. Right?
if the tankers are sitting there full...it's because somebody bought the cargo and are having it shipped to their plant or tank farm in houston/baytown/texas city. they are waiting their turn. getting one of these on and off the dock is about two days
the article downplays the weather....which is a mistake. bad weather casues these pileups all the time. fog in the spring and fall (now in tx) is the most common reason
I truly love to watch free markets work! There is nothing like it! Well... maybe one thing.
Tyler, is it time for a channel stuffing update?
It's happening in the auto industry, the RV market, why not the oil market?
At this rate the poor Saudi Royals are going to have to sell their Arabian horses and live like us poor folk.
Nah, they will just go back to fucking camels in the desert. Oh....wait.....they never stopped
Buy the oil AND keep the boat as our gift to you!
But Wait There's MORE !!!
If you call in the next 15 minutes we'll double you order for no additional charge!
CALL NOW !
WW3 is coming.
"WW3 is coming." Yes. To a "theater" near you.
The END is near, no doubt. Blood Moons, Shemita, Niburu, anal probes on trailer park residents in Polk County, FL. Keep yer powder dry and yer Pecker hard.
My Olds is liking the sub-$2 gas.
Great FILL every empty hole, and dry well we have drained.(may need it when we got to global war.)
Those old enough to remember the GAS LINES,and ODD and EVEN lic plate days?, of the late 70'/early 80's when we had a SO CALLED LACK of crude?.
(Which was 100% total horse manure), it was ALL a fabrication/test by the US Gov to SEE what the reactions would be by the citizens,when put into that situation.( I knew a dude that was upper food chain at Exxon), he told me that EVERY hole/storage facility, underground resevoir in all coastal Gulf areas could not hold antother gallon of crude.
I would love to see them do that SAME test now with the animals/roamers we have now as so called citizens, WE all know the reactions would never be even close.
Riots/murders/anarchy, all hell would break loose.That's how far we have fallen as a civilized country.
You know they are ust going to sink that crap and blame the Russians. It is win win for the tard bankers in control.
Turn it all into Vaseline. They're going to need it to shove all the 7 years worth of lies up everybody's collective ass.
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Then why isn't gasoline much cheaper?
Will I actually use more if the price is twices as cheap? NO.
Will prices fall for the widgets produced with oil? NO.
Where is the supposedly S&D curve that is actually more like a stair-step?
•?•
V-V
if the price of gasoline when to $1.00 a gallon, the .gov would hike taxes by 2-3 dollars to slush fund something
plentiful oil supply is a sure sign of peak oil...oh wait.
just filled up for $1.83/gal...if 0 int rate and qe can't stimulate the econ, well cheap fucking oil sure will. er it used to but the Banksters have fucked everything so badly even cheap energy may not work.
Now I can finally buy that Obamacare silver policy I've always wanted.....
I challenge the assumption that the crude price is dropping because of the inventory backlog and contango. Crude oil price is inversely related to US $. As the $ strengthens, price of crude drops. US$ is on a rip against world currencies, so price of crude drops, thereby creating stable crude prices in the basket of currencies other than US$.
In the alternative, because there is an oil glut, there is less need to buy crude, so there is less need to have US$ to buy crude, so the demand to buy US$ drops, so the price of US$ against other world currencies drops. SInce this is not reality at present, this hypothesis should be rejected.
I challenge the assumption that the crude price is dropping because of the inventory backlog and contango. Crude oil price is inversely related to US $. As the $ strengthens, price of crude drops. US$ is on a rip against world currencies, so price of crude drops, thereby creating stable crude prices in the basket of currencies other than US$.
In the alternative, because there is an oil glut, there is less need to buy crude, so there is less need to have US$ to buy crude, so the demand to buy US$ drops, so the price of US$ against other world currencies drops. SInce this is not reality at present, this hypothesis should be rejected.
Get as much money as you can out of the banks before 50% of them disappear.
DEFLATION IS COMING. Oil is going to $10 per barrel and gas to $.88 per gallon if they are lucky.
I want .639/gal like it was in '76. What's so wrong wif dat?
So THIS is how Water World happened centuries in the future with Dennis Hopper being the pastor of the Exxon Valdez loaded with crude -- muthafuckin contago, bitches.
Sell my Fracking stocks?
THANK GOD!
I'm going to drive my big block 1964 GTO with Tri-Power daily now, first time in many, many years it got daily use!
Praise the Lord!!
In all seriousness, do you use an additive to replace the lead? Marvel mystery oil?
Top US Military Spy Chief: US Deliberately Created ISIS
http://russia-insider.com/en/politics/top-us-security-official-admits-cr...
There is of course one other possibility that has not been mentioned:
Advanced Planning strategic military buildup
Bingo!
OurFiniteWorld blog. Get reading.
Don't forget the crony capitalism asswipes and the free gas reward points. Only good for X amount of days at XYZ Gas Station.
Does this mean they are rethinking selling oil from the Petroleum Reserve they were considering a couple of weeks ago?
Of course not. The rule of crony capitalists is to sell low (to your friends) and buy high (from your friends). The entire point of capturing government is to collect a profit out of the taxpayers.
One hurricane and all those oil boats are gone.
Ummm... 100Million bbls sitting in those
ships???
Isn't daily crude consumption something like
93Million bbls/day???
Just sayin...
Nothing like a whopping lawsuit against Exxon to slow down oil consumption. it's always the government that gets the money.
Peak Legal?
Looks to me like an easy target rich environment for terrorists. If crew member of an Iranian tanker placed a limpet mine bomb in the outside surface one of the tankers, how would anyone know it was not terrorism?
...or if one tanker deceided to "lose control" and start crashing into the others
...... What is a Commission?
When Brent hit its low in August about a dollar and a half lower than it is now, it quickly shot back in a few days to over 50. If I remember right it was merely because OPEC decided to have a meeting about things.
..... The oil starts rockin when the OPEC are talkin, got it.
What's that you say Lassie? You can't find a chart showing the supply of common sense in governments?
Bye bye Santos
The price of retail gasoline actually went up about 8 cents from last week to this week.
It doesn't seem reasonble to accuse retailers, distributers and refiners of conspiring to keep gas prices high, but what a coincidence. Retail gasoline seems to have severed it's ties to crude.
those tankers are full of illegals, not oil...takes time to offload and give them id's and free shit
Syrian 'refugees'
.....Pass the Syrup, Auntie.
Shelter in place until further notice.
Cramer save us!
Looks like we've got us a convoy!
The US is stealing as much as they can from IRAQ before Russia runs the SHOW !!
Maybe the break in the petro dollar peg is when oil goes to $0
Its coming in faster than we can burn it lol
These kinds of problems tend to compound over-time, this could very well end with a chain of tankers lined up from the atlantic around florida to texas lol
Needless to say such a situation could get very dangerous, the chances of a collision goes up with such high traffic, and o/c a spill.
How is it that gasoline prices are so high with such a supply build up happening? refiners cant process enough oil to meet demand while such a supply surplus exists? seems refiners haven't kept up with the times.
Diesel at the very least should be 50 cents a gallon by now.
Looks like the next big oil slick in the making to me.
Not to mention that equivalent hording and futures speculation in grain stocks regularly caused riots and revolutions in medieval Europe. This is why capitalism was virtually outlawed from Constantine to Elizabeth I. Market manipulation via hording, raising prices of consumer necessities. Keep this up, and the Little People might actually start appreciating Marx (or a student with an unknown name, more likely) again.
You know what those big oil tankers sitting so peacefully out in the gulf look like to me?
--- Black Swans ----
Hope the Enviromentalist and Chief has patrols going on out in the gulf and my crystal ball is mistaken.
That or WW III.
Or both.
Here are some signs of a coming recession.
1. Business loans for M&A not CAPEX.
http://www.zerohedge.com/news/2015-10-15/there-goes-final-pillar-us-recovery-loan-growth-paradox-explained
2. Factory orders continue to drop
http://www.zerohedge.com/news/2015-10-02/us-factory-orders-flash-recession-warning-drop-yoy-10th-month-row
3. Default risk spikes
http://www.zerohedge.com/news/2015-10-02/us-financials-default-risk-spikes-2-year-high
4. M&A set record
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/
5. Fed sees 2 bubbles
http://michaelekelley.com/2015/02/20/fed-warns-of-two-bubbles/
o Commercial Property higher than pre-2007 level.
http://nreionline.com/finance-investment/cre-prices-are-now-officially-above-pre-recession-peak
o Global Corporate Debt Market hits $5 trillion.
http://fn.dealogic.com/fn/DCMRank.htm
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
Good thing there aren't any countries with subs looking to create a bio nightmare..... what?
What I don't get, is why do we have to take the oil? If we don't need it, why can we not just send it back? If you went out and bought a jug of milk yesterday and someone knocked on your door to sell oyu some milk the next day and you jug was still almost full, you would refuse it. So, why do we take all this extra oil? I thought markets were suppsed to run on supply and demand. If there is no demand, then stick the Saudis with it, let them pump to their hearts content. If we are being forced to, well then we the American people vote some pretty big stinking idiots into office to make these shitty ass deals for us!
Whos we? Who the hell are you?
It is going to the refineries to be turned into gasoline and other products. The refineries will export it back out or keep it here in the US.
Not all producing countries have refineries.
Explain why DUG aint crashing
Peak oil is a myth. Production is the truth. Sales are the bottom line.
Black Gold Matters
Someone has probably already said this in the NINE PAGES OF COMMENTS but they're gonna have a long wait!
WTI Crude is at $41 handle. Only $2 to go for new lows. And $2 does not seem unreasonable according to this!
That's less than 1/3 of the world consumption of one day btw...
there is 951 ships in port in Singapore at the moment. all time high. At the peak of the 2008/09 crisis it was 745!
When you consider that the 2008 GFC was FAKE - Allowing the FED to print copious amounts of money while the rest of us had to tighten out collective BELTS !!! The thing is that the next one WON"T be FAKE and an economic 'nudge' from China will tip the whole FUCKING thing over !!! Prepare !! Tell me again why the amount of Billionaires worldwide has doubled since 2008 ???? - Tell me how QE has helped the 'average JOE' ???? Tell me how ZIRP is GOOD for the the economy ??? Tell me how getting ZERO interest on your savings for the last 8 years makes you better off !
Gladius 17 .... nothing personal .... but, you're a snake bit loser .... you live in a careless way .... that invites the trouble you desperately seek .... to construct your personal web of victimhood .... I know people like you .... you could live better .... if you really wanted to ?
There could be considerable oil storage in transit .... as tankers cruise at slower, more economical speeds .... or drift with the currents .... just guessin' ?
I get a turning head chuckle listening to "experts" in the MSM telling us how important firm oil prices are to our economy. Only in Libtard Land can the primary economic input commodity lowering in price be "bad" for the US economy. It's the same bacasswards non-critical thinking that brings us the "if you build it they will come" bullbleep. IE: raise taxes on producers to get more production, build ghost cities to stimulate the building industry, etc. etc. Econ 101 tells us that if there is more supply than demand prices fall. Well duh! Anybody wanna bet the massivly, even parabolically growing "known oil reserves" has anything to do with cheap crude? The second element of this formula is that irresponsable, even purposful demand destruction in the form of taxes and regulation are killing our consumers. Once again- consumers will not or more accuratly cannot earn, then spend makes producing products profitably very hard to do. Declining demand=a glut in supply. Gee, whoda thunk it?
On a philosophicl note I observe that an essential element of Leftism is scaresity. They bleat on and on about running out of this and that. In their finite "I am God" worldview everything is running out. Remember the water scarsity scare in the 90s? Yep- the earth is 2/3rds covered in the stuff with even more in the water table, yet we were all gonna die of thirst any day now. It is uncontested science that oil is manufactured in the Earth's mantel, and pushes up throught the crust (taking on organic components) and ultimatly squeezes out on top. Ever walked any of the beaches on the Eastern Seaboard? Blobs of tar, and sand bonded with petrolium are everywhere. Remember the Oil Rivers in PA and OH? There is so much oil under our feet that w are never going to run out of the stuff. It's literally a renewable resource.
It's now time for the commy trolls to attempt to refute this, and when they cannot, resort to childish name calling. Let the fun begin!