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Beware Buying Crude: Oil Storage Is "Increasingly Full"
If you follow geopolitics and the oil market (and really, you can’t follow the latter without following the former) you might be wondering whether the tragedy that took place in Paris last Friday may be enough to override the fundamentals for a while.
That is, if ever there were a catalyst that had a chance of bringing about a sustained rally in crude, surely the prospect of World War III starting in the Middle East is it.
Well, before you get any ideas about BTFD-ing via some nightmare of a triple leveraged crude ETF, you might want to consider that no matter how close we get to a global conflict in Syria, the world is simply awash in black gold and with more Iranian supply set to come online starting as early as Q1, the fundamental picture will likely overshadow all other concerns.
Or at least that’s Citi’s take.
“The Paris tragedy may warrant some uptick in geopolitical premia but this is likely trumped by near-term negative impacts on European air travel and/or economic blowback, adding further weight to the market,” Chris Main writes, in a note out Tuesday.
As Main goes on to note, there simply isn’t much on-land storage left and once the Iranians are up and running at full capacity, the “problem” will only get worse. Consider the following:
On-land storage is getting increasingly full, with Citi estimating around 47-m bbls of available ex-US commercial storage left.
Oil in “quasi-storage”, which is oil on the water that is yet to be delivered but has not been earmarked for floating storage, is on the rise at ~100-m bbls of combined crude and oil products.
Up-to-date observed stock data and capacities have always been hard to come by, but our best estimations put available crude storage in Europe, Japan, South Korea, China and Saldanha Bay at 46-m bbls. Table 2 shows the availability and current levels of crude in-tank by region. Europe, Japan and South Korea are benchmarked vs. previous maximums, which given refinery closures may even estimate on the high-side.
The overhang of WAF barrels and current levels of crude on the water mean on-land storage getting full in 1H’16, particularly if Iranian barrels come back earlier in the year.
In short: "The US is the last place with significant onshore crude storage space left."
Which leads directly to Citi's conclusion: "'Sell the rally' near-term as fundamentals remain very sloppy and inventory constraints are becoming increasingly more binding."
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`Cheaper at the pump, YAY!! ....wait, the price is NOT going down at the pump?
It is around here finally. Just paid $1.81. I'll take it.
We just hit $1.68 which pissed me off since I had just filled up Friday at $1.79.......
Boris is grapple with same problem of copper, "increasing full". Sorry, there is no job for Boris is hire, please do not bring thick leather glove or rubber boot.
Boris the Spider!
https://www.youtube.com/watch?v=bvFuUaCe8eY
It is going down in NJ. $1.75 today
Yesterday morning when I drove to town gas at "my" station was $1.89 (credit price). When I came home a few hours later it was $1.85. Around town I've seen it as low as $1.71 cash price. This is Houston metro area, Land of the Refineries. Apparently we don't get cheaper gas just because it is made two miles from the gas station.
So in other words, everybody is pretty much stocked up for war and we should BTFD. Got it.
Exactamundo. Oil on the hoof is quite valuable if a war breaks out...
Bush was right again, ‘The Iraq war will cost little, and Iraq oil will pay for it. Then.....”
Not as nice as a Peace Dividend but self-serve, 89 octane, Gasoline is below $2.00 in these parts.
I hope your post was meant to be sarcastic, because there's no way Iraqi oil will cover the $1 trillion+ spent over there. Bush was right a couple of times during his presidency, but this wasn't one of them. This was an outright line of propaganda used for selling the war.
That would be $1T per year.
And this is a surprise? Inventory build season is underway and will likely continue into April of next yr. Does that mean that there cannot
be weekly drawdowns? No it does not.
Buy a more fuel efficient vehicle and bring down even further your monthly fuel costs. And doing so you send less money to those that want to blow us up. Your car insurance costs may be lower, too. Why is this so difficult for Americans to understand?
I have 20-yr old Honda that still gets approx 35mpg highway. And best of all its only got
about 108k miles! And the cherry on top is: its easy as pie to work on! So, pay less to the ragheads
(or EXXON/CHEVRON/BP etc), pay less to the automakers and pay little if any to mechanics.
My wife works at a large regional bank. She has a lot of responsibility so she's fairly high in the organization. I found it interesting that her boss drives an small car, albeit older, just for the purposes of saving money. So, I guess its possible that a gas-guzzling image isn't everytiing for those in higher positions of responsibility.
"if ever there were a catalyst that had a chance of bringing about a sustained rally in crude, surely the prospect of World War III starting in the Middle East is it. "
War is the stimulus of last resort. Of course, with the current crop of thieves, scoundrels and incompetents running the world, I'm sure they'll find a way to screw that up too.
God help us all.
The only way they can get the citizens of USA Inc to use more gasoline is by giving it away for free.
If gas was free the only way I could use more of it is to drive around pointlessly. Some places I've lived I didn't have to use a car at all, and free gas wouldn't make me drive instead of walking, biking, riding the bus and/or train. There are better things to do in life than sit in a car, and I have met a lot of people of the same mindset.
Do you live in a prairie state?
God must be making us new oil! -idiots
This is really a breakdown in the pricing mechanism. These absurdly low oil prices in dollar terms are a bad thing, and another example of a "market" that's fundamentally mispricing everything. This isn't proof of the infinitude of oil. This is proof that the dollar is chaotically collapsing.
More like proof of high production, which tends to follow from extended periods of high prices.
High prices are the best cure for high prices.
Just perfect for a Russian launched missile from land, sea, or air along with plenty of torpedos to sink those tankers with!
Better quadruple the insurance on those tankers and storage facilities before something happens to them!!!
So if domestic storage is filling up, why are refiners still importing ~7 MMbpd??
Could it be that a lot of that "oil" in storage is actually high API condenstate that no one knows how to get rid of the glut? Remember that it cannot be exported as it was classified as oil at the point of production...
Looks like I have to get rid of all these 55 gallon oil drums in the shed
Peak oil storage used to be peak oil. The experts are worethless in their long term predictions.