Something Strange Is Taking Place In The Middle Of The Atlantic Ocean

Tyler Durden's picture

Early last month, we noted that something very strange was happening off the coast of Galveston, Texas. 

As FT reported, "the amount of oil [now] at sea is at least double the levels of earlier this year and is equivalent to more than a day of global oil supply.” In short: the global deflationary crude supply glut is beginning to manifest itself in a flotilla of stationary supertankers, as millions of barrels of oil are simply stuck in the ocean as VLCCs wait to unload.

Ultimately, this led to nearly 40 crude tankers with a combined cargo capacity of 28.4 million barrels waiting to anchor near Galveston. Here’s what the logjam looked like:

 

In the latest sign that the world is simply running out of capacity when it comes to coping with an inexorable supply of commodities, three diesel tankers en route from the Gulf to Europe did something rather odd on Wednesday: they stopped, turned around in the middle of the ocean, and headed back the way they came! 

"At least three 37,000 tonne tankers - Vendome Street, Atlantic Star and Atlantic Titan - have made U-turns in the Atlantic ocean in recent days and are now heading back west," Reuters reported, citing its own tracking data.

The Vendome Street actually made it to within 800 miles of Portgual (so around 75% of the way there) before abruptly turning around. "Ship brokers said a turnaround so late in the journey would come at a cost to the charterer," Reuters notes. 

The problem: low prices, no storage capacity, and soft demand.

Here's Reuters again:

"European diesel prices and refining margins have collapsed in recent days to six-year lows as the market has been overwhelmed by imports from huge refineries in the United States, Russia, Asia and the Middle East. At the same time, unusually mild temperatures in Europe and North America further limited demand for diesel and heating oil, ptting even more pressure on the market.

 

Gasoil stocks, which include diesel and heating oil, in the Amsterdam-Rotterdam-Antwerp storage hub climbed to a fresh record high last week.

And here are the stunning visuals via MarineTraffic.

Vendome Street

Atlantic Titan

As of now, it's "unclear if the tankers will discharge their diesel cargoes in the Gulf Coast or await new orders," but what you're seeing is a supply glut so acute that tankers are literally just sailing around with nowhere to go as there are reportedly some 250,000 tonnes of diesel anchored off Europe and the Mediterranean looking for a home. On that note, we'll close with the following quote from a trader who spoke to Reuters: 

"The idea is to keep tankers on the water as long as you can and try to find a stronger market."

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HedgeAccordingly's picture

oil is going to 5$ a barrel. 

ghengiskhan's picture

But happy days are here again.  Big daddy government said so and then the stock market went up again.  That means everything is fine.

turtle's picture

Finally someone booted Tyler Durderdian... was wondering: Does he make money out of hits to his porn websites or is it just free advertising?

Save_America1st's picture

awesome!  Drop all that diesel off in Florida please.  Love to see it drop down to about 1.50/gal around here

I MISS KUDLOW's picture

Free crude for everyone, sign me up,,,,,,,what did we send back in trade for all that?

old naughty's picture

did the turn around happen before or after the strike on ISIS tankers?

BuddyEffed's picture

Has anyone checked to see if it's just oil plated tungsten inside?

Remember that big parking zone in the Asian waters where huge amounts of surplus and unused transport ships were being parked?

Any chance this is its equivalent for tankers?

nuubee's picture

This is not as strange as it may seem. I have a friend with a fairly large sailboat. He recently took it to Hawaii and they passed a large tanker literally just sitting there in the middle of the Pacific.

New England Patriot's picture
That's the middle of the Atlantic Ocean! And I am not taking my ship out there to just sit, no matter what no damn machine says. We're supposed to go to Metropolis and we're going to Metropolis!
Beam Me Up Scotty's picture

So all those years we were paying $4 for a gallon of gas wasn't because of scarcity like we were being told???  MOAR LIES!!  All they had to do was open up the faucet and the price would go down.  More fleecing!!

erg's picture

I think all these tankers Captains are hoping to stumble across the Bermuda Triangle and be done with it already.

Maybe there's a big insurance payout.

7.62x54r's picture

The Bakkan frack oil plays are paying off, and we now have a glut, which is bankrupting the people who invested in it. The gulf states are holding the oil off shore hoping the price will rise.

Enjoy it while you can.

Quus Ant's picture

No, no, no.  We do not have an oil glut we are on the far side of peak oil and supply is tight and tightening.  The price of oil is being manipulated downward much like PMs and they are monkeyhammered for the same reason-  if markets were allowed to reveal price as a function of SUPPLY and DEMAND price would have hockeysticked some years ago and oil dependent post-modern civilization would have sputtered to a halt. Isn't it amazing that gold bugs can plainly see how gold price is controlled by naked short selling, and yet not see the same con in the oil game?  

Saudi Arabia is selling oil it doesn't have; stealing Iraqi, Syrian and possibly Libyan and Yemenese oil under the smoke screen of their largesse and selling it (parking it outside Galveston) with the material support of every country that lives and breathes beholden to the petrodollarempire.  The opposition comprised of Russia, China, Iran, Syria, and possibly some silent partners, are dancing a fine line: 

hamstringing/royally fucking over the competition before THE END and beginning of the next paradigm,

While avoiding two possible extinction events:

the sudden revelation of the true status of oil reserves followed by a cataclysmic global shut down and plunge into darkness

a thermonuclear war.

East and West have the same goals.  There are, however, a few actors who will only lose in a post oil world and they are working tirelessly to reshuffle the deck.  Seen this way the actions of our leaders, which often read as scattered, illogical, venal and villainous become more or less understandable.  We literally can't handle the truth. 

Cheers.

 

Bokkenrijder's picture

Or is it a currency play because of the US FED rate hike?

cheka's picture

nothing unusual about the number of ships off of galveston.  as part of my job i look at that all the time.  the number of facilities and docks in galveston/texas city/baytown/bayport/houston/pasadena requires such.  the biggest numbers are when there's a few days of fog delay

Bendromeda Strain's picture

Isn't it amazing that gold bugs can plainly see how gold price is controlled by naked short selling, and yet not see the same con in the oil game?

Naked short selling is not the same thing as forcing down prices via glut. If your proposed shortage occurs, everyone will know at the same time. Nobody will be falsely secure in paper oil saying "there is plenty". This oil move is much more akin to "Brown's Bottom" when the corrupt then Chancellor of the Exchequer dumped Britain's gold into a bear market. It was an actual physical market force - not a naked paper lie. That is the difference that goldbugs can see.

Quus Ant's picture

My main point was there is no glut.  My other point was that every state actor knows this and have a vested interest in hiding the facts in the ground.

Selling what they do not have- stealing what they need.  Keeping the plebs in line. 

zvzzt's picture

no need for Bermuda, a big methane-earth-fart below the ship will do the trick... you can simulate the scenario at home with a rubber ducky in the bath tub and a night of beer and chili

Lorca's Novena's picture

Funny how the 'terrorists' dont target oil tankers headin west.... maybe they are afraid of teh Bermuda Triangle.

nofluer's picture

Most turrists are sand fleas... can't swim.

NoDebt's picture

With interest rates at zero the carry cost of inventory is.... near zero.

sun tzu's picture

All they had to do was end QE and prices collapsed

newdoobie's picture

Didn't congress just allow the selling of crude again?

 

AGuy's picture

The Emerging Market economies (Asia, brazil, India, etc) are all collapsing creating an unexpected supply imbalances. EM debt has peaked. Not only is Oil down, so are all commodites: iron ore, Copper, Cement, etc. The World is in a recession. Recall that during the 2008-2009 collapse Oil plunged into the low 1930s, Then the EM started borrowing like made and building lots and lots of infrastructure that never gets used.

 

nofluer's picture

If copper is down enough, China can dig up the copper they moved from those "bonded warehouses" (so they were GOSH "empty") and put it back in the warehouses.

monkeyboy's picture

Next they'll be telling us Man Made Global Warming/Climate Change is a furphy.

DownWithYogaPants's picture

Oh globull warming is a Furphy alright. ( Wild rumor purported to be true and in this case is NOT ) 

roadhazard's picture

I screamed about that rip off for years. Communication with people in power resulted in no responses.

willwork4food's picture

1. No it's not the middle of the Atlantic Ocean.

2. You might wish to change your name after North Carolina kicks your ass in Jan.

Chia-Pet's picture

Did you wave at Captain Phillips?

Tarzan's picture

So we have Tankers lined up across the ocean waiting to import their oil,

and Congress responds by lifting the ban on exporting oil and gas?

If the glut of oil and gas in the States is so huge that we need to export it, why are we importing so much that tankers are queued up across the Atlantic waiting to unload?

Oil should be more like $10 a barrel, but then the tree huggers would have an aneurysm seeing all the gas guzzling SUV and Pickup trucks Americans run to buy every time the gas prices drop.

Antifaschistische's picture

This is ZH!!   THINK OUT OF THE Box people!!

Lake Mead is going to dry up, we can use it as the largest US Oil Storage facility!!...and we simply convert the existing water infrastructure to oil, so we can get it to the refineries in California.  BOOM!      

_ConanTheLibertarian_'s picture

And when the lake is full, just a spark and BOOM it's empty really quick.

The Pope's picture

I don't know th--aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaahhhh!!!!

Chuck Walla's picture

Bin Laden

FORWARD OILY SOVIET!

sun tzu's picture

Considering it's going from the US to EU, it was laden. The US exports distillates. The EU imports distillates. 

SixIsNinE's picture

i just saw $1.76 / gallon here in Colorado today = hard to believe

azusgm's picture

Filled up with $1.659 for regular today in Tyler, Texas.

franzpick's picture

In the emerging collapse of world trade, manufacturing and personal consumption, we will sooner than later see 99c gas at the pump. Amazing - 2-digit gas to 2-digit gas - in one generation.

acetinker's picture

In LA (Lower Alabama) where I was raised, there used to be "gas wars".  Lowest prices I recall were .299 for regular, and .329 for hi-test.

Mama's '58 Caddy ran better on hi-test.  For Daddy's '56 210 wagon, it didn't much matter.

Mama worked for the Corps of Engineers, Daddy was a flightline mechanic, and we were NOT wealthy.  This was in the '62-'65 time period. Daddy was able to build race cars, though.  They ran on either av-gas (~120 octane) or methanol (not ethanol) and that shit was really expensive, at .599 and an even dollar, respectively.

I feel like Archie Bunker.

ebear's picture

"I feel like Archie Bunker."

As long as you don't look like him you'll be fine.

PavlovPup's picture

1.16 a liter here on Vancouver Island. just under four of those to a gallon.

sun tzu's picture

$1.89 in Dallas for some reason it popped up 10 cents the past couple of days while oil prices and wholesale gasoline prices have been dropping

Moe Howard's picture

It was $1.70 here in KY last week, jumped to $1.90 over the weekend.

Chia-Pet's picture

I filled up my Prius for a dollar.

It was 8/10 full because I didn't drive much last month.

At least I got that going for me.

detached.amusement's picture

just as long as you dont think it drives like a ferrari, like the other 60% of prius drivers