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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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Thu, 12/17/2015 - 04:23 | 6934062 Fireman
Fireman's picture

Without oil muscle to grease the game, how long will the Saudi Mercan IOU petroscrip toilet paper dollah keep the Wall Streeters' Ponzi crapper from being flushed?  This blocked petro sewer coming exactly as the genuises in Washing town decide to dump the so-called strategic reserve. Smart!

Thu, 12/17/2015 - 06:12 | 6934146 Grouchy Marx
Grouchy Marx's picture

Global warming has destroyed the market for oil. We must stop global warming. 

Thu, 12/17/2015 - 07:40 | 6934236 Golden Phoenix
Golden Phoenix's picture

The Captain was like 'Oh crap, did I remember to turn the oven off?'

Thu, 12/17/2015 - 07:49 | 6934244 Wahooo
Wahooo's picture

And what will they do with all the surplus commodities?  Well, fashion them into war machines, of course!

Thu, 12/17/2015 - 07:52 | 6934251 oldguyonBMXbike
oldguyonBMXbike's picture

I give it 2 weeks before a major oil spill happens.

Thu, 12/17/2015 - 08:24 | 6934332 financialrealist
financialrealist's picture

Nothing WWIII won't fix.

Thu, 12/17/2015 - 08:37 | 6934374 Elio
Elio's picture

My personal feeling is when some countries in the future desperately needs a cheap oil in the future it will be very expensive. Can you imagine scnerio that you need cheap oil to grow but prices reaches 200 dollars. Never say never.

Thu, 12/17/2015 - 09:32 | 6934518 Thinkor
Thinkor's picture

I have rent free storage space available in my backyard oil tank. May be some wastage.

Thu, 12/17/2015 - 09:39 | 6934546 Atomizer
Atomizer's picture

An artificial creation of force majeure scenario.  

Thu, 12/17/2015 - 10:37 | 6934833 astoriajoe
astoriajoe's picture

Its like NYC's garbage barge from the 70s. 

 

Thu, 12/17/2015 - 18:43 | 6937206 JoeSoMD
JoeSoMD's picture

Ron Bousso and Libby George of PortNews report...

Tankers laden with diesel heading from the U.S. Gulf Coast to Europe are turning around in mid-ocean as European storage is nearly filled to the brim.  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, according to Reuters ship tracking.  It is unclear if the tankers will discharge their diesel cargoes in the Gulf Coast or will await new orders, according to traders and shipping brokers.  "European prices are so soft," one trader said. "Sellers must see better numbers."
The VENDOME STREET was more than three quarters of the way to Europe, turning around just 800 miles off the coast of Portugal. Ship brokers said a turnaround so late in the journey would come at a cost to the charterer.  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. (Full Story)Gasoil stocks, which include diesel and heating oil, in the Amsterdam-Rotterdam-Antwerp storage hub climbed to a fresh record high last week. Prompt Low Sulphur Gasoil futures LGOc1, the European diesel benchmark, have been trading at sharp discount to later contracts, in what is known as contango, prompting traders to store product.  In some cases, traders opted to store product on tankers. At least 250,000 tonnes of diesel are currently anchored off Europe and the Mediterranean seeking a discharge port, according to traders. "The idea is to keep tankers on the water as long as you can and try to find a stronger market," a trader said.

Fri, 12/18/2015 - 04:05 | 6938382 Royal Wulff
Royal Wulff's picture

Is it over-supply or lack of demand due to the destruction Obama has unleashed?

Fri, 12/18/2015 - 09:59 | 6938779 fstwrtr
fstwrtr's picture

Sounds like they are at a crossroads.. should they steam around looking for higher paying markets?, Or go with the sure thing and hitch a ride to the middle east with the navy. At least the ME is a sure bet on consumtion.

Tue, 12/22/2015 - 01:57 | 6951941 rex-lacrymarum
rex-lacrymarum's picture

It may not mean much, but this is almost the same story as the one told in the Economist in early 1999 entitled "Drowining in Oil". At the time it was also noted that there wasn't enough storage space left on land, and countless tankers laden with crude were simply "parking" at sea. Crude oil bottomed a few days later and subsequently rose by 1,400% over the next 9 years. 

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