Stunning Photos Of Huge Oil Supertanker Lines Forming "World's Biggest Traffic Jam"

Tyler Durden's picture

 

      "It may be the world's biggest traffic jam."

      - Reuters

Last week we revealed what we thought was a "shocking photo" of nearly 30 oil tankers caught in a traffic jam off the Iraqi coast, an indication of just how much excess oil is currently parked offshore.

 

To be sure, the record offshore storage is a problem because with the front-end contango collapsing, DB warned just several weeks ago when comparing the current level of floating storage (157.3 million barrels) versus that in early February (126.6 million barrels), that there may be an additional 31 million barrels of inventory to be drawn down between now and the next inventory trough over the next several months. It calculated that "depending on the duration of drawdown (three months or six months) this could mean anywhere from 165-330 kb/d of incremental supply."

But the photo above, meant to do DB's thesis justice, was nothing in comparisons to what Reuters would reveal today.

Because as ports struggle to cope with a global oil glut, huge queues of supertankers have formed in some of the world's busiest sea lanes, where some 200 million barrels of crude lies waiting to be loaded or delivered, Reuters reports today.

The vessels, filled with oil worth around $7.5 billion at current market prices, would stretch for almost 40 km (25 miles) if formed up in one straight line.

Something not quite so theoretical, and yet almost identical taking place right now, is shown in the photo below, which shows VLCC supertankers traveling between India and Southeast Asia, courtesy of Reuters.

 

And while the market is for now clearly ignoring the unprecedented accumulation of oil in offshore storage, a bearish indicator of just how much oil will hit markets if and when prices continue rising or when collapsing contango makes it no longer economic to hold for many it is an all too real daily existence. As Reuters reports, one captain with more than 20 years at sea said his tanker had been anchored off Qingdao in northeastern China since late March and was unlikely to dock before the end of this week, a frustrating delay of more than three weeks.

"We've stayed here a long time," he said, requesting anonymity because he is not authorized to speak to the press, but added that another kind of jam was helping to alleviate the boredom. "We have a piano, drums, crew who play guitar – they are not professional but they are coming good. We have more than 1,000 DVDs so there is no need to watch the same one 20 times."

As we first showed last week in the photo above, the worst congestion is in the Middle East, as ports struggle to cope with soaring output available for export.

It's not just the Persian Gulf though: shocking sights can be seen in in Asia, where many ports have not been upgraded in time to deal with ravenous demand as consumers take advantage of cheap fuel.

"It's the worst I've seen at Qingdao," said a second tanker captain waiting to offload at the world's seventh busiest port, adding that his crew was killing time doing maintenance work. 

Ralph Leszczynski, head of research at shipbroker Banchero Costa, in Singapore, said the snarl-up was "one of the worst tanker traffic jams in recent years".  The cause was "a perfect storm of red-hot demand from new entrant refineries in China and port infrastructure in the Middle East and Latin America that is unable to cope", he said.

Perhaps in retrospect it is not so much "ravenous demand", as soaring supply with no place to deliver the oil to. According to ship tracking data, 125 supertankers with the capacity to carry oil to supply energy-hungry China for three weeks, are waiting in line at ports. The combined daily cost is $6.25 million, based on current ship hire rates of around $50,000-a-day. It is also why Swiss energy trading companies such as Vitol and Trafigura have had a bumper year, one which has offset their pure-play commodity exposure losses.

"It messes up port schedules, catering schedules, crew schedules and the schedules of delivering the transported goods," said one shipping logistics manager in Singapore. "It also raises the cost for pretty much everyone involved."

For dealers, a month-long delay can turn a profitable trade into a painful loss. "If you've bought 100,000 barrels of crude at $40 (a barrel) that'll cost you $4 million," said one oil trader. "And if you've calculated another 1.5 million bucks for a month's worth of shipping, but you end up paying double that because your ship is stuck in port congestion, then that can seriously mess up everything from your schedule to your arbitrage profitability." In other words, for every Vitol that is making a killing on the contango, someone is losing.

Here Reuters gets to the heart of the matter with the explanation why oil shipping lanes now look like parking lots:

"at the heart of the congestion is an unprecedented rise in global oil production... as soaring output has pulled down oil prices by as much as 70 percent since 2014. That has helped spur demand from China's independent refiners, freed from government restrictions on imports just last year and gorging on plentiful crude, putting extra pressure on ports."

The unprecedented number of ships at sea filled with cargo and just waiting for the signal to offload is also causing congestion between the main producer and consumer hubs.

Almost all supertankers heading to Asia pass by Singapore or adjacent facilities in southern Malaysia, the world's fuel station for tankers and also a global refinery and ship maintenance hub.

Shipping data shows that some 50 supertankers are currently anchored in or close to Singaporean waters for refueling, maintenance or waiting to deliver crude to refineries or be used as floating storage.

This can be seen in the following Reuters photo of oil tankers lining up on the eastern coast of Singapore.

 

As well as the following Marinetraffic map.

 

For sailors stuck onboard this "parking lot" of anchored tankers, one of the biggest problems is simply wiling away the time, Reuters adds.

"Some of the ships are well-equipped for their crews, but many aren't," said a Filipino sailor who left a very large crude carrier (VLCC) in March after a voyage to China. "On my last one, we had no regular internet ... only an old TV with a couple of old DVD movies. The food is terrible and while waiting to offload we did pretty hard maintenance work. The sort of stuff you can't do when the engine is running."

Captain Alan Loynd, who spent more than 25 years at sea and is now a marine consultant, said long port delays were rare, but could be tedious and isolating when they happened.

And unlike in previous eras, having a couple of beers to break the monotony is usually out of the question.

"The chances of getting ashore are remote," he said. "A lot of ships are now dry, so there's no alcohol on board."

Unfortunately for Capitan Loynd and so many of his peers, the dry period will last a lot longer because as even more supply is unleashed, as land-based storage fills up and as every incremental producer rushes to stash millions of barrels on whatever ships they can charter just to let them float at sea.

Unless of course, the short-end contango flips and becomes a huge cash burn for the owners of all that oil to keep all their not so precious cargo seaborne. In that case those tens of millions of barrels will promptly find their way to the market, which will then unleash an unprecedented period of wholesale dumping as the liquidation scramble to find a buyer at any price, pushes oil prices to fresh new lows.

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Mr.Sono's picture

no wonder oil is going up

OrangeJews's picture
OrangeJews (not verified) Mr.Sono Apr 13, 2016 11:48 AM

All we need now is a big bomb and POOF!!!!

Looney's picture

All these Supertankers, instead of wasting time waiting in line, should start racing each other.

Whoever wins the race takes possession of the loser’s vessel and everything in it.  ;-)

Looney

nuubee's picture

Where commerce does not move freely, it will eventually be moved by force.

nuclearsquid's picture

this is a submariner's wet dream.

rccalhoun's picture

sink them all and oil goes to $100

Newspeaktogo's picture

Hey, don't give em any ideas. They're fucking stupid enough.

CheapBastard's picture

This huge supply and zilch demand obviously explains why oil is rising > $40.

 

Advanced Princeton Economic.

RAT005's picture

Just as gold was manipulated down to accomodate bankrupt govs. and banksters, I think the banksters manipulated oil price higher to make getting their loans paid back more secure.

jbvtme's picture

they carrying oil or refugees?

pods's picture

Is it just me or did a whole section of this page disappear?  SOB!

NoDebt's picture

"We have a piano, drums, crew who play guitar – they are not professional but they are coming good. We have more than 1,000 DVDs so there is no need to watch the same one 20 times."

Yeah, but do you have hookers and blow?  No, you do not.

847328_3527's picture

Every friend I have in Houston involved with oil says oil will most likely drop to $20-$26 unless they somehow manipulate it like they do house prices.

Flakmeister's picture

One can logically infer that you have zero friends in Houston involved with oil, or all your friends in Houstan are clueless...

cheka's picture

please stop it with this.  the article about the galveston/houston traffic was complete bunk - normal traffic

i watch that daily for last 10 years as part of my job

SoilMyselfRotten's picture

Looks like an ISIS fleet, bomb those bitchezz

GoinFawr's picture

Re:"Yeah, but do you have hookers and blow?  No, you do not"

....luckily any self-respecting capitalist with their own boat and a few too many girlfriends in low places would have the wherewithal to recognize such an opportunity when it presents itself.

Rakshas's picture

......they have Maid to Order in Singapore........

Paveway IV's picture

So does anyone here have the Cliff's Notes version of why the gold conspiracy sites are reporting a gold-backed Chinese yuan next week - the 19th? 

This seems to be news to China, who has reported no such thing. As far as I can tell, people are confusing this with the major Chinese banks' plans to fix gold prices in terms of yuan (since they resent having to rely on the rigged USD benchmark gold price). Is this all it is? There's a follow-on effect of devaluing the yuan and dragging the dollar down to realistic values as well, but those are secondary. In any case, the 'gold-backed yuan' seems nothing more then confusion on fringe sites about what it going on. Is this right?

Seems like the yuan-based gold benchmark itself should be bigger news on ZH than it is, but I see almost nothing about it. Is it not that big of a deal? I'm obviously not a gold or PM guy, so it's plenty confusing.

jakesdad's picture

I'm sure lloyd has his best people looking into it as we speak...

IronForge's picture

You can even use WWII Era Torpedoes for these.

Just load the Tubes, shoot the Fish, hear them go off, Reload and Repeat.

That being said, that Malacca - Sri Lanka Stretch along the Indian Ocean is a Bitch of a Ride if you're not on a Large Tanker.

N0TaREALmerican's picture
N0TaREALmerican (not verified) Looney Apr 13, 2016 11:55 AM

I'm liking this idea.    It needs a good Marketing name.    The Tanker Cup?        

undertow1141's picture

In this scenario, is rubbing allowed like in NASCAR?

old naughty's picture

someone should start a Baltic Wet Index.

OverTheHedge's picture

>>someone should start a Baltic Wet Index.

Surely the word "moist" ought to be included.......

(and don't call me Shirley)

GoldenGoosed's picture

OJ.... That is the ring of fire their bobbling in and then as they head towards the Indian Ocean the through areas where they have earth quakes at ten on the scale under the sea in the Malaysian straights. And on towards India need I explain how India used to be a continent but it crashed into the continent in which it sits. It moves inland so fast that mt Everest grows an inch taller each year.
They don't need a bomb only Mother Nature hanging in most of those zones.
And now we head towards hurricane season.
Not to mention the increased chance of human error.

Janet Shalom Bernanke's picture

Don't think Obama and his war machine hasn't already thought of that.

Surely there is someone on board wearing a black shirt and who has a beard.  Looks like ISI/ISIL to me.  

Janet Shalom Bernanke's picture

I have an idea, these tankers can come to the Gulf of Mexico, dump their cargo in the water, then can blame British Petroleum.   Problem solved.  Just use the Gulf as a storage tank of last resort.

Joe Sichs Pach's picture

 

This absolutely represents Peak Oil...Storage!

cheka's picture

watch out

 

the oildrum.com dupes will neg you

a farking CARTEL was put in place to create artificial scarcity

true scarcity has no use for a cartel

Blythes Master's picture

No where to run, no where to hide.

KnuckleDragger-X's picture

It doesn't exist if it's on the water......

DetectiveStern's picture

I wouldn't fancy being stuck on an oil tanker for weeks on end. Hope they're paying decent overtime or things could get very interesting.

JoeSoMD's picture

Not typically for a ship at anchor... for most of the watchstanders it's just 4 on 8 off and 4 on... if they were "steaming" then there would be daywork which would give you 2 to 4 hours OT a day.  They just have the generator(s) running and not the main engine, so probably not much of a requirement for any time beyond 8 hours a day.  Further, the mates on the bridge only have to keep lookout in case the anchors drag... the GPS sounds an alarm automatically if the anchor drags... so life is really boring... no oil to pump... no fuel to transfer because consumption is so low, no ballast to transfer... yikes - I'm glad it ain't me.

cheka's picture

the ships i deal with are 6 hours on, 6 hours off

shitty schedule, but for 1200 bucks a month they dont complain (deckhands are third worlders, esp pinoy)

down time is spent scraping and painting.....saltwater is hell

jerry_theking_lawler's picture

Well, that's a normal day in Singapore....its like a floating city around the city/state. Crazy.

 

But yes, there is a glut and whoever doesn't believe this is peddling fiction.

Jacksons Ghost's picture

Deflation, banker worst nightmare. Great for us.

Winston Churchill's picture

Bankers have a solution involving supply destruction,or war for short.Creates lots of debt as  well.

 

N0TaREALmerican's picture
N0TaREALmerican (not verified) Apr 13, 2016 11:49 AM

Good thing there's no u-boats. 

Haydukez's picture

A global economy that "works," if only for the the future of jellyfish.

Space Animatoltipap's picture

Another reason for starting a war.

boattrash's picture

Bingo! When will we see the bomb (recovery)?

pickatheweek's picture

hmmmm, and WTI has rallied how many percentage points in the last 2 weeks because of talk of possible cuts?

adr's picture

It wasn't talk of possible cuts, oil prices rallied 40% on talk of a production FREEZE at current levels.

THERE WAS NO TALK OF CUTS.

The fucking Goldman Sachs human rape algos ran the price because to them, FREEZE is a cut because it means no further gains in production.

The same principal as spending more than last year, but less than you said is a spending cut.

RacerX's picture

Looks more like a blockade.

Big Corked Boots's picture

Nothing to do on board ship?

What happened to rum, sodomy and the lash?

cheka's picture

handline fishing...watching dvds....a few ships have basketball goals on them.  pinoy are queer for basketball

OverTheHedge's picture

What happened to rum, sodomy and the lash?

Spoken like a true British boarding-school survivor. Not sure if third world peasant workers are allowed such rarefied delights.

"Tell me, young Smegma-FitzPatrick-Smythe, what did happen to rum, sodomy and the lash?"

"We let the lower classes have them, m'lord, such a waste. Only kiddy-fiddling and necrophilic bestiality for us toffs, these days."