Something Very Strange Is Taking Place Off The Coast Of Galveston, TX

[SocalDinar]

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:

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.

 

 

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.

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.

 

 

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.

 

 

“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:

Average:

4.933335

 

 

 

http://www.zerohedge.com/news/2015-11-12/something-very-strange-taking-place-coast-galveston

 

[umbertino]

Grazie for sharing, Socal.

[dog53]

Hey cheap oil = cheap gas

 

Im ok with it.

[SnowGlobe7]

yup me too Dog.

 

expensive oil did not help Iraq RV..so heck with it.....drop those oil prices!!!!!!!!!

you should start a poll....how low will gas prices go!!!!!!

And how long will they stay that way

[bigwave]

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.”
 

Probably pisses off the owners of the ships to no end.

[SnowGlobe7]

$1.86 this morning here in Tulsa

[reveldog]

California is still almost 300.00

[Shabibilicious]

California is still almost 300.00

 

That's pretty steep.    

 

GO RV, then BV

[dog53]

California is still almost 300.00

 

 

wow!!!!!!

three hundred dollars a gallon is just way to much to pay for gas.

 

Premium or regular   

[reveldog]

2.86  last I paid

[Texstorm]

Thanks SocalDinar! Economically speaking the U.S. Would be in okay shape at about $70bbl, the effects are already starting to show hear in Houston. One problem the south has is that there are not enough refineries and while tree hungers have made it almost impossible to build any new ones , I hope that they are happy with their bank accounts as the trickle down affects start coming into play.

[SnowGlobe7]

Tulsa is oil and gas...lay offs started months ago....very much a trickle down economy here...same with american airlines....lay offs are just part of it..if you are in the industry or rely o it...you are very well aware

[SocalDinar]

California is still almost 300.00

Blame Arnold Schwarzenegger on that. His 2010 global warming cap and trade bill came into effect for the refiners at the first of this year just when oil was sliding down. Perfect timing for those communist thieves in Sacramento . The refiners are getting hit with a 70 cents a gallon tax and they are passing right back on to us. If oil goes back to were it was we will easily be at over  $5.00 a gallon

 

Sad thing is most Californians have never heard about this.

 

But the majority of California Voters are Idiots.  I hope those frigging chickens appreciate what  we have done for them  $ 5.00 for a dozen eggs. We are just stupid here.!!

Edited November 12, 2015 by SocalDinar

[jg1]

When Trump get in he said he will build another refinery or two Then prices of gas will go way down. Go Trump.

[SocalDinar]

Thanks SocalDinar! Economically speaking the U.S. Would be in okay shape at about $70bbl, the effects are already starting to show hear in Houston. One problem the south has is that there are not enough refineries and while tree hungers have made it almost impossible to build any new ones , I hope that they are happy with their bank accounts as the trickle down affects start coming into play.

So true Texstorm.

I had a snot nosed kid trying to get me to sign a petition at the grocery store regarding another crap environmental issue.  I laughed at him and i asked what good is a clean environment if you cant feed your family. He could not answer me.

There has to be some balance

Edited November 12, 2015 by SocalDinar

[Shabibilicious]

Trump Casino and Refinery.......it's got a nicely arrogant ring to it.       "My gas is #1 in the polls".     

 

GO RV, then BV 

[Bunk]

California is still almost 300.00

 

  $2.00 for the gas,and $298 for the taxes 

[new york kevin]

Blame Arnold Schwarzenegger on that. His 2010 global warming cap and trade bill came into effect for the refiners at the first of this year just when oil was sliding down. Perfect timing for those communist thieves in Sacramento . The refiners are getting hit with a 70 cents a gallon tax and they are passing right back on to us. If oil goes back to were it was we will easily be at over  $5.00 a gallon

 

Sad thing is most Californians have never heard about this.

 

But the majority of California Voters are Idiots.  I hope those frigging chickens appreciate what  we have done for them  $ 5.00 for a dozen eggs. We are just stupid here.!!

Sad but true brother. What do ya want for a State Legislature that has been DOMINATED by one political party for the last 45 years. They vote themselves raises during financial crisises. They allow cash cows like the local water boards to raise prices on consumers of water after the consumers double or triple the amount of water they were ordered to save or receive fines,and penalties. Why, the consumers aren't buying enough of their product to,allow the water boards to cover their expenses. Cut down your expenses dumb butt!!! Nooooooo, we cannot do that. Have they built a system of water reservoirs throughout the state to store rain run off, or store water purchased from the Colorado River ? Have they built a series of ocean water desalination plants all along the coast to allow the state to become water independent? Noooooo. They do spend 50 billion dollars plus, for a high speed train that is not high speed at all. A high speed train that does not even reach the maximum allotted time for the train to go from Cochilla to ... Where is it suppose to stop at! That's why I joined VIP. To get legal ideas to on how to pay the legally minimum amount of taxes on my post RV cash. So far that constitutes a six month delay for me to start cashing in so I can establish a primary residence in a more tax friendly state. Get a CPA, Tax Attorney, etc.

[blueskyline]

^{China just purchased some oil feilds in texas to the tune of 1.3 billion dollars . Could some of this oil from Iraq given to us at a highly discounted price make its way to those oil feilds ? To pay down some debt owed to china ? At fair market value ?}

[zzztop]

Blame Arnold Schwarzenegger on that. His 2010 global warming cap and trade bill came into effect for the refiners at the first of this year just when oil was sliding down. Perfect timing for those communist thieves in Sacramento . The refiners are getting hit with a 70 cents a gallon tax and they are passing right back on to us. If oil goes back to were it was we will easily be at over  $5.00 a gallon

 

Sad thing is most Californians have never heard about this.

 

But the majority of California Voters are Idiots.  I hope those frigging chickens appreciate what  we have done for them  $ 5.00 for a dozen eggs. We are just stupid here.!!

You are exactly right.  I have lived in Riverside Ca. my entire life of 47 years.   The ignorance and stupidity here is off the charts.  I need to get the hell out of here.

[nstoolman1]

During the "shortage" in the 70's, 80's there were tankers lined up off the shores of NY. Mass hysteria about the oil companies stopping the flow of crude in to the US for price control. Turned out they were riding on their high water mark, meaning they were empty. They were actually waiting to come in for the high sulfur crude that the EPA wouldn't let the refineries convert. Before I get excited about lower prices I would like to see the water depth markers on the side of the ships. And yes the shortage was real. It was contrived by the government and oil companies to keep the prices high. Higher prices=high taxes.

[SnowGlobe7]

riding low...thats the one

 

(name the movie)

[ronscarpa]

 Thanks for this enlightening article Socal...(+1) 

[markb57]

now we can all get one of these

 

[DinarMillionaire]

riding low...thats the one

 

(name the movie)

The Italian Job?