Floating oil storage ----70k per day! - PeachParts Mercedes-Benz Forum

Plantman · #1 03-03-2009, 09:09 PM

Oil producers running out of storage space
Glut caused by world slowdown leaves the world awash in crude

NEW YORK - Supertankers that once raced around the world to satisfy an unquenchable thirst for oil are now parked offshore, fully loaded, anchors down, their crews killing time. In the United States, vast storage farms for oil are almost out of room.

As demand for crude has plummeted, the world suddenly finds itself awash in oil that has nowhere to go.

It’s been less than a year since oil prices hit record highs. But now producers and traders are struggling with the new reality: The world wants less oil, not more. And turning off the spigot is about as easy as turning around one of those tankers.
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So oil companies and investors are stashing crude, waiting for demand to rise and the bear market to end so they can turn a profit later.

Meanwhile, oil-producing countries such as Iran have pumped millions of barrels of their own crude into idle tankers, effectively taking crude off the market to halt declining prices that are devastating their economies.

Traders have always played a game of store and sell, bringing oil to market when it can fetch the best price. They say this time is different because of how fast the bottom fell out of the oil market.

“Nobody expected this,” said Antoine Halff, an analyst with Newedge. “The majority of people out there thought the market would keep rising to $200, even $250, a barrel. They were tripping over each other to pick a higher forecast.”

Now the strategy is storage. Anyone who can buy cheap oil and store it might be able to sell it at a premium later, when the global economy ramps up again.

The oil tanks that surround Cushing, Okla., in a sprawling network that holds 10 percent of the nation’s oil, have been swelling for months. Exactly how close they are to full is a closely guarded secret, but analysts who cover the industry say Cushing is approaching capacity.

There are other storage tanks in the country with plenty of extra room to take on oil, but Cushing is the delivery point for the oil traded on the New York Mercantile Exchange. So the closer Cushing gets to full, the lower the price of oil goes.

Gas demand drops

Some oil is ending up in giant ships and staying there. On these supertankers, rented by oil companies such as Royal Dutch Shell, there is little for crews to do but paint and repaint the decks to pass time.

More than 30 tankers, each with the ability to move 2 million barrels of oil from port to port, now serve as little more than floating storage tanks. They are moored across the globe, from the Texas coast to the calm waters off Europe and Nigeria.

“It gets expensive to do this,” said Phil Flynn, an analyst at Alaron Trading Corp. “If you’re sitting on a bunch of oil and you’re stuck paying storage and insurance, and you can’t find a buyer, you may have to sell it at a discount just to get rid of it.”

On the other hand, as storage units on land have filled up, the companies that own the tankers have profited. Tanker companies charge an average of $75,000 a day, three times as much as last summer, to hold crude, said Douglas Mavrinac, an analyst with Jefferies & Co.

Demand for oil began to increase steadily in the early 1980s, and it went into overdrive in recent years as the Chinese economy surged and as producers pumped lakes of oil out of the ground to take advantage of a spike in prices. Then recession gripped the globe, frozen credit markets made things worse, and inventories swelled.

Refineries in the U.S. have cut way back on production of gas as the economy weakens and millions of Americans, many of them laid off, keep their cars in the garage.

The latest government records show U.S. inventories are bloated with a virtual sea of surplus crude, enough to fuel 15 million cars for a year. Inventories have grown by 26 million barrels since the beginning of the year alone. Oil from Saudi Arabia, the United Arab Emirates and Nigeria is finding few takers, even though much of it is used to make gasoline in the United States.

There are so many players in the international oil market that no one has enough control to sway prices. OPEC slashed production by more than 4 million barrels a day, and still the price of a barrel of crude languishes near $40. At its peak, it traded at $147 a barrel.

Experts aren’t sure what will happen when all that oil finally comes ashore.

Pooka · #2 03-03-2009, 09:33 PM

The oil company term for this is 'demurrage'. Most oil companies have one person who does nothing but reduce demurrage charges. The easiest way to do this is to request a date of arrival from the ship's master and then tell them to slow down if you do not have the room.

You can also command 'dead stop' and that's when the demurrage charges kick in. The master of the ship picks the place to ride out the stop and you get to pay for his 'parking fees' as well.

I wonder what those demurrage control people are doing now?

Emmerich · #3 03-04-2009, 12:38 AM

That story is misleading. The price of WTI crude (Cushing) is not the single source of crude in the US by a long shot. WTI is the benchmark for NYMEX trading and thats why you hear about it. WTI is going down due to a local supply glut at Cushing but Brent and the spot market are holding flat, and gasoline prices are rising.

Track North Sea Brent if you want a good indicator of crude prices.

You know we are in deep doo doo when the price of crude drops over 50% since last summer and the economy is still tanking. thanks to Obamas iron life raft for the economy, he will manage to prevent a recovery that had already started.

pawoSD · #4 03-04-2009, 01:46 AM

This summer I am going to drive drive drive and travel all over while fuel is cheap. Gotta take advantage!