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RE: Update2 – (BN) Speculators Morgan Stanley/Citigroup Seek Supertanker store Crude

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#6342

Charles Randall
Participant

Here is update on the Commodity traders buying crude & storing on supertankers taking advantage of contango where future prices beat the current spot market price. <See previous post Jan 9, 2009 Oil Traders seek +10 Supertankers & is under post Venezuela OPEC crude cuts.> 
 
It looks like Morgan Stanley, Citigroup (Phibro), commodity traders & Koch, Shell oil traders have joined the feeding frenzy and the total crude stored in ships is now ~80 MM Bbl the most in 20 years.
 
The article mentions WTI as one crudes buy for the trade but WTI is traded in domestic US Cushing hubb & never exported so it is doubtful anything more than paper hedge with another crude linked to it trade occurs, probably same for Brent since less than 20 cargoes a month are ever exported (one reasons the two shallow traded cargo volume crudes are not really indicators to be used for industry benchmarks on spot market).
 
As minimum these type crude players are going to drive up freight cost, crude futures & spot market prices without adding anything of market value back into the oil industry. These are the exact type of folks that drove crude to $147/Bbl on speculative trades and collapsed the market because these prices were so unconnected to fundamentals. 
 
Since Stockmarket and Congress only make noise about blocking these folks from speculating oil – the industry needs to find way to stop this removal of profit from commodity trading that has no assets at risk in the industry. However, this trade is almost solid since they have taken positions on loaded physical barrels & placed future hedges that guarantee a margin …. the only hope might be that current futures price gain of $2.15/Bbl-month until December would drop below their Demurrage contract rates of $1.15/Bbl-month or extend longer period than traders planned and eat some profits. 
 
Regards

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