“Keeping the Dying Economy Afloat”: Something Very Strange Is Taking Place Off The Coast Of Galveston, TX

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Editor’s Note: Gas prices might drop even further? This is all part of the lead up to war. Absolutely everything is being manipulated right now.

oiltanker

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:

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.

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.

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.

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.

“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:

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  • Anothereno

    The price of oil is shit yet the price at the pumps is still over a dollar a liter rip us off more plz…

    • Remember summer of 2008? Oil $165 a barrel. Gasoline around $4.20 a gallon. After obama got elected all of sudden oil drops to around $90 a barrel and gasoline in Pa was $1.49 a gallon. So explain this if oil is $45 a barrel then why is gas in Pa $2.29 a gallon? It actually jumped .16 cents last week for no reason. Explain?

  • Asphalt roofing is still ‘through the roof’ . Bucket of tar is $40. It wasn’t fun the last 3 days doing a partial tear off and re-roofing with “CHEAP” rolled roofing. Metal and corrugated products way pricier, at least when you do-it-yourself

    • tomw

      I was always amazed how people would try to fudge, anyway they could, when it came to their roof. I mean, it only protects, just about everything they own.

      • a pile of dust in the garage was being protected, and the sparrows. Now they are out and the dust in the dump. 10 years is the expected duration of properly applied asphalt roofing. I did the job for free for a cancer patient relative. still amazed pal?

        • tomw

          I wasn’t talking about you personally. Been in the business for 45 years now.

          • Roofing is one of the most difficult trades in construction. Insulation is about the same level of ‘fun’ .
            I look for houses to flip, and the ones with at least a decent roof have hope.

          • tomw

            Then I must have had a lot of “fun’ lol.

          • Man is roofing tough ! The Year: 1999, under the sun, 14/12 pitch, 90 degrees, 4 layers to pry off… ah,,,the good ole days

          • tomw

            Did too many to count. But I pay today for all that fun in the sun. Can’t even pick up my grand kids .lol.

          • Try hot mop in Yuma, Arizona, May through September with temps up to 125.

  • breakawaymotorsports .

    All this oil sitting off shore in ships…great. Next hurricane or tsunami in that area could create an incredible oil disaster.

    • maybe the Martians will blast them with their Acme Ray Guns ! Or an Asteroid, Meteor, Meteorite, Airliner, or even a UUO, unidentified underwater object will wipe out the ships and hurl their contents not just all over the Galveston area, but pollute the Moon , Sun and Stars,,,

      WE SHOULD MOVE THE EARTH TO A DIFFERENT, SAFER , PARALLEL UNIVErSE !

    • Virginia Allston

      Maybe that is what someone has in mind.

  • Mike

    Of course they won’t drop, but let the prices go back up again and they will raise their prices again. Price gouging plain and simple.

  • Dan Black

    They will just say another refinery shut down or is in need of repair yada yada

    • Yup. Time to convert the refineries to cooking the mysterious “Winter Blend”.

      • I_P_Frehley

        We here in The People’s Democratic Socialist Republic of Cook County (the bastion leftist nincompoopery) know only too well of the “seasonal blends” that are required to be used…every week.

        • I can’t say as I envy your location. Chicago is one of the seats of Communism in America, along with the Black Muslim capital of the USA.

  • hahahahaaaa!

  • ron17571

    I read about this years ago. Something about it being cheaper to store oil in tankers.There is always a bunch of ships hanging out from what i read. They are all backed up over seas also,waiting to leave.Enjoy the 40 oil while you can.

  • TorontoStreetNews

    As the VIX Predictor — I predict a further stock market crash the week of Nov. 23 to Nov. 27. Get your options bets in now for that week — best to do it by Nov. 20 the Friday before.

    — Victor Fletcher / timing15@yahoo.ca

  • masterblaster

    Or agriculture that is fueled by oil

  • YoOleMe

    As a helicopter “driver”, working out of Pearland Tx. in the mid ~ late 70’s servicing offshore platforms and drilling rigs, there were two of these anchorages — one off Galveston, the other off of Cameron La. — EACH with 40~ 50 of these VLCC’s on the hock, for literally years-on-end, but then; they were to create Carter’s pump shortage, while allowing the Middle-East wells to keep flowing. Smaller tankers would shuttle loads from the VLCCs to the East coast and other usage facilities around the country.

    From time-to-time I’d get a trip to Crew-Change one of the vessels, which took place at Lunch time, and since they fed the incoming & outgoing crews together, I would have lunch with them and “feast,” like a 5-Star restaurant, albeit; sans the vino (a fine variety of which was available!)

    Several times the SS AMERICA, or SS UNITED STATES (twin 5th largest VLCC’s in the world) would be in the Galveston area — some 50 ~ 60 miles out, back then — and due to their enormous size, they were visible 3~4 MINUTES BEFORE the nearest of any of the other tankers between me and there location.

    • sunshine

      The refineries and that area of east TX and LA fascinate me. Any cool stories you wanna share?

      • YoOleMe

        Sorry: Never had any involvement with refineries; just mineral & petroleum drilling & exploration in Australia; Peru; Argentina; North Slope, Alaska; & off shore U.S. Gulf Coast frm Pt. Isabel, Tx. to Mobile Bay, Ala.

  • fred miller

    I guess this is what they meant by “Peak Oil”

    • Nexusfast123

      People mistakenly think of ‘peak oil’ being where oil is not available. All that happens after peak oil is that oil will get harder and more costly to extract and the price will rise. There is an excess of oil now due over investment in extraction and a massive slow down of the global economy.

      • fred miller

        Was meant for humor. Chill out.

  • I_P_Frehley

    So is the petro-dollar safe and sound still? Or will my pocket lint be an acceptable, alternative currency? Before anyone tries to “correct” me, this is all sarcasm – some of yous know that I love sarcasm, so CHEERS to you!

  • Nexusfast123

    Because of simultaneous over investment (excess supply) in exploration (tar sands, shale oil, deep sea extraction, etc) and a collapse in demand as the world economy slows. Many of the high cost oil extraction operations will go bust to the tune of billions. If the world economy ever grows again I would expect oil prices to rise over time. However, the global economy looks like it will collapse.

  • none

    Take a look at the map showing red dots where tankers anchored.
    It sort of looks like a large penis, giving us a sign from the president.

  • The Pukes that Were think they own you: and they will try to tax / charge / fee you to poverty BUT DO THIS with any public debt presentment :

    No Right of Title can be acquired by fraud.

    Notice to discharge debt against the account named herein. This offset command is made pursuant to remedy found in Public Law: “Chap 48, 48 Stat. 112”. Until the State Governments come out of suspension, by the Federal Government’s placing sufficient quantities of lawful silver and Gold-backed money back into general circulation or to fully back all notes in circulation pursuant to Art 1 sec 10, this notice is given, pursuant to the remedy for violations of the Coinage Act of 2 April 1792, 1 Statutes at Large 246 CHAPTER XVI, an Act establishing a Mint, and regulating the Coins of the United States, Section 19.

    Notice to agent/agency is notice to principal notice to Principal is notice to agent /agency.

    Notice: it is a violation of the law if you fail to discharge your invoice as commanded. This account is accepted for value and exempt from levy under uS constitution, and International treaty.

    UPDATE :

    reduce the pretend gov’t to a manageable level, about zero. then re-instate the Republic

    Fresh off the press:

    you promised all your property- which includes your thoughts, labor, body, stuff, ideas , etc to the STATE and you didn’t even know you did. You must rebut that presumption on the record before you can tell them to F&$^ off ! https://deanclifford.blogspot.com/ for details,

    they think they are the sole beneficiaries of ALL of your life/property