Bailout Banks hoarding Crude Oil (Again)

[kenny]

Morgan Stanley who recently converting from a Investment Bank to a Bank holding company so they could recieve a $10,000,000,000 bailout package is seeking a Supertanker to Store Oil..

By Alaric Nightingale and Todd Zeranski

Jan. 15 (Bloomberg) -- Morgan Stanley is seeking a supertanker to store crude oil, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from higher prices later in the year, four shipbrokers said.

The bank has yet to find a suitable vessel, said one of the brokers, all of whom asked not to be identified because the information is private. Carlos Melville, a spokesman for Morgan Stanley in London, declined to comment.

“There’s a lot of people looking for storage,” Denis Petropoulos, London-based head of tankers at Braemar Shipping Services Plc, the world’s second-largest publicly traded shipbroker, said by phone.

Banks and commodity traders are seeking new ways to make money after the Standard & Poor’s 500 Index fell by the most since 1937 last year and crude oil prices dropped more than $100 a barrel from their peak. Companies including Koch Industries Inc. and BP Plc are hoarding enough crude at sea to supply the world for almost a day.

Frontline Ltd., the world’s biggest owner of supertankers, yesterday said about 80 million barrels of crude oil are being stored in tankers, the most in 20 years. A purchaser could buy oil now, keep it for months at sea and fetch better prices by selling oil futures that are higher than the spot price.

The so-called contango pricing structure has been caused by excess oil supply as demand slows and speculation that output cuts by the Organization of Petroleum Exporting Countries will reduce the glut later this year.

Tanks Filling Up

Slumping U.S. oil demand means tanks are filling at Cushing, Oklahoma, the pricing point for the benchmark West Texas Intermediate grade. Futures contracts indicate WTI will gain an average of about $2.15 a barrel a month until December.

Supertanker storage deals are being done at about $75,000 a day, according to Petropoulos. Assuming the ship has a 2 million- barrel cargo, that works out at $1.12 a barrel over a 30-day period. Traders also need to pay financing and insurance costs.

Phibro LLC, Citigroup’s commodities trading unit, has the carrier Ice Transporter stationed off north Scotland, according to people familiar with the matter. Shell, Europe’s largest oil company, has booked the supertankers Leander and Eliza.

Oil traders hired two more ships to store North Sea crude off Scotland’s Orkney Islands. The 2 million-barrel supertanker Luxembourg is scheduled to arrive at Scapa Flow on Jan. 21 while the 600,000-barrel transporter Atlantic Galaxy is already there, said Captain William Sclater, operations manager at the port.

Oil Grades

The easiest types of oil to buy for the trade are likely to be either WTI or the North Sea grades Brent, Forties, Oseberg or Ekofisk. That’s because they are the ones used to settle the most-traded futures contracts.

Other oils, such as those from the Middle East and Africa, are usually bought and sold at prices related to the main European and U.S. grades. Because those prices fluctuate, it means traders assume an extra risk by hoarding them.

Morgan Stanley owns half of Heidmar Inc., which operates smaller oil tankers. Heidmar hasn’t had demand for its tankers to store oil, probably because they aren’t the largest supertankers that investors need for the contango trade, Tim Brennan, the company’s chief executive officer, said by phone Jan. 8.

http://www.bloomberg.com/apps/news?p...IkY&refer=home

[MeatPounder]

Actually that is very sound business.
Rather than simply playing the futures (as I do) and hoping like hell you never have to take or provide delivery, they are actually looking to stock up at a good price as a hedge against the inevitable rise in price again.

Not much difference in actuality as a consumer seeing soup on sale for 4 cans for a buck and loading their pantries.

It isn't hoarding, as that would necessitate a high demand with them hoarding their supply to drive up (manipulate) prices.

With all the storage at full capacity due to the lower demand it makes sense for them to find some short term storage, and hedging that the probable inevitable upswing in value of the oil they can buy at todays prices will far outweigh the price of the short term storage...a pretty good hedge IMHO

Again not much different then what I did about 4 yrs ago. A national rug manufacturer was going out of business and they had mixed pallates of their rugs (2x4 up to 12x15) on bulk auction for 500 bucks a pallette (275 a pallette for bulk of 8 or more)
I went out and rented dry storage at a locale warehouse for 100 bucks a month and bought 20 pallettes with another 10% off for just 5k....broke them down, sorted them, and fed them for two years to swaps and consignments...after paying 2200 storage, about 4k in side labor over that time, I realized about 42k

I had a great price if I could store it, knowing the resale would be astronomical down the road....so I created a hedge by obtaining storage for the bulk...same thing with what they are doing really

[kenny]

Originally Posted by MeatPounder

Actually that is very sound business.
Rather than simply playing the futures (as I do) and hoping like hell you never have to take or provide delivery, they are actually looking to stock up at a good price as a hedge against the inevitable rise in price again.

Not much difference in actuality as a consumer seeing soup on sale for 4 cans for a buck and loading their pantries.

It isn't hoarding, as that would necessitate a high demand with them hoarding their supply to drive up (manipulate) prices.

With all the storage at full capacity due to the lower demand it makes sense for them to find some short term storage, and hedging that the probable inevitable upswing in value of the oil they can buy at todays prices will far outweigh the price of the short term storage...a pretty good hedge IMHO

Again not much different then what I did about 4 yrs ago. A national rug manufacturer was going out of business and they had mixed pallates of their rugs (2x4 up to 12x15) on bulk auction for 500 bucks a pallette (275 a pallette for bulk of 8 or more)
I went out and rented dry storage at a locale warehouse for 100 bucks a month and bought 20 pallettes with another 10% off for just 5k....broke them down, sorted them, and fed them for two years to swaps and consignments...after paying 2200 storage, about 4k in side labor over that time, I realized about 42k

I had a great price if I could store it, knowing the resale would be astronomical down the road....so I created a hedge by obtaining storage for the bulk...same thing with what they are doing really

How do you think prices got to where they were in July $147 per barrel?

It was a speculative bubble that popped.. sound investment?

Yes, at the expense of everybody else..

[Useless]

Originally Posted by sleeper

Yes, at the expense of everybody else..

Well yeah, that's how a business turns a profit: At the expense of everybody else.

[MeatPounder]

Speculative bubble?
Yes some of it was that, a lot of it (the majority) was all the messes in the middle east, a good portion was a huge increase in demand due to US wasteful over consumption and huge increased demand from emerging markets (primarily china and india), to a minor degree all the turmoil with supply from Africa and manipulation from mid level producers such as chavez and putin, and of course good old fashion gouging by big oil with a very very friendly administration.....the moon not only aligned with mars, but jupiter, venus, and saturn as well.

[LD]

Originally Posted by MeatPounder

Actually that is very sound business.
Rather than simply playing the futures (as I do) and hoping like hell you never have to take or provide delivery, they are actually looking to stock up at a good price as a hedge against the inevitable rise in price again.

Of course the 10 billion from the taxpayer funds probably reduces the risk of loss a bit, you think...?

[kenny]

Originally Posted by MeatPounder

Speculative bubble?
Yes some of it was that, a lot of it (the majority) was all the messes in the middle east, a good portion was a huge increase in demand due to US wasteful over consumption and huge increased demand from emerging markets (primarily china and india), to a minor degree all the turmoil with supply from Africa and manipulation from mid level producers such as chavez and putin, and of course good old fashion gouging by big oil with a very very friendly administration.....the moon not only aligned with mars, but jupiter, venus, and saturn as well.

I'm sure the fact that 70% of the money in oil futures was speculative didn't play a role..

In fact it has already been proven that the dramatic drop in oil prices coincides with a large withdraw of speculative positions.

I'll further address this matter with facts at a later time prehaps tomorrow. Right now I'm in a hurry.

[kenny]

Originally Posted by Useless Warrior

Well yeah, that's how a business turns a profit: At the expense of everybody else.

There is a huge difference in profiting from a service and creating an artificial shortage be it via bidding up paper or hoarding the physical commodity to drive the price up 300%.

Of course I hope this is within the scope of your ethics. I trust you were being sarcastic.

[Useless]

Originally Posted by sleeper

Of course I hope this is within the scope of your ethics. I trust you were being sarcastic.

I've been hoarding porn for years.

[Toby]

Originally Posted by MeatPounder

...a good portion was a huge increase in demand due to US wasteful over consumption and huge increased demand from emerging markets...

Actually, that's not correct. During the 18 month period up to last August crude oil prices increased from about $55/barrel to over $130/barrel. During that same time period world demand actually dropped slightly while supply increased slightly.

[kenny]

Originally Posted by Useless Warrior

I've been hoarding porn for years.

You've been saturating the market with free porn for years.. just like me

You aren't foolin me