My buddy in Houston sent me an aerial photo of the Gulf of Mexico - incredible amount of very large crude carriers (VLCCs) of 20 to 25 oil supertankers have been chartered for floating storage over the last few weeks – equivalent to something in the region of 50 million barrels of oil. The host of very large crude carriers (VLCCs) are camped out at various locations across the globe including: the U.S. Gulf of Mexico, the North Sea, in India and also in Malaysia. Royal Dutch Shell, BP and Koch Industries are among the companies thought to be stock-piling reserves in hope of a Christmas bonus, if OPEC price cuts send prices rising once again. More sensational – yet unconfirmed – reports have estimated that there are in the region of 300 vessels floating, like sitting ducks, outside of the port of Fujairah in the United Arab Emirates alone. Olivier Jakob, Managing Director of Petromatrix GmbH, in Switzerland, said: “For OPEC there’s too much oil in storage and to have it floating is also more problematic.“OPEC cutting production is not good for shipowners because you will have less vessels being used,” added Mr. Jakob.As a result the International Energy Agency (IEA) stated in its widely-read monthly oil market report: “The increase in floating storage has developed as a result of abundant prompt supplies having a hard time finding customers, further supported by lower freight rates.”
Two things come to mind - (1) I hope Al Queda doesn't decide to use these sitting ducks for target practice. (2) Only 50% of oil is used for automobile gas and jet fuel. The other 50% is used for plastics, fertalizers and chemicals. As long as this world economy stays in the duldrums with no one buying anything, the oil surplus will continue.
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