Contango is back

[ogarbitrage]

Iraq offers Asian buyers largest discount on its oil since 2003

OPEC oil producers compete for Asian market share

 

[FCXoptions]

http://www.reuters.com/article/2015...-storage-limit-analysis-idUSKBN0LH0BG20150213

 

[ogarbitrage]

Is the market projecting a slack demand for storage? As we might be moving higher from here? Or maybe the breath before the plunge?

Not certain on how to interpret...

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I believe the spreads in the front are indicating on-land storage is nearing capacity and the spillover into water-based storage is beginning to hasten (see bolded in "Spot storage").

Spot storage

Floating storage plays in the VLCC arena could expand to the spot market, Paddy Rodgers says.

The Euronav chief executive says enquiries are emerging at the end of spot contracts for short storage deals as traders look for ways to exploit contango in the oil price.

Rodgers explains the enquiries have suggested adding between 30 and 90 days of time charter coverage at the end of spot fixtures.

The additional storage play comes on top of the 40 or so VLCCs fixed on time charters this year, many with storage options, according to the executive's estimates.

Rodgers says the increased level of interest in VLCC period deals is in part because charterers are nervous amid the knowledge a "multi-year recovery" will take place over the next 12 to 24 months.

He told investors on Euronav’s fourth quarter conference call the removal of period ships from the market is just one reason for his optimism about the tanker market.

Rodgers argued 12 VLCCs set for delivery over the next 24 months had uncertain ownership, which raised questions about potential slippage and non-delivery.

He also dismissed fears about owners increasing vessel speeds on ballast legs in an improving market.

Owners have learned their lesson over the past five years, he says, and will preserve eco savings until their ships had been fixed before accelerating to arrive on time.

Storage Industry Benefits From Oil Contango

Marco Dunand of oil trader Mercuria told Reuters he believes that there will be about 400 million barrels of oil worth roughly $22 billion stored onshore and offshore in massive oil tankers by the end of the first quarter of 2015.

US gasoline market players grapple with wide futures spreads

The bid in crude at the moment is driven by its own contango structure and strong cracks which are in turn driven by steep global contangos in gasoline and distillate curves. Light African barrels are supported by Libyan issues (again) and strong naphtha cracks.

 

[ogarbitrage]

Storage dearth may drive oil prices to $30

 

[ogarbitrage]

Chinese trader Unipec sells crude stored on megatanker as prices rise -sources

Unipec, the marketing arm of Chinese oil giant Sinopec , sold 2 million barrels of Nigerian Qua Iboe crude for delivery in July to Indian refiner Hindustan Petroleum Corp , three trading sources said. They declined to be identified as they were not authorised to speak with media.

Unipec chartered the vessel last September, just as Brent crude fell below $100 a barrel, the beginning of a dramatic rout in prices.

Reuters ship-tracking data suggests it has stored crude since January 2015.

More than 30 tankers were put on long-term charter early this year to trade contango, although most were later used for regular deliveries as prices recovered.

"Everyone is trying to exit from storage," said a trader with a large trading house.

Looks like Unipec hedged the cargo with the Jan/July Brent or Dubai spreads.

 

[xandman]

I am avoiding LNG and deep water rig equities like grim death.

TK ($36.85) just went down the toilet while FRO is still in the $3s

 

[FCXoptions]

Any clue what has been causing the big selloff in it?

 

[xandman]

No clue. Oil supply chain is too complex unless your plugged into Platts.

My economic thesis was that there was no place to store all that oil and the shipping industry has already bottomed in valuation from the Greek/Industry troubles. Simple.

I will become an "investor" in the next recession. Old school Graham and Dodd stuff, but Oil Majors and Refining only.

 

[ogarbitrage]

Alittle late on the commentary, but VLCC freight rates fell in late July after Nigeria banned ~18% of the global fleet from entering its waters. A sudden surge in available supply has the effect one would expect on prices. While they gave no official reason for the ban, I suspect it had to do with many of the trading companies altering the destinations for the cargos after leaving Nigerian waters. Nigerian crude oil taxes are subject to destination clauses that vary in cost depending on the final destination of the cargo, so it appears NNPC wised up to and got tired of the mid-voyage route changes.

 

[xandman]

How about "grim death" LNG? Cheniere's Sabine Pass Terminal Trains 1-4 will be complete in 4Q 2015.

Given the valuations, there seem to be some incredibly high expectations. Carl Icahn has taken an 8% stake. I think LNG may have found a floor in it's stock price.