Oil hoarding on ships.....

WTF?_2

Interesting article in Bloomberg:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZSSMtC6ynNY

Jan. 8 (Bloomberg) -- Citigroup Inc.’s commodities-trading unit followed BP Plc and Royal Dutch Shell Plc in anchoring a full oil tanker offshore northern Scotland to profit from higher prices later this year.

Phibro LLC is keeping up to 1 million barrels of the North Sea Forties grade of oil in the Ice Transporter near the Orkney Islands, according to people familiar with the matter. Phibro is seeking to make money from contango, a market where buyers pay more for delivery later in the year than they do today.

Citigroup’s trade shows how the contango, caused by an inventory surplus onshore, is attracting more traders to hoard oil. Brent crude for January 2010 settlement sells for $58.97 a barrel, 30 percent above the contract for next month. Stockpiles surged as recession reduced demand, while forward prices remain higher on forecasts OPEC cuts will start to curb excess supply.

Looks like the outlook is for higher prices in the not too distant future.....

StevieJ

Yes, that is why the share prices for Shell and BP are holding up, the share price is always a good leading indicator.
But anyway:

http://uk.finance.yahoo.com/q/cq?d=v1&s=%40OIL

Generali

StevieJ wrote: »

Yes, that is why the like share price for Shell and BP are holding up, the share price is always a good leading indicator.
Buy anyway:

http://uk.finance.yahoo.com/q/cq?d=v1&s=%40OIL

Aren't they also holding up as investors didn't believe that an oil price of $150/bbl would last indefinitely?

If the oil is sitting there waiting to be delivered in physical form but with no use for it then that will push down the price in future when it is delivered.

My guess is that the future price reflects fears about Russian supplies in light of the gas fiasco.

socrates

I have a relative who works in the oil industry in Canada - he told me that America put pressure on them about prices and wanted them to be kept high during the height of the war in Iraq- I wonder why ....

StevieJ

Generali wrote: »

Aren't they also holding up as investors didn't believe that an oil price of $150/bbl would last indefinitely?

If the oil is sitting there waiting to be delivered in physical form but with no use for it then that will push down the price in future when it is delivered.

My guess is that the future price reflects fears about Russian supplies in light of the gas fiasco.

I think the future price reflects back to 'business as usual' as the recession starts to ease. You are correct that the price extremes have not been reflected in the share price, but I think the current volatility in the oil price reflects the Russia and Gaza situation.

StevieJ

socrates wrote: »

I have a relative who works in the oil industry in Canada - he told me that America put pressure on them about prices and wanted them to be kept high during the height of the war in Iraq- I wonder why ....

The oil in Canada is very expensive to produce anyway $70 ? so they need a high oil price.

butterfly72

socrates wrote: »

I have a relative who works in the oil industry in Canada - he told me that America put pressure on them about prices and wanted them to be kept high during the height of the war in Iraq- I wonder why ....

I also have a relative who worked in the industry until recently and tells me that america have been stock piling oil for years. The whole industry seems dodgy to me.

purch

My guess is that the future price reflects fears about Russian supplies in light of the gas fiasco

Which is probably 99% of the reasons behind why this dispute suddenly happened.

Russia needs Oil to be above $70 bbl or they lose out.

Jennifer_Jane

In South Africa, they used to (during their darkest years), hoard oil. They had sufficient for three years, I think, and oil was considered to be a 'strategic resource'. (Well, obviously.)

And, rather like Gordon Brown selling off the UK Gold during the book (ie cheapest) times, I think South Africa sold off their oil stocks during their boom times, too.

Jen
x

Count_Dante

Hoarding oil is a good plan when the price is low because when the price rises the oil is sold, which reduces the price. The overall effect is to stabilise the price.

mummytofour

I guess this means that petrol will be going up soon? A lady I know in the USA says the petrol has started to go up over there already.