Why is the oil price going up if the world is awash with the stuff!?

Andrew64

Oil has gone above 70$ a barrel yet according to this article I found from last month they don't know where to keep the stuff! I was in Singapore last week and I saw at least 10 fully loaded tankers 'parked' offshore with my own eyes. My host said there were even more around the island. So are the spivs on the job like last summer??

http://www.telegraph.co.uk/finance/newsbysector/energy/5274121/Rising-reserves-of-unused-oil-put-strain-on-storage.html

harryhound

Yes Yes Yes

MyLastFiver

I think oil pricing is fairly efficient, which means that future, as well as current supply, is priced in. In reaction to the over-supply, OPEC have turned down production. This is already in the price.

Or I could be talking b0ll0cks...

1echidna

10 oil tankers, depending on the markets being served, may not represent many days consumption. Hardly stockpiles of very great significance.

ad9898_3

Why is the oil price going up if the world is awash with the stuff!?

Because it isn't, may I suggest some bedtime reading, start with.

The Party Is Over.... Oil, War and the Fate of Industrial Societies, By Richard Heinberg.

A good starter to get on with, puts most issues into easy to understand, layman's terms.

StevieJ

Andrew64 wrote: »

Oil has gone above 70$ a barrel yet according to this article I found from last month they don't know where to keep the stuff! I was in Singapore last week and I saw at least 10 fully loaded tankers 'parked' offshore with my own eyes. My host said there were even more around the island. So are the spivs on the job like last summer??

Merely Contangoing

mbga9pgf

I personally think the market has over-egged the recovery. In other words, the market is overpriced IMO. Not sure how high it could go, but as soon as we get the next batch of bad news which shatters any hope of an immediate recovery, I wouldnt be surprised to see $55 a barrel again. If we do, that will be the stage at which I will be getting in, along with other commodities. (platinum is going to be my key commodity, plus some copper in the form of ETF/ETCs).

Banking sector is yet to take another big hit but again, once we reach peak pesssimism, I will be getting in big style, HSBC, Barclays my key targets.

We have the last wave of the financial crisis approaching, once it is over, I think we will see some return of normality across the market. Slow recovery to 2012, faster recovery post 2015. We still have over 1 trillion in writedowns to come, from the peak of the market when RMBS products were getting REALLY exotic. once those products get washed out in the market, I think we can start to move away from the fear!

Timing will be everything though!

chucky

mbga9pgf wrote: »

We have the last wave of the financial crisis approaching, once it is over, I think we will see some return of normality across the market. Slow recovery to 2012, faster recovery post 2015. We still have over 1 trillion in writedowns to come, from the peak of the market when RMBS products were getting REALLY exotic. once those products get washed out in the market, I think we can start to move away from the fear!

i don't disagree with your other points but the RMBS issues are being put under control. most of the RMBS scare stories come from internet blogs with dubious statistics.

RMBS trade processing wil be centrally controlled and central couunterparty will be responsible for clearing/ all risk will then be managed by the central counterparty instead of by individual counterparties like CDS trades historically were. the Governments UK and US will provide guarantees against default.

The UK government unveiled its £50bn ABS guarantee scheme (ABSGS) on 22 April

UK prime RMBS 'well placed' to withstand recession
Following the FSA's announcement that it is stress testing bank's capital against the impact of a 50% peak-to-trough fall in house prices, Fitch says that triple-A prime UK pass-through RMBS are well placed to withstand a recession of an even greater magnitude.

In a special report published earlier in the year, the agency calculated the loss coverage for all vintages of UK prime pass-through RMBS across a variety of house price decline and mortgage default scenarios. "The report identified that triple-A prime UK pass-through RMBS of 2003-2007 vintage had a loss coverage of 9.2x when factored against the agency's central expectation of a 30% peak-to-trough UK house price decline and increasing defaults based on the performance of prime mortgages during the recession of the early 1990s," says Francesca Zwolinsky, director in Fitch's RMBS team.

"Notwithstanding, Fitch analysis showed that triple-A prime pass-through RMBS were well placed to withstand a significantly deeper recession, with the breakeven point being a scenario of 60% house prices declines in combination with a default rate of 30% - equivalent to approximately 4x-5x the default rates seen during last recession," Zwolinsky adds.

https://www.structuredcreditinvestor.com/default.asp?page=1100&subtype=notloggedon&Status=8&SID=20544&ISS=22269

mbga9pgf

chucky wrote: »

i don't disagree with your other points but the RMBS issues are being put under control. most of the RMBS scare stories come from internet blogs with dubious statistics.

RMBS trade processing wil be centrally controlled and central couunterparty will be responsible for clearing/ all risk will then be managed by the central counterparty instead of by individual counterparties like CDS trades historically were. the Governments UK and US will provide guarantees against default.




https://www.structuredcreditinvestor.com/default.asp?page=1100&subtype=notloggedon&Status=8&SID=20544&ISS=22269

I am not talking about UK RMBS. I am talking about the hundreds of billions of dollars worth of toxic waste that could potentially be on our books from the US. given, only a percentage of this RMBS will be on UK banks books, but I certainly dont think 50 billion will cover the bill from US vintage plus UK vintage RMBS. CDS was never a real big issue. There were enough covers to balance the large CDS bets. This doesnt account for the effect of any delayed recovery in the US. As a result of further banking instability.

RMBS however is a different issue. The Debts from these loans is increasing by the day and any rescue attempt has only pushed the inevitable into the future.


If the stress tests were so successful, why didnt the FSA publish the full results like the US did? Not a tin foil hat wearer, but even then I still think there is something fishy going on...

Fore example, did the stress test account for further overseas losses or purely UK losses? All well and good assuming british banks purely deal with british loans, but in this global economy, we should know this is pretty far from the truth.

Luxury Home Owners Atop Financial Time Bomb as 'Option Pay' Adjustable Rate Mortgages Reset




Millions Stretched Themselves Financially, Face Painful Adjustment, Default, Foreclosure - as Payments on Option Pay Adjustable Mortgages Reset.
NEWPORT BEACH, Calif., June 8 /PRNewswire/ -- Adjustable rate mortgages (Pay Option ARM's) were widely used in the hot housing market of recent years. Many households that took advantage of "Option Pay" loans or "teaser rate" loans - types of adjustable rate mortgages that holds down payments for an initial period or when the borrow selects a lower payment and defers interest and/or principle-- are facing resets of their interest rates that can cause monthly payments to balloon upward of 65% as reported by Credit Suisse (CS). "Home owners list major payment adjustments". For example, a 1 million dollar mortgage taken out 36 months ago with an initial payment of $2,528 per month could jump to just under $7,000 per month.
Sean Reynolds, Managing Director of Mortgage Loan Restructuring at the Law Offices of Joseph R. Manning, Jr., A Professional Law Corporation that focuses on loan modifications, says the handwriting is on the wall, adjustments will mean multitudes of borrowers will be unable to make the higher payments and may be forced to sell their homes, or worse, lose them to foreclosure. The firm cites statistics from 60 Minutes indicating that Option Pay Mortgages are the next wave of defaults that are now plaguing the Luxury Home Market. It's a predictable time bomb. Reset dates indicate as much as 70% of "Pay Option" ARM loans may default over the next three years. Many home owners are now defaulting on the teaser rates indicating the inevitable when these loans reset. According to CNBC 12% of all mortgages in the U.S. are not current.
Many home owners locked in rates as low as 1 percent in the early stages of their Pay Option Adjustable (ARM). In almost every case these mortgage payments will more than double once the rate is adjusted. And that spells tragic news for homeowners -- according to Credit Suisse (CS) a third of loans are deeply delinquent and resets will begin to accelerate next spring, rising from about $4 billion resetting in March 2010 to a peak of $14 billion in September 2011. About $500 billion of Pay Option ARM loans are outstanding, according to the bank.
Further compounding the problem is many types of adjustable rate mortgages (ARMs) or Pay Option (ARM's) carried heavy prepayment penalties that may make it difficult to refinance once the loan adjusts. Many of these loans also carried caps on the amount of interest that could be deferred causing a recast in as little as two years from the date the loan was funded.
"Consumers are in a real bind, especially in California and Florida," said Sean Reynolds, Managing Director of Mortgage Loan Restructuring at the Law Offices of Joseph R. Manning, Jr., A Professional Law Corporation that works to modify these types of loans.
Fortunately, Sean Reynolds has been specializing in financing solutions for over 18 years, and has worked with a broad range of clients that used Pay Option ARM to finance their homes. He is now assisting the same homeowners with loan modifications along with real estate attorney Joseph Manning.

http://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/www/story/06-08-2009/0005039799&EDATE=

article 4 days old.

History shows, governments, government agencies and central banks are notoriously bad at estimating losses in times of crisis. We are a way to go before we are out of the woods yet. Good news is, once we ARE out, I think the subsequent recovery is going to be pretty strong.

harryhound

Thanks for the link.
I too think there is some more unravelling to come in the domestic housing market here and in USA.

The BBC has been investigating the statistics from the council of mortgage lenders: Interesting figures of the number of "receiver of rents" actions that had been made to dispossess the Buy to Let landlord, behind on his mortgage.

Receiver of rent statistics are collected separately, but are excluded from the arrears and possessions figures. In the first quarter of 2009 there were 1,700 repossessions and 2,400 appointments of receivers of rent for buy-to-let mortgages in arrears.

I think we will be staggering on like this until the next general election is out of the way.

Don't forget the repossessions do not appear in the statistics from the Land Registry as they are not thought to be "willing seller to willing buyer".

Jonbvn

According to the Gruaniad, not as awash as originally thought! (Thanks to StevieJ for the link)

http://www.guardian.co.uk/business/feedarticle/8552858