Tag Archives: Oil Prices

Epic Oil Glut Sparks Super Tanker ‘Traffic Jams’ at Sea

Graphic for News Item: Epic Oil Glut Sparks Super Tanker 'Traffic Jams' at Sea

It’s no secret that a massive supply glut has caused global oil prices to crash this year. Ferocious production from OPEC and near-record U.S. output is adding to sky-high oil inventories around the world.

But what’s less widely known is that the oversupply problem has gotten so bad that oil tankers waiting to be offloaded are piling up off the U.S. Gulf Coast because there’s nowhere to put the crude.

So-called “floating storage” of crude oil soared to nearly triple the normal level last week, according to ClipperData, which tracks global shipments of crude.

It’s a “super tanker traffic jam,” said Matt Smith, director of commodity research at ClipperData.

Not Enough Buyers

Smith first noticed the maritime congestion popping up a month ago off the coast of Singapore. That was alarming because Asia accounts for one-third of global oil demand.

“It was kind of strange to see. The ships didn’t have any buyers,” he said.

And then ClipperData discovered a similar phenomenon off China and even the Arabian Gulf.

“There just appears to be more oil than can be dealt with. They haven’t got anywhere to put it,” said Smith.

$2 Gas Coming Soon

That, of course, is great news for American drivers. National average gasoline prices have dropped to $2.10 a barrel, down by 75 cents from a year ago, according to AAA. U.S. prices could slip below $2 by Christmas nationwide for the first time since 2009, AAA said.

Oil prices are also heading south. The latest evidence of the lingering glut helped cause oil prices last week to briefly tumble below $40 a barrel for the first time since late August. Over the past year and a half, oil has lost more than 60% of its value, an epic crash that has thrown the energy industry into disarray.

The problem is OPEC producers, led by Saudi Arabia and Iraq, are pumping oil aggressively despite depressed prices. U.S. output is also near record highs, though it has slowed a bit.

Inventories As High As They’ve Ever Been

There is a “massive cushion” of crude oil around the world, with global stockpiles sitting at a record 3 billion barrels, according to the International Energy Agency.

A stunning 487 million barrels of crude is sitting in U.S. inventories, levels unseen at this time of the year in the last 80 years, according to the U.S. Energy Information Administration.

“We’ve been through a low-price environment all year — yet the world is still awash with crude here,” said Smith.

Source: Oil & Gas People

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This Chart Makes It Look Like It’s All Over In Venezuela

Supporter of Venezuela’s late President Hugo Chavez holds a doll of him as she stands outside a military academy where the funeral ceremony for Chavez is held, in Caracas March 8, 2013.  Article source: Business Insider

Collapsing oil prices have a turned a difficult economic situation into a dire one. Oil exports brought in 60% of the country’s revenue.

And now, according the UBS, Venezuela has an 82% chance of collapsing within a year. The country will no longer be able to make payments to foreign investors without oil revenue as it was.

Economist Rafael del Fuente wrote in a recent note:

By the government’s own recognition, the economy contracted by 4% in the first three quarters of 2014;
inflation is running at close to 65%; the fiscal deficit has shot up above 15% of GDP by most estimates; and the black market exchange rate is trading at VEF180 to the dollar, almost 30 times higher than the official Cencoex rate.

Wall Street is watching and waiting, which is why the spread on Venezuela’s 5 year credit default swap — basically debt insurance — has spiked. You just don’t see charts like this everyday people.

Meanwhile, as foreign investors wait for the day Venezuela calls them and says, ‘sorry, we don’t have the cash’, ordinary Venezuelans suffer. The government cut them loose a while ago, doing nothing to curb rampant inflation (at 60%) and shortages of goods and food. People wait in line for days to enter grocery stores with empty shelves.

venezuelan cds skitch

On hearing this, the Venezuelan Minister of Food said — “I’ve been in tons of lines. I went to my favorite sports team’s game this weekend, and…I went to go buy an arepa [Venezuelan sandwich] … and I had to wait in line there, too.”