Wednesday, June 17, 2009

oil shennanigans...,

Fist tap to Dale for providing this "how the world works" item.

Hellenic Shipping News | A fifth of supertankers being used to store oil are scheduled to deliver their cargoes, according to ICAP Shipping, a unit of ICAP Plc, the world’s biggest broker of deals between banks. A so-called notice of redelivery was issued for seven of 33 supertankers storing crude, Simon Chattrabhuti, a London-based analyst at ICAP, said by e-mail today. There “may well be others storing or that have given notice,” he said. Two new carriers were hired to store oil, the analyst said.

The amount of oil stored at sea climbed to the highest in at least two decades because traders could buy the commodity, sit on it and take advantage of higher prices in the future, according to Frontline Ltd., the biggest supertanker operator. Hamilton, Bermuda-based Frontline on May 28 estimated as many as 60 supertankers were storing oil.

The storage trade boosted demand for vessels as oil supply and demand contracted. BP Plc, Citigroup Inc.’s Phibro LLC, Royal Dutch Shell Plc and Koch Industries Ltd. were among the companies that sought tankers to store cargoes. Most of the crude oil is being stored in the Gulf of Mexico and in Europe, according to E.A. Gibson Shipbrokers Ltd.

The premium for Brent crude for delivery in a month’s time compared with immediate supply has shrunk to 72 cents a barrel from as much as $1.16 a barrel a month ago. The spread is profitable so long as it exceeds storage and finance costs.

Oil Products
Traders are now seeking to store oil products. JPMorgan Chase & Co. booked the newly built supertanker Front Queen to store 2 million barrels of heating oil off the coast of Malta, and several other traders are seeking similar deals, Athens- based Optima Shipbrokers said June 2.

A supertanker is capable of storing about 2 million barrels of crude, more than France consumes every day. Crude oil has advanced 55 percent in New York trading this year, rebounding from last year’s 54 percent slump.

Oil-shipping costs have climbed in recent days, further reducing potential profit from storage. The industry-benchmark route, based on Saudi Arabian shipments to Japan, has gained 28 percent since May 28.

The route rose 2.5 percent to 36.58 Worldscale points today, according to the Baltic Exchange in London. Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes.

ICAP Shipping arranges oil-tanker rentals and also has a commodities ship-broking team.