"Having exposed the world yesterday to the 2-mile long line of tankers-full'o'crude heading from Iraq to the US, several weeks after reporting that China has run out of oil storage spacewe can now confirm that the global crude "in transit" glut is becoming gargantuan and is starting to have adverse consequences on the price of oil.
While the crude oil tanker backlog in Houston reaches an almost unprecedented 39 (with combined capacity of 28.4 million barrels), as The FT reports that from China to the Gulf of Mexico, the growing flotilla of stationary supertankers is evidence that the oil price crash may still have further to run, as more than 100m barrels of crude oil and heavy fuels are being held on ships at sea (as the year-long supply glut fills up available storage on land). The storage problems are so severe in fact, that traders asking ships to go slow, and that is where we seesomething very strange occurring off the coast near Galveston, TX.
FT reports that "the amount of oil at sea is at least double the levels of earlier this year and is equivalent to more than a day of global oil supply. The numbers of vessels has been compiled by the Financial Times from satellite tracking data and industry sources."
The storage glut is unprecedented"
"This looks bad. And I would make the obvious conclusions. However, just to be sure, not being experienced in this, this kind of storage fleet might be typical of seasonal changes? I would doubt that although one would want to know that kind of background to be sure."
And another commentator;"Meanwhile, the US government is scheduled to sell nearly 30 million barrels from the Strategic Petroleum Reserve, this to bring in revenue to pay for spending elsewhere in the newly passed two year budget deal. Slight problem. The price they anticipate getting is $84.00 per barrel.'
To which I replied;
Noting that the harm from China's woes has been worse than expected, the International Monetary Fund has downgraded its outlook for worldwide growth this year to 3.1 percent, which would be the slowest since the recession year of 2009.
Citigroup has warned of a possible new worldwide recession caused by China's slump. So has the Organization for Economic Cooperation and Development.
China has an outsize effect on the world because it accounted for 30 percent of global growth last year, up from just 13 percent a decade earlier, according to the World Bank. The impact is seen in Standard & Poor's GSCI commodities index: The index, reflecting prices of 24 items, including crude oil, copper and cattle, shrank 19 percent from July through September."