12 Empty Supertankers Tell Us Everything We Need To Know About The Oil Market
by Tyler Durden
ZeroHedge.com
Sun, 02/24/2019
As the US battles with its OPEC+ rivals over the direction of global oil prices (Trump wants to keep oil prices subdued, while Saudi Arabia and Russia, reeling from years of prices too low to balance their budgets, are desperately hoping to push them higher with another round of production cuts), 12 supertankers sailing across the Atlantic can tell us a lot about the changing supply dynamics in the global oil market.
The tankers have been traveling a route spanning thousands of miles with no cargo other than some seawater needed for ballast. Of course, in normal times, the ships would be filled with heavy, high sulfur Middle East oil for delivery to refineries in places like Houston or New Orleans.
But these aren’t “normal” times. Following the OPE+ agreement to cut 1.5 mb/d, the ships are sailing cargo-less – forgoing profits on half of their journey – just so they can pick up the light crude that US shale producers – which briefly turned the US into a net-exporter of oil for the first time late last year – have been relentlessly pumping, according to Bloomberg.
That’s quite a sacrifice for the owners of the ships, which are traveling 21,000 with nothing to show for it.
The 12 vessels are making voyages of as much as 21,000 miles direct from Asia, all the way around South Africa, holding nothing but seawater for stability because Middle East producers are restricting supplies. Still, America’s booming volumes of light crude must still be exported, and there aren’t enough supertankers in the Atlantic Ocean for the job. So they’re coming empty.
“What’s driving this is a U.S. oil market that’s looking relatively bearish with domestic production estimates trending higher, and persistent crude oil builds we have seen for the last few weeks,” said Warren Patterson, head of commodities strategy at ING Bank NV in Amsterdam. “At the same time, OPEC cuts are supporting international grades like Brent, creating an export incentive.”
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