Morgan Stanley Said to Seek Supertanker to Store Oil (Update1)

[Joanne98]

Source: Bloomberg



Jan. 15 (Bloomberg) -- Morgan Stanley is seeking a supertanker to store crude oil, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from higher prices later in the year, four shipbrokers said.

The bank, the second-biggest U.S. securities firm until becoming a bank-holding company in September, has yet to find a suitable vessel, said one of the brokers. The shipbrokers asked not to be identified because the information is private. Carlos Melville, a spokesman for Morgan Stanley in London, declined to comment, in an e-mail today.

“There’s a lot of people looking for storage,” Denis Petropoulos, London-based head of tankers at Braemar Shipping Services Plc, the world’s second-largest publicly traded shipbroker, said by phone.

Frontline Ltd., the world’s biggest owner of supertankers, yesterday said about 80 million barrels of crude oil are being stored in tankers, the most in 20 years. A purchaser could buy oil now, keep it for months at sea and fetch better prices by selling oil futures that are higher than the spot price.



Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aRo2aV9.jLhI&refer=home

---

So the rumor is true. They are storing crude in tankers to keep the price from collasping. So much for the so-called "free market".

[pattmarty]

1. FOR CHRISTS SAKE, FIX THE FUCKING COMMODITY SPECULATING!!!!!!

[florida08]

7. I agree

Oil is a natural resource..something that should be protected not gambled on. But oil is currency nowadays and a weapon to be wheeled. Seems the intentions of shedding our dependency on it may just be a boondoggle.

[avaistheone1]

24. I wonder if these banks and financial institutions are using our bailout $$ to pursue such purchases

Thus the banksters get to rape us twice.

[NOW tense]

2. How much does a super tanker cost $10 billion?

[Divernan]

18. They will most likely lease it, not buy it.

[Lucky Luciano]

3. You don't get it - this puts pressure on the price of oil

The more oil that is stored, the higher the supply which puts pressure on the prices.

It is a nobrainer to do what they are doing - I wish that I could! There is enormous contango in the market right now - contango is where long dated futures are priced higher than near term futures. Right now one year futures for oil are about $59 per barrel and near term it is $37. So if I can buy oil for $37 - and this is the key - take delivery and have a place to store it, then I can sell the 12 month contract for $59 and deliver it in 12 months for a $22 profit per barrel minus about $0.90 per month for storage, which would cut the profit to about $12 per barrel. If you can store 10MM barrels on a tanker, this trade makes $120MM. Excellent work...but it is very hard to secure a tanker, because EVERYONE wants to do this. It is such a no brainer.

[Trajan]

4. Morgan Stanley is Enron ...

We are tired of the market scouring opportunists and their apologists ...

There is PLENTY of oil in this world: Morgan Stanley has ONE strategy: run up the price ASAP ...

It is a lie to say they are INCREASING supply : They are simply moving it, and holding it ... they do NOT produce it ...

They are trying to MIDDLE MAN ...... Former Enron traders are behind this, and I say : FUCK THEM ! ....

[Lucky Luciano]

9. This will not run the price up.

They are not producing - true, but if I can buy something currently priced at $35 (down $2 since original post) and sell it for $58.50 12 months later conditional on my ability to store it for about $0.90 per month, then it will have no impact on the current prices. If more storage became available then the 12 month contract will fall in value as others try to exploit this incredible discrepancy. This huge gap between near term and 12 month futures tells you that storage capacity is hard to come by - in other words, the supply of oil is ENORMOUS! Also note that in one year, that which was sold for $58.50 may be trading at $35 come delivery time, but it is not relevant if someone sold at $58.50 a year before and had the oil to deliver.

As I said, I would do this in a heartbeat if I could secure a tanker!

[pattmarty]

11. You are keeping oil OFF the market at the current lower price.

YOU ARE DEAD WRONG!!! Either "fix" the definitely broken commodity speculation (and I mean ALL of it) or make it fucking illegal to speculate in what many consider "life/death" products. These people are shitbag opportunists of the fucking lowest order.

[Lucky Luciano]

12. The supplies are through the roof..in Cushing, OK

where the NYMEX oil is held for delivery is overflowing practically. There is nowhere to store anything anymore - it has to be stored on ships at this point.

[pattmarty]

13. Then why is the price going up again, now??? That is what causes.....

........recessions, bubbles, depressions, this finagling of the markets. There is no such thing as "free markets", if you have influence at a certain level in a certain industry, you can in essence "control" a particular market. I am not against Capitalism per se, what I want is a STRICTLY regulated Capitalism or "Democratic Socialism". If this happens you won't have these crazy fucking "swings" and people will still have the opportunity to "make money" on investments,, just not the crazy returns of the past (unregulated) years and I might add, not at the expense of everyone else in the world.

[Lucky Luciano]

14. What are you talking about?

Oil is down $2 today and is at a new low for the Feb contract. It did have that big jump to $50 last week when the Gaza situation worsened and the Saudis talked about cutting output further...but that did not last as economic numbers came out and supply numbers came out that sent the price lower.

Refined products (ie gasoline, heating oil, etc) have not come in as much on the latest downturn in oil because refining margins (as measured by crack spreads - google "crack spreads") have been under severe pressure - they were negative before the new year, but have improved since then. Given the improved refining margins, I would expect refiners to make more gasoline which should put pressure on gasoline prices again.

[pattmarty]

16. What am I talking about????? Go out for a drive in your (any) town......

........and look at pump prices. In the last 2 fucking weeks gas went up here (in Ark.) 20cents/gal. According to your explanation (supply & demand, I guess is what u are talking about) it should have fucking dropped. So much for "market forces". What I am saying is that ALL the markets are controlled, some more so than others. Why are these "markets" so complex? Why can't a HS educated average intelligence individual figure out so called "simple" banking/lending transactions? Most half way intelligent people now are figuring it out. It's because THESE INSTITUTIONS DON'T WANT US TO UNDERSTAND IT. This country is heading toward being the shithole of the northern hemisphere. We don't have a manufacturing base anymore, and the only thing we will have left will be the "financial capital of the world", which means an extreme gap in wealth between the haves (investor class) and the have nots (all the rest of us). You may have knowledge of some of the "tricks" of Wall st/banking, but it seems you don't have a fucking clue on how the rest of this country survives.

[Lugnut]

19. Gas prices at the pump are going up here.

Regular gas was $1.799 per gal yesterday and $1.899 today at one local station. I'd like somebody to explain to me how that works when the crude price is dropping like a rock.

[anigbrowl]

21. It isn't. It's going down.

The price of gas trails the price of oil by several weeks. And democratic socialism doesn't eliminate market swings or recessions, even though I too am in favor of it. Chill out, maybe cut your coffee intake.

[Trajan]

23. I am GLAD he is drinking plenty of coffee ...

FUCK the oil barons, they are RIP OFFS and their DU apologists can piss up a fucking rope as far as I am concerned ...

Price gouging and oil speculation has much to do with our current economic malaise : The extreme increases in fuel costs have forced MANY producers to increase their prices, and have royally FUCKED working families out of their hard earned wages ....

The oil barons can go straight to hell, and their DU supporters can go along with them ...

Cut your coffee intake ? .... abusive ad hominem .... Pure fucking poppycock ...

[pattmarty]

30. I'll drink (THREE cups of coffee) to that!!!!!! Yeah, I don't know if..........

..........some of these folks work on Wall st or in the banking industry and are just sensitive about their livelihoods which I respect. Some are just uninformed about the way our system works. It's gamed to reward the people with means first and foremost. Like I stated earlier, I don't have a inherent problem with Capitalism, but It MUST BE REGULATED. We have laws for humans to keep order and that's what regulations are supposed to be for regarding "business". We dropped regulations, didn't enforce others (like anti-trust)and downright passed laws to do away with other protections. So, yeah, I'll have another cup of coffee and by the way, better check up on your 401 K's.

[Hannah Bell]

25. if storage is tight, that would mean there's plenty of excess supply, is what you're

saying? & the higher futures price is the premium for the tightness of storage (not tightness of oil supply)?

[Lucky Luciano]

29. You nailed it!

The supply points have record amounts of oil. The expense of storage is also pushing longer term prices out significantly as well as you stated. Close to contract expiration (eg today), the price plunges for the contract about to expire for those who cannot take delivery are forced to sell...but the next month's contract will not move in tandem and the spread goes even wider. Next month's contract is trading around $43.71 and the contract that expires today is trading around $35.79. That is a monster spread that exploded in the last few days. This happened last month as well.

[pattmarty]

31. As a wise man once said; "regulate it".

[NOW tense]

5. Are they using their bailout money for this?

[Lucky Luciano]

8. I encourage them to use their bailout money for this given that it makes

money. We do not want them to do things that are not profitable.

[Hannah Bell]

26. it doesn't "make" money. it transfers money that already exists from one person's

pocket to another person's.

production "makes" money.

finance "transfers" money.

[Lucky Luciano]

28. Semantics, but the point is that given how much the taxpayers

have invested, profitable trades will help the TARP recover what was invested. The TARP was invested poorly since the gov't overpaid for what they received. I liked the recent article pointing out how Warren Buffet got a much better deal than the gov't did.

[Joanne98]

15. Good point!

:nuke:

[lumberjack_jeff]

17. It also affects the current price of oil

If the tankers are being used for offshore storage, then less transportation capacity is available now.

It is not only a strategy to capitalize on higher prices later, it's a strategy to create higher prices now.

[OregonBlue]

6. K & R. When will our "leaders" do something about this.

[bluesmail]

10. Does BigOil own BigFinance or is it the other way around? Does it even matter at

this point? Manipulation.

[Hawkowl]

20. Covering bad speculation bets

It sounds like they have hedged oil (with a speculative futures contract) at some ungodly high rate and rather than take the loss, they are going to try and take delivery of the commodity and hold it till the price goes up.

[Lucky Luciano]

22. The point is that you do not have to hold the oil until the price goes up.

The traders in this case can sell the one year contract for $58 and lock in the price and hold the oil until the contract expires and they must deliver. It is a perfectly hedged position and almost totally riskless - probably the only risk is execution - e.g. some schmuck did not insure the tanker properly and it blows up or something like that.

[The Second Stone]

27. How about for 5 percent of the oil we let them use

The national strategic reserve for up to a year.

[Lucky Luciano]

32. If you mean 5% per year, then SOLD! About 1.25% to 1.5% would be inline

with the cost of storage on a tanker.