Last Summer, we were reminded over and over how we were running out of oil. Now we find ourselves in the awkward situation of running out of places to store the stuff. Its pretty clear that the price of oil is no longer subject to the decisions of the oil producing countries to cut production. They are now in the unusual position of being powerless, pushing on strings like central bankers.
Over the last several years, demand for paper oil (naked oil futures) was far greater than for the physical stuff, and now that the paper world has been unravelled, and the paper money (leverage) that supported it is being retired, the one problem at least for now has been that there have been a great deal more sellers of the paper oil than buyers.
At the end of 2008, the IEA reported that current inventories of crude oil, gasoline and distillate fuels were well above their long term averages. Running out of storage for oil is great for the tank and tanker business, but a bearish development for oil, despite the recent run-up.
Shipping prices collapsed as trade slowed last year, but they are now rising sharply as traders at the likes of Citigroup and BP fill tankers and moor them off Scotland. Thursday, daily charter rates for tankers shipping crude from the Middle East to the U.S. jumped 45%, according to London's Baltic Exchange.
If you really don't want to get your hands dirty, you could just buy tanker futures. Despite the latest jump, they are roughly a third of where they were six months ago and will probably continue rising as surplus oil looks for a home.
Did we really go that rapidly from running out of oil to running out of places to stockpile it?
