From Bloomberg:
A 26-mile-long line of idled oil tankers, enough to blockade the English Channel, may signal a 25 percent slump in freight rates next year.
The ships will unload 26 percent of the crude and oil products they are storing in six months, adding to vessel supply and pushing rates for supertankers down to an average of $30,000 a day next year, compared with $40,212 now, according to the median estimate in a Bloomberg News survey of 15 analysts, traders and shipbrokers.
That’s below what Frontline Ltd., the biggest operator of the ships, says it needs to break even.
Traders booked a record number of ships for storage this year, seeking to profit from longer-dated energy futures trading at a premium to contracts for immediate delivery, according to SSY Consultancy & Research Ltd., a unit of the world’s second- largest shipbroker. Ships taken out of that trade would return to compete for cargoes just as deliveries from shipyards’ largest-ever order book swell the global fleet.
“The tanker market has been defying gravity,” said Martin Stopford, a London-based director at Clarkson Plc, the world’s largest shipbroker. Stopford has covered shipping since 1971.
Outside of the coming crash in tanker lease rates there is the looming crash in oil prices. Think about it – that much oil and other petroleum products are sitting in tankers and thus clearly not actually needed in the day to day. Its all surplus product – its off the market, for now, because speculators have placed it there. And it gets worse – all this oil has been un-needed while OPEC has dialed back on production due to the global recession.
Once all that comes on the market, then the price for all oil products will drop. Unless, of course, the global economy not only recovers, but goes gangbusters in to boom times. The reality is that even a modest economic recovery won’t be on track prior to 2011 and that is if everything goes well (something I don’t expect due to the Chinese real estate and securities bubbles, as well as our own stock bubble).
I was wondering what was keeping oil prices as high as they are. I mean, I knew that speculators were pushing up the price, but I hadn’t known that they were pushing up the price and then just storing surplus production for later delivery. This is insane. And very likely a direct result of all that money we and everyone else has been printing – the world is flush with fiat cash, allowing jerk speculators to run wild.
2010 will be a looooong year.
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