Morgan Stanley Said to Seek Supertanker to Store Oil

Discussion in 'Wall St. News' started by S2007S, Jan 15, 2009.

  1. S2007S


    Morgan Stanley Said to Seek Supertanker to Store Oil (Update2)

    By Alaric Nightingale and Todd Zeranski

    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 has yet to find a suitable vessel, said one of the brokers, all of whom asked not to be identified because the information is private. Carlos Melville, a spokesman for Morgan Stanley in London, declined to comment.

    “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.

    Banks and commodity traders are seeking new ways to make money after the Standard & Poor’s 500 Index fell by the most since 1937 last year and crude oil prices dropped more than $100 a barrel from their peak. Companies including Koch Industries Inc. and BP Plc are hoarding enough crude at sea to supply the world for almost a day.

    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.

    The so-called contango pricing structure has been caused by excess oil supply as demand slows and speculation that output cuts by the Organization of Petroleum Exporting Countries will reduce the glut later this year.

    Tanks Filling Up

    Slumping U.S. oil demand means tanks are filling at Cushing, Oklahoma, the pricing point for the benchmark West Texas Intermediate grade. Futures contracts indicate WTI will gain an average of about $2.15 a barrel a month until December.

    Supertanker storage deals are being done at about $75,000 a day, according to Petropoulos. Assuming the ship has a 2 million- barrel cargo, that works out at $1.12 a barrel over a 30-day period. Traders also need to pay financing and insurance costs.

    Phibro LLC, Citigroup’s commodities trading unit, has the carrier Ice Transporter stationed off north Scotland, according to people familiar with the matter. Shell, Europe’s largest oil company, has booked the supertankers Leander and Eliza.

    Oil traders hired two more ships to store North Sea crude off Scotland’s Orkney Islands. The 2 million-barrel supertanker Luxembourg is scheduled to arrive at Scapa Flow on Jan. 21 while the 600,000-barrel transporter Atlantic Galaxy is already there, said Captain William Sclater, operations manager at the port.

    Oil Grades

    The easiest types of oil to buy for the trade are likely to be either WTI or the North Sea grades Brent, Forties, Oseberg or Ekofisk. That’s because they are the ones used to settle the most-traded futures contracts.

    Other oils, such as those from the Middle East and Africa, are usually bought and sold at prices related to the main European and U.S. grades. Because those prices fluctuate, it means traders assume an extra risk by hoarding them.

    Morgan Stanley owns half of Heidmar Inc., which operates smaller oil tankers. Heidmar hasn’t had demand for its tankers to store oil, probably because they aren’t the largest supertankers that investors need for the contango trade, Tim Brennan, the company’s chief executive officer, said by phone Jan. 8.
  2. Why not F....the public by adding upward pressure to oil prices....

    With the public's money....

    Sorta Madoffish ?

    Besides if they lose....bail money....

    Even the head is "SEC" proof....

    Time to clean house for good....

    Go Volcker.....
  3. The decided to take deliver and hope to cut losses by waiting for oil to rise again. They did not want to do this.
  4. Actually this is a near risk-free money for the physical players, they are just selling the fowards contracts and buying the cash spot prices now. You buy physical crude today in the physical market with specific grades and then sell the April contract and makes over $16 usd per barrel.
  5. Amen. I think that this is a great plan, really, and it will actually get returns, unlike jamming tarp funds into the abyss that is/are MBS's and CDO's
  6. But you need to find a place to store the oil. That is why the big boys are looking to store the oil in a tanker.
  7. Yes, Firms like shell, trafigura, Marc Rich & Co. have been doing this since late nov 08.

    Actually, Shell have over 100 million usd at stake right now doing this.. With the RBOB and Heat Cracks spreads in a bull rally, I think we should pay more attention to refineries and big oil corps in the coming months.
  8. That's right.

    The last time we saw somenthing like this was in the early 70's, and Marc Rich and Phillip Bros made a Fortune that year, over $14 dollar per Barrel. Actually because of this huge profits Marc Rich was able to invented the “spot market” for crude oil revolutionizing commodity trading. And the beginning of the end for the OPEC and Big Sisters monopolies over the Oil prices.
  9. They should try to buy all the oil and corner the market like the Hunt brothers tried during the great silver bubble :)
  10. tradersboredom

    tradersboredom Guest

    but there profit or gain from this activity is cost of storing and managing and delivering the oil.

    it's same as wholesaling business. isn't most oil bought and delivered at spot price or near month.

    why would anyone pay the 3 month price or 6 month price? it's illiquid contracts.

    this is just proof that oil prices were manipulated by big money.

    these guys had a lot cash to invest and actually sold it. since they are taking delivery they are actually paying cash and holding the oil.

    #10     Jan 16, 2009