A "Flood" of new oil..........

[GRG55]

Re: A "Flood" of new oil : Be Careful What You Wish For

Would Texas be an example?

I think your definition of the terms is determining the answer.

In my hometown, the school districts are by far the largest employer, and will always be. No one calls it a "school teacher economy." There is no lack of private sector activity. It's just that the "non school" employment is highly diverse, including electrical engineering, jet aircraft maintenance, bio-technology, tourism, architecture, and fishing. None of these can possibly employ as many people as the school districts.


A "resource nation" has a very large tax revenue from resources. If it becomes a "high tech" nation, then the tax revenue comes from a myriad of sources, (electronics, pharmaceuticals, bio tech, auto parts) and none of them can ever be as big as the resource income was. So, by your definition, it is impossible to make a transition.

If we were to take Texas (or North Dakota) as an example, the real estate market, the construction sector, the number of kids in the schools (and hence "the school teacher economy"), the retail sales figures, the number of doctors/nurses/medical techs employed, and even the number of students enrolled in colleges such as A&M are all HEAVILY influenced by the in-migration, wages and capital spending of the petroleum sector over the past dozen years. Even a big chunk of the high tech sector in Austin, TX is driven by the cash that spins off what Texas extracts from the earth.

The realtors and construction workers, hospital administrators, School Boards, politicians and others may try to make the argument that their growth is a sign of economic diversification. It's nonsense, pure and simple.

I stand by my definition as reasonable to answer the question. However, if you feel some other definition is warranted certainly propose it.

[Polish_Silver]

Re: A "Flood" of new oil : Be Careful What You Wish For

Maybe Russia can replace lost energy export revenues by increasing exports of polonium to the EU?

...Total reserves have fallen from $511bn to $388bn in a year. The Kremlin has already committed a third of what remains to bolster the domestic economy in 2015, greatly reducing the amount that can be used to defend the rouble...

I'd be interested in just one true example of a resource dependent nation that was able to truly diversify its economy away from that dependence. I am not aware of any. My definition is an economy previously dependent on commodities where resource extraction is replaced with something else as the largest source of tax revenue for government. Not even Norway has been able to come close to achieving that.

Would Texas be an example?

I think your definition of the terms is determining the answer.

In my hometown, the school districts are by far the largest employer, and will always be. No one calls it a "school teacher economy." There is no lack of private sector activity. It's just that the "non school" employment is highly diverse, including electrical engineering, jet aircraft maintenance, bio-technology, tourism, architecture, and fishing. None of these can possibly employ as many people as the school districts.


A "resource nation" has a very large tax revenue from resources. If it becomes a "high tech" nation, then the tax revenue comes from a myriad of sources, (electronics, pharmaceuticals, bio tech, auto parts) and none of them can ever be as big as the resource income was. So, by your definition, it is impossible to make a transition.

[GRG55]

Re: A "Flood" of new oil : Be Careful What You Wish For

seen tonite over at 0C

How could trillions of dollars be laundered from the Wash DC regime
to Saudi Arabia? Why, through Citigroup, of course.

I don't get the money laundering part of the argument. Prince Al Waleed bin Talal was a very vocal critic of Saudi oil policy in October.

Saudi Arabia’s Prince Al Waleed bin Talal slams Kingdom’s oil policy

Could be he went short oil when he came to understand that neither the Saudi Oil Minister nor the Royal Court was going to listen to him.

Using Citi makes sense given his long standing and considerable shareholding through Kingdom Holding. Al Waleed floated 5% of his primary investment vehicle Kingdom Holding on the Saudi stock exchange in 2007, just before the financial crisis. At the time Kingdom claimed to hold US$9.2 Billion in Citi shares as of end of Q1 2007. No points for knowing what happened next . In 2010 the share capital was reduced and Kingdom Holding shares were consolidated 17:10.

[lektrode]

Re: A "Flood" of new oil : Be Careful What You Wish For

seen tonite over at 0C

How could trillions of dollars be laundered from the Wash DC regime
to Saudi Arabia? Why, through Citigroup, of course.

A clever reader with probably more knowledge of the Middle East than they would care to have put before me a very interesting question. Is the US laundering money to Saudi Arabia through Citigroup in order to “hedge” against, or compensate Saudi Arabia for the drop in oil prices?


Well, it sure as hell looks like it.


I recently tweeted the reportage on the massive derivatives position being accumulated by Citigroup (the parent Holding Company) and Citibank (the bank held by Citigroup HoldCo) – $135 TRILLION. Citi is adding roughly $10 TRILLION PER QUARTER, and the bank is now holding MORE derivatives than the parent HoldCo, which is unprecedented and shocking.

Even worse, the bank – the derivatives holdings of which are now “guaranteed” by the FDIC, which is to say the US TAXPAYERS, thanks to the Cromnibus bill – is where the exposure is being added – $9 TRILLION was added to the Citibank portfolio within the third quarter of 2014 alone – the latest available data.

Citi is the only big bank that is INCREASING its derivatives position, all the other big banks have modestly reduced their derivatives exposure in the same time period. But Citi is piling it on as hard and fast as it can – NINE TRILLION $ IN ONE QUARTER!!


Do you know who the largest private shareholder of Citigroup is?

Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud. Mister Saudi Arabia.


So, I’m going to indulge in a little dot connecting here. I don’t think this is terribly far-fetched.


I hypothesize that the Washington DC regime is providing Saudi Arabia with a “laundered short hedge” on oil prices through Citi. Citi “borrows” money from the Federal Reserve at next to zero percent, plows it into swaps (a form of highly leveraged derivative wherein cashflows, not assets, are the underlying “commodity”) at this stunning clip because all swaps are held “off balance sheet”. Remember that term from MF Global?


The position is such that it makes money when oil prices drop, thus “hedging” Saudi Arabia. If the poop hits the fan, thanks to the Cromnibus, 100% of Citibank’s derivatives portfolio is now under the umbrella of the FDIC, which we all know means the Federal Reserve printing dollars to bail out their friends. The FDIC is only sitting on a few billion in assets. It’s a joke.


So, the Washington DC regime has essentially posted YOU AND SEVERAL GENERATIONS OF YOUR PROGENY as the collateral guaranteeing a short hedge on oil prices that it is providing for Saudi Arabia through its ownership of Citigroup. In other words, MONEY LAUNDERING, EXCEPT ON A MULTI-GENERATIONAL, CIVILIZATIONAL SCALE.


Lee Greenwood could not be reached for comment.

[GRG55]

Re: A "Flood" of new oil : Be Careful What You Wish For

I'd be interested in just one true example of a resource dependent nation that was able to truly diversify its economy away from that dependence. I am not aware of any. My definition is an economy previously dependent on commodities where resource extraction is replaced with something else as the largest source of tax revenue for government. Not even Norway has been able to come close to achieving that.

"Diversifying" into petrochemicals, heavy equipment manufacturing, overheated real estate construction, retailing of luxury goods, and all other such delusional nonsense driven by high wages during the commodity price boom doesn't count as diversification (although the tripe emitted by local politicians and business "leaders" during the boom would wish to have you believe otherwise).

Venezuela is already a ward of the Chinese government. Russia is well on its way in the same direction. The Chinese are patient; when it takes more than 15 years to agree on price for a gas supply contract with Russia it is pretty clear who is dependent on whom. Putin overplayed his hand and Europe will now become permanently less dependent on Russian energy with time. Russia has no hope of diversifying from its extraordinarily high dependence on resources; it can't even effectively compete with China to sell arms to the world.

Maybe Russia can replace lost energy export revenues by increasing exports of polonium to the EU?

Russia 'has deteriorated significantly' as Fitch cuts credit rating

Fitch has written a scathing assesment of Russia's economy after downgrading it to BBB

10:42PM GMT 09 Jan 2015

Fitch has downgraded Russia's credit rating and painted a horrific picture of a struggling economy rocked by a collapsing rouble, falling oil prices, high inflation and declining international reserves.

The ratings agency cut the country to BBB- from BBB with a negative outlook, meaning further downgrades are possible.

But it was the language Fitch used in its reasoning that was most shocking.

Russia's economic outlook "has deteriorated significantly" in just six months, Fitch stated. Gross Domestic Product will shrink 4pc this year, the agency added, far worse than the 1.5pc contraction it previously expected. "Growth may not return until 2017," Fitch said.

Western sanctions, imposed after President Vladimir Putin's took Russia into neighbouring Ukraine, "continue to weigh on the economy" but the plunging oil price is causing just as much, if not more, damage to one of the world's energy giants...

..."Commodity dependence is high: energy products account for almost 70pc of merchandise exports and 50pc of federal government revenue, exposing the public finances and the balance of payments to external shocks," Fitch wrote.

Brent crude was trading at less than $50 a barrel on Friday, down from more than $111 in June last year...

...The rouble, which has slumped around 20pc since Christmas and was trading at 63 against the dollar on Friday, is in lockstep with Brent crude. Fitch cited the collapsing currency as one of the reasons Russia's banking sector has suffered a major shock, the others being "intense market volatility" and the central bank's decision to hike interest rates from 10pc to 17pc.

That shock move - Bank of Russia’s sixth increase in 2014 - took rates to heights not seen since the country’s default in 1998, and “is aimed at limiting substantially increased rouble depreciation risks and inflation risks”, the bank said.

Fitch expects Russian inflation, which stood at 11.4pc at the end of 2014, to remain in double-digits through this year before falling to 8.5pc by 2016. "The prospects of the [central bank] realising its end-2015 inflation target of 4.5pc now look remote, particularly if the exchange rate falls further, potentially leading to still higher interest rates," Fitch wrote.

This all comes as international reserves "fall faster than Fitch expected"...

...Total reserves have fallen from $511bn to $388bn in a year. The Kremlin has already committed a third of what remains to bolster the domestic economy in 2015, greatly reducing the amount that can be used to defend the rouble...

[lakedaemonian]

Re: A "Flood" of new oil : Be Careful What You Wish For

Interesting.


In the knowledge we gained in dairy farming(that relates to the grain gamble above), we found that grain based dairy farming(very common in the US) was a very dangerous game in a world of both rising and volatile grain prices, as it would appear energy prices and grain prices seem to fly in formation.

Unfortunately, grain based dairy farmers can often find themselves hit hard with rising input costs, but lagging revenue(it seems to take a while for wholesale supplier prices to rise in unison), and the same downside in reverse with farm gate supplier.

So our investment in pasture based dairy farming here in NZ back in 2007 was based on purchasing a distressed property being sold into a soon to rise farmgate price and the fact it being the closest thing to an oil well analog as we could find.

And it worked out well until we decided to get off the crazy train(a bit early in 11-12...although better early than late with highly illiquid assets).

Farmgate wholesale dairy prices started their drop into freefall about 8 months ago.

Energy price volatility will be shaking loose a LOT of financially marginal businesses I reckon.

---------

Anywho....the purpose of my post is that I couldn't agree more with the "second owner makes the money".

But is this the "smart money"?

It certainly sounds like it, but does it "feel" like it?

Based on reading between the lines of your posts I'd be thinking you're not confident we are going to see a quick bounce up.

But then again grain infrastructure isn't exactly the most liquid of assets.

[GRG55]

Re: A "Flood" of new oil : Be Careful What You Wish For

People seem to be under the gross misunderstanding that this is something new. It isn't.

The resource extraction industries (all of them, not just oil and gas) have a well deserved reputation for being extraordinarily efficient destroyers of capital.

There's an old adage in the oil patch that the second owner of a property makes all the money. We are about to see that video play yet again. There will be plenty of producing properties that change hands, some at distress prices, as the banks choke off credit to the most indebted companies that paid to drill them. And despite the high initial decline rates the oil will keep flowing, and the smart money second owners are going to make out like bandits. Count on it.

Edit added: The smart money in the oil patch knows there are four distinct phases to every cycle: A time to drill, a time to sell, a time to work on the golf game, and a time to buy. Rinse and repeat. And in case anybody is wondering, there is still plenty of time to finish the back nine.

Canada’s Richest Grain Family Betting on Rebound in Oil

Jan 4, 2015 8:43 PM MT


A decade after expanding its grain business during a slump in prices, the Richardson family of Winnipeg, one of the richest in Canada, is making a similar bet on oil.

With crude futures collapsing to the lowest in five years, the Richardson’s Tundra Oil & Gas unit last month agreed to buy 550 wells in Manitoba, part of a $410 million divestiture of Canadian assets by EOG Resources Inc. (EOG) Tundra’s biggest purchase ever will boost its output this year by one-third to 32,000 barrels a day, and Chief Executive Officer Ken Neufeld says he remains on the lookout for more deals.

“If you’ve got a sustained low oil price for a period of time, you’re going to have companies out there that are going to run into some financial difficulty,” Neufeld said in a Dec. 16 telephone interview from Winnipeg. “There may be a buying opportunity there.”

As the oil slump forces some energy companies to cut spending, Tundra said it will expand drilling in a bet that prices will rally. To zig when others zag isn’t new for privately-held James Richardson & Sons Ltd., a company founded as a crop merchant more than 157 years ago, before Canada became a nation. Over the past decade, the family invested in grain facilities during a drought and expanded in financial services amid the worst economic crisis since the Great Depression...

...Tundra plans to spend $70 million in the next year to drill on the EOG properties, which includes 12,000 acres of undeveloped land, in a bid to find more oil. EOG said the net proved reserves it sold in Manitoba and Alberta, totaled 8.5 million barrels, including natural-gas liquids.

“We continue to believe the business that we’re in is a good business long-term,” Neufeld said. “I’m optimistic crude prices are going to come back to something more normal.”...

...Lower prices already are having an impact. Calgary-based Husky Energy Inc. (HSE) said Dec. 17 it will delay a decision on a C$2.8 billion expansion off Canada’s Atlantic Coast and will spend 33 percent less in 2015. London-based BP Plc (BP/) said it plans to cut $1 billion to $2 billion from a previous capital spending budget for 2015.

Drilling activity in Western Canada may drop 15 percent in 2015, Patricia Mohr, an economist at ScotiaBank, said in a Nov. 28 report...

...The Richardsons have been there before. When crude fell close to $10 in 1998, making production unprofitable for many companies, the family expanded its investment in energy to 25 percent of assets from about 3 percent, Hartley Richardson said in a March interview. Tundra bought in Alberta, including a stake in Western Oil Sands Inc., a company with 20 percent interest in Athabasca Oil Sands Project that was later purchased by Marathon Oil Corp. (MRO) for C$5.8 billion.

Another payoff came in late 2004, when Tundra unearthed the biggest oil reserves in Manitoba in almost half a century, after drilling near Sinclair, Manitoba, a small community near the Saskatchewan border. The Richardsons became the province’s top producer, surpassing a Chevron Corp. (CVX) unit.

The Richardsons took a similar approach in grains a decade ago, when spring-wheat production fell to a 30-year low and some farmers abandoned fields that were too dry to plant. After an adviser warned there was no future in the business that James Richardson started in 1857, Hartley Richardson said the company began one of its biggest expansions, acquiring grain depots and loading facilities...

[ProdigyofZen]

Re: A "Flood" of new oil : Be Careful What You Wish For

A not so happy New Year is about to begin for many. Just one example:

December 30, 2014

CALGARY, ALBERTA–(Marketwired – Dec. 30, 2014) - Southern Pacific Resource Corp.’s (“Southern Pacific” or the “Company”) (TSX:STP) Board of Directors has been engaged in a strategic review process with RBC Capital Markets, its financial advisor, to devise and implement a strategy to address the Company’s liquidity and financing requirements and improve its capital structure. Strategic and financial alternatives under consideration are focused on relieving the financial burden of the current debt structure and obtaining additional financing necessary to fund ongoing operations and to drill additional wells at STP-McKay and Senlac. The alternatives under consideration and review include the sale of all or a portion of the Company’s assets, a recapitalization, debt and capital restructuring through statutory or other procedures, or a combination of the foregoing.

The Company has elected not to make the cash interest payment (of approximately C$5.175 million) due on December 31, 2014 in respect of its outstanding 6% convertible unsecured subordinated debentures. The convertible debentures are issued pursuant to an indenture dated January 7, 2011, for an aggregate principal amount of C$172,500,000 due June 30, 2016 and are listed on the TSX. Under the terms of the governing indenture for the convertible debentures, the Company has a 30 day cure period from the periodic interest payment date in order to make this cash interest payment before an event of default will occur...

...Southern Pacific Resource Corp. is engaged in the exploration, development and production of in-situ thermal heavy oil and bitumen production in the Athabasca oil sands of Alberta and in Senlac, Saskatchewan...

El-Erian weighs in:

This Era of Low-Cost Oil Is Different


DEC 29, 2014 9:29 AM ESTBy Mohamed A. El-Erian


Having seen numerous fluctuations in the energy markets over the years, many analysts and policy makers have a natural tendency to “look through” the latest drop in oil prices -- that is, to treat the impact as transient rather than as signaling long-term changes.

I suspect that view would be a mistake this time around. The world is experiencing much more than a temporary dip in oil prices. Because of a change in the supply model, this is a fundamental shift that will likely have long-lasting effects.

Through the years, markets have been conditioned to expect OPEC members to cut their production in response to a sharp drop in prices. Saudi Arabia played the role of the “swing producer.” As the biggest producer, it was willing and able to absorb a disproportionately large part of the output cut in order to stabilize prices and provide the basis for a rebound.

It did so directly by adhering to its lowered individual output ceiling, and indirectly by turning a blind eye when other OPEC members cheated by exceeding their ceilings to generate higher earnings. In the few periods when Saudi Arabia didn't initially play this role, such as in the late 1990s, oil prices collapsed to levels that threatened the commercial viability of even the lower-cost OPEC producers.

Yet in serving as the swing producer through the years, Saudi Arabia learned an important lesson: It isn’t easy to regain market share. This difficulty is greatly amplified now that significant non-traditional energy supplies, including shale, are hitting the market.

That simple calculation is behind Saudi Arabia’s insistence on not reducing production this time. Without such action by the No. 1 producer, and with no one else either able or willing to be the swing producer, OPEC is no longer in a position to lower its production even though oil prices have collapsed by about 50 percent since June.
This change in the production model means it is up to natural market forces to restore pricing power to the oil markets. Low prices will lead to the gradual shutdown of what are now unprofitable oil fields and alternative energy supplies, and they will discourage investment in new capacity. At the same time, they will encourage higher demand for oil.

This will all happen, but it will take a while. In the meantime, as oil prices settle at significantly lower levels, economic behavior will change beyond the “one-off” impact.
As costs fall for manufacturing and a wide range of other activities affected by energy costs, and as consumers spend less on gas and more on other things, many oil-importing nations will see a rise in gross domestic product. And this higher economic activity is likely to boost investment in new plants, equipment and labor, financed by corporate cash sitting on the sidelines.

The likelihood of longer-lasting changes is intensified when we include the geopolitical ripple effects. In addition to creating huge domestic problems for some producers such as Russia and Venezuela, the lower prices reduce these nations’ real and perceived influence on other countries. Some believe Cuba, for example, agreed to the recent deal with the U.S. because its leaders worried they would be getting less support from Russia and Venezuela. And for countries such as Iraq and Nigeria, low oil prices can fuel more unrest and fragmentation, and increase the domestic and regional disruptive impact of extremist groups.

Few expected oil prices to fall so far, especially in such a short time. The surprises won’t stop here. A prolonged period of low oil prices is also likely to result in durable economic, political and geopolitical changes that, not so long ago, would have been considered remote, if not unthinkable

[ProdigyofZen]

Re: A "Flood" of new oil : Be Careful What You Wish For

So is there an Eastham Capital(s) of the oil/gas/coal flavours?

And if so, which one(s) are the most likely second owners?

-----

Are there any/many "pure play" second owners?

Or is it more common for such properties to be "land banked" by players so large that the returns will be averaged down by the rest of the colossus business?

The firm you are looking for is called Merit Energy. They pretty much kill it by buying assets on the cheap after distress but they rarely have capital raises and they are pretty much over-subscribed.

[GRG55]

Re: A "Flood" of new oil : Be Careful What You Wish For

People seem to be under the gross misunderstanding that this is something new. It isn't.

The resource extraction industries (all of them, not just oil and gas) have a well deserved reputation for being extraordinarily efficient destroyers of capital.

There's an old adage in the oil patch that the second owner of a property makes all the money. We are about to see that video play yet again. There will be plenty of producing properties that change hands, some at distress prices, as the banks choke off credit to the most indebted companies that paid to drill them. And despite the high initial decline rates the oil will keep flowing, and the smart money second owners are going to make out like bandits. Count on it.

Edit added: The smart money in the oil patch knows there are four distinct phases to every cycle: A time to drill, a time to sell, a time to work on the golf game, and a time to buy. Rinse and repeat. And in case anybody is wondering, there is still plenty of time to finish the back nine.

A not so happy New Year is about to begin for many. Just one example:

December 30, 2014

CALGARY, ALBERTA–(Marketwired – Dec. 30, 2014) - Southern Pacific Resource Corp.’s (“Southern Pacific” or the “Company”) (TSX:STP) Board of Directors has been engaged in a strategic review process with RBC Capital Markets, its financial advisor, to devise and implement a strategy to address the Company’s liquidity and financing requirements and improve its capital structure. Strategic and financial alternatives under consideration are focused on relieving the financial burden of the current debt structure and obtaining additional financing necessary to fund ongoing operations and to drill additional wells at STP-McKay and Senlac. The alternatives under consideration and review include the sale of all or a portion of the Company’s assets, a recapitalization, debt and capital restructuring through statutory or other procedures, or a combination of the foregoing.

The Company has elected not to make the cash interest payment (of approximately C$5.175 million) due on December 31, 2014 in respect of its outstanding 6% convertible unsecured subordinated debentures. The convertible debentures are issued pursuant to an indenture dated January 7, 2011, for an aggregate principal amount of C$172,500,000 due June 30, 2016 and are listed on the TSX. Under the terms of the governing indenture for the convertible debentures, the Company has a 30 day cure period from the periodic interest payment date in order to make this cash interest payment before an event of default will occur...

...Southern Pacific Resource Corp. is engaged in the exploration, development and production of in-situ thermal heavy oil and bitumen production in the Athabasca oil sands of Alberta and in Senlac, Saskatchewan...

[icm63]

Re: A "Flood" of new oil : Be Careful What You Wish For

Best explanation of OIL price drop ...

By Chris Cook

Video from 2012...correct thesis, timing wrong due to US QE

Now

BUY Oil under $40

[touchring]

Re: A "Flood" of new oil : Be Careful What You Wish For

"Moving into the first quarter of 2015, freight rates are likely to correct downwards, opening up floating storage opportunities," JBC Energy said.

Interesting, how about storing the excess crude oil in underground caverns?

[GRG55]

Re: A "Flood" of new oil..........

The WTI mini-avalanche off $80, which was roughly the bottom of the trading range since late 2010, is typical oil price behavior. It is this fairly predictable outcome that caused me to estimate "$60" in the wager with my brother last year.

An abbreviation from a post on this thread dated 03-29-14:



I have no education in finance, nor do I play the futures markets. But I have been around the oil game long enough to have learned one or two things.

Wholesale gasoline prices in the USA started falling in June. Refinery margins are squeezed. That inevitably has to be resolved with either a rise in product price or a fall in crude oil price. The initial decline in crude price this year is all about supply, not a decrease in demand (EJ has also noted that demand shows no indication of any material decline).

The WTI oil futures market remained in backwardation for years until the near month price threatened to break decisively below $80 earlier this year, at which point anybody long crude oil reserves (read: all those debt laden shale oil drillers) started hedging aggressively and voila...about mid-October the combination of supply driven sinking spot price and longer dated hedging inverted the curve, which now remains in contango for as far as the eye can see.

And therein lies the present danger. Today the entire curve shifted down, with the spot and near months falling more than the long dated contracts. One of two things is going to happen. Either the steepening contango is going to, once again, make it profitable to buy oil on the spot market, forward sell and take physical delivery (this is the economic growth, no recession outcome - tankers full of cheap oil at anchor waiting to fuel the growing economy at higher future prices) or, alternatively, this oil price decline is not over...a continuing falling spot price (as we saw today) will cause traders with forward contracts in contango to close them. In the worst oil price declines in these situations, the resulting avalanche of supply drives the curve to backwardation - which is the scenario I was expecting last year to take it to $60 before year-end 2014.

Crude oil seen stored on tankers in 2015 as contango widens

SINGAPORETue Dec 23, 2014 3:00pm EST

(Reuters) - Global oil traders are likely to store crude in tankers next year, as a widening contango makes large-scale storage at sea profitable for the first time since the financial crisis more than five years ago, industry sources said.

Oil prices have plunged nearly 50 percent since June due to a global supply glut, but the economics for storing crude at sea have mostly remained unfavorable.

However, with Brent for prompt delivery dropping sharply versus later contracts in the past week, traders are increasingly requesting to lease vessels for storage...

This market structure, known as contango, allows traders to lock-in profits by buying oil now and selling it forward for later delivery, as long as the costs of storage are low enough...

...Analysts at JBC Energy expect 30-60 million barrels of oil to be stored offshore worldwide in the first six months of 2015...

...However, as day rates drop, ship owners will be compelled to lock in deals to allow charterers to store crude for months, industry sources said.

"Moving into the first quarter of 2015, freight rates are likely to correct downwards, opening up floating storage opportunities," JBC Energy said.

[lakedaemonian]

Re: A "Flood" of new oil : Be Careful What You Wish For

I got a call from a VC asking me about Iridium when they were seeking a follow-on round. My question was: How big is the market for a costly, proprietary phone that has to be line-of-sight at the moment a call comes in, assuming the owner can predict when that might be?

Who is the customer?

The value proposition of wireless is not location but time. The value of wireless is in being able to receive calls anytime. The value of receiving or making calls anyplace is secondary.

Ten years later the answer to my question is on the new Iridium website: Hikers on mountains.

9/11, and the subsequent need for coms in remote/austere locations(before they eventually install local mobile networks) would probably have seen them develop a substantial .GOV, .MIL, and NGO customer base in the 2002-2007+ time frame.

I've used their phone/network in some pretty remote locations and it worked well…although the per minute bills were reportedly pretty high when I first used them in 2006. Work calls were as long as they took. Personal calls to home were limited to 5 minutes per week.

[lakedaemonian]

Re: A "Flood" of new oil : Be Careful What You Wish For

I got a call from a VC asking me about Iridium when they were seeking a follow-on round. My question was: How big is the market for a costly, proprietary phone that has to be line-of-sight at the moment a call comes in, assuming the owner can predict when that might be?

Who is the customer?

The value proposition of wireless is not location but time. The value of wireless is in being able to receive calls anytime. The value of receiving or making calls anyplace is secondary.

Ten years later the answer to my question is on the new Iridium website: Hikers on mountains.

9/11, and the subsequent need for coms in remote/austere locations(before they eventually install local mobile networks) would probably have seen them develop a substantial .GOV, .MIL, and NGO customer base in the 2002-2007+ time frame.

I've used their phone/network in some pretty remote locations and it worked well…although the per minute bills were reportedly pretty high when I first used them in 2006. Work calls were as long as they took. Personal calls to home were limited to 5 minutes per week.