"Morgan Stanley hired an oil tanker to store crude oil in the Gulf of Mexico, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from the contango, two shipbrokers said in reports earlier today."
There is a sharp contango in the near months in the NYMEX oil pit, and it will get sharper as the attempts to suppress the price near term, most likely to punish Russia, Venezuela and Iran, falter. Then it will flatten as market adjusts prices to normalcy.
Let's see if Bloomberg gives us a more coherent update. But its funny that Citigroup, Morgan Stanley, and probably other banks are buying oil now to store in tankers and deliver later when the paper chase falters. Nice use of the bailout money. Why lend when you can speculate on market inefficiency which you help to create?
Bloomberg
Goldman Sees ‘Swift, Violent’ Oil Rally Later in Year
By Grant Smith
Jan. 19 (Bloomberg) -- Goldman Sachs Group Inc. commodity analyst Jeffrey Currie said he expects a “swift and violent rebound” in energy prices in the second half of the year.
Oil prices may have reached their lowest point already, after falling to $32.40 in mid-December, and are expected to rise to $65 by the end of this year, the analyst said. There is scope for a “new bull market” in oil, Currie said. (The December '09 futures are trading around there already - Jesse)
World oil demand is likely to fall by about 1.6 million barrels a day this year, the Goldman analyst said today at a conference in London. That’s bigger than the reduction expected by the International Energy Agency, which last week forecast a decrease of about 500,000 barrels a day, or 0.6 percent, this year.
A recent tactic of using supertankers to store crude oil to take advantage of higher prices later this year is “difficult” to profit from and is “near the end of this process” anyway, the Goldman analyst said. (We can only use the NYMEX 'front month' to punish Iran, Venezuela, and Russia for so long - Jesse)
New York crude futures for delivery in December, trading near $56 a barrel, currently cost some $15 a barrel more than March futures, a market situation known as contango, where prices are higher for later delivery. (This is poorly worded at best - Jesse)
The contango is likely to flatten as supply cuts by OPEC and other producers take effect, reducing the availability of oil for immediate delivery, Currie said. (Contango is when the future months are higher in price. This is the case for the futures. But December delivery, according to this article, is in backwardation, where true 'spot' is higher than paper prices, and a sure sign of price manipulation. - Jesse)
The Organization of Petroleum Exporting Countries started another round of supply cutbacks at the start of this month. The group’s compliance with its overall efforts to cut production will probably peak at 75 percent, or a reduction of about 3 million barrels a day out of an announced aim of 4.2 million barrels a day, Goldman Sachs said.
In several steps, 10 OPEC members have pledged to reduce production to 24.845 million barrels a day, a cut of 4.2 million barrels a day from September’s level.
Morgan Stanley hired an oil tanker to store crude oil in the Gulf of Mexico, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from the contango, two shipbrokers said in reports earlier today.
