Morgan Stanley Hires Supertanker to Store Oil in Gulf | Hacker News Reader

Morgan Stanley Hires Supertanker to Store Oil in Gulf

bloomberg.com

30 pointschaostheory29 comments

Morgan Stanley Said to Cancel Tanker for Oil Storage. http://bloomberg.com/apps/news?pid=20601087&sid=aSia8gPt...

It's because there's contango in oil futures right now.

The spread between front month futures and november is something along the lines of $30 a barrel.

So you buy a front month future, take delivery, simmer, and sell a november future. If the profit from the futures arb is worth more than the opportunity cost (tanker rental), then it's a good play.

$30 a gallon.

Barrel?

Sorry, just got out of my time machine.

Welcome to Germany.

there's contaigo in oil futures

http://en.wikipedia.org/wiki/Contango

When you type faster than you think or speak, problems like this tend to arise.

i'm not sure why the article doesn't mention it, but one of the reasons this makes sense for MS is the rising "contango" in oil futures (see http://en.wikipedia.org/wiki/Contango and http://www.energytribune.com/articles.cfm?aid=1214)

essentially the market is betting that oil prices will rise in the coming months, which puts storage space at an obvious premium.

Morgan Stanley hired its tanker at $68,000 a day, the two brokers said. That works out at $1.02 a barrel a month, based on a 2 million-barrel cargo.

http://zerohedge.blogspot.com/2009/01/zany-profit-idea-of-da...

  Friday, January 16, 2009
  Risk-Free Profit Idea of the Day
  Posted by Tyler Durden at 1:47 PM
  Buy: Barrels of Oil (we do not have a position in this "security" so we hope the SEC does not bust our front door in an hour for position peddling)

http://news.ycombinator.com/item?id=424877

http://news.ycombinator.com/item?id=426142

Edit of the comment gave me a blank page at that time.

HN is sagging under the load of new users. Sometimes, in the middle of the day, it serves up blank pages. Also, since the edit limit is one hour, if one clicks the edit button at 59 minutes (i.e. right before it disappears), the response might be something like this: http://news.ycombinator.com/edit?id=440702

Is it only me or I am not the only one worried about what can happen with such a big high-value sitting duck?

There are hundreds of tankers out there just like it. Plus, an attack on one would hurt nature more than anything else.

Prior to 2001 I would seek a financial justification for such attacks. Sadly, we can no longer count on such rational behaviour.

Prospectus: PotG, Inc. ("Pirates of the Gulf") will take the proven Somali piracy business model into the Gulf of Mexico.

We will use using occasional hijackings to extort protection money from supertanker owners.

Competitive threats: US Navy.

I imagine it's hard to steal 2 million barrels of oil.

I imagine it's hard to steal 2 million barrels of oil.

Someone did it, just the other day. http://news.google.com/news?q=pirate+tanker

The tanker's capture in November sparked fears for its enormous cargo. The Liberian-flagged tanker was carrying 2 million barrels of crude oil worth about ...

Really? We gave these banks TARP money and they're out spending it on hoarding oil so they can jack consumer prices later? Talk about sleazy.

they're out spending it on hoarding oil so they can jack consumer prices later

They are providing new value to the economy by smoothing price fluctuations. When the market prices rise, and they sell their stocks of oil, the resulting market prices will be lower than they would otherwise be.

Well, if you're a commodities trader, ideally you want to buy something then sell it quicker than it takes to ship it. Then it can physically be transported directly from the seller to the buyer. "Taking delivery", as it's called, is a nightmare for the typical commodities trader, who generally has absolutely no idea what to do with it, and doesn't want to pay for warehousing out of his potential profit.

One tankerload of oil isn't going to be enough to move the market. I suspect what happened was they vastly overpaid for it and can't for whatever reason bear to just write it off.

One tankerload of oil isn't going to be enough to move the market.

From the article:

Frontline Ltd., the world’s biggest owner of supertankers, said Jan. 14 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 futures that are higher than the spot price.

The world uses about 86 million barrels of oil per day.

I do find it curious that MS would actually take delivery, and I also suspect they are trying to minimize the damage of buying at $130/barrel. Sorry about my comment being a little sarcastic...I am constantly amazed at the amount of money that has been swallowed by the derivatives black hole, and I like to poke fun at what I perceive as the flotsam in it's wake.

so are the ships crewed? they just sit at sea?

a job on this crew may qualify as one of those "what job can I do that allows me plenty of time to work on my startup?"

Do they have internet access?

of course they do, its a dream job. they have shuffleboard, a swimming pool, jogging track, helicopter pad for visits from the bankers that want to check on their hordes of oil...all the normal accouterments of a super tanker ;)

But --- do they have Ninjas to keep the pirates off-board?

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