Oil Tanker Storage Play Update

by ez2remembercpl

TL,DR: the bull case around earnings remains strong in the short-term (30 days) which is all I care about.

Reading a lot of oil tanker trader feeds (OOTT). Info from the ones with actual jobs in the industry…

BULL case:

  • the absolute crazy spot rates for tankers ($200K+) are currently gone, but
  • tanker storage rates are often still at multiples of normal rates on spot market, and at least strongly “elevated”
  • long-term contract rates are at very high, well-above “normal” prices
  • the “lower” storage adds are because there’s truly little room in Cushing (the “empty” space is for refining needs, and the rest is contracted)
  • The storage issue is now global
  • top names are trading around Feb stock prices, as if market expected somewhat typical (but good) year, after sell-off

BEAR case

  • the contango curve is dropping hard/gone for the moment with the rise in WTI
  • US govt says they’ll store hundreds of millions of barrels for US producers in strategic reserve
  • Noobs out of USO after reverse split + USO changing to “we can buy any type of oil contract” pulled a shit ton of pressure on WTI rates
  • OPEC+ cuts start now, will have a strong effect
  • US cuts (and others) are already in effect
  • POTUS punched Saudi Arabia in the face, and threatened regime change and complete Middle Eastern destabilization without cuts, which came immediately
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BULL response (whoops):

  • It’s middle month, there’s a likely huge drop in WTI prices coming again as we near May 21 settlement
  • Production cuts today drive future price cuts, pressure rates for immediate contracts, little effect on oil already in holds
  • Russia cheats on cuts all the time. Other countries may join them
  • The storage space for hundreds of millions of barrels of oil in the strategic reserve is a fantasy (unless the Jones Act is suspended, meaning taker calls print, or oil in the ground is counted as “reserve” and the US govt pays for future production…which feels insane, but no less insane than any other economic decision by the USA these days)
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Twitters I’m reading: just #OOTT and you get a lot of info. The wheat from the chaff I’m using are

I took the advice of smarter people, and sold my NAT calls all for profit (50% – 200+%). I am holding several others still, and further dips would make me load more. I definitely will buy STNG calls at this price because it’s back to near “yawn”-type year levels. Since it’s the first, if it reports blockbuster numbers everybody reacts to them.

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.