[TheDude]

Far out. Forbes

11.20.08, 10:58 AM EST By Luke Pachymuthu
DUBAI, Nov 20 (Reuters) - Oil companies plan to store millions of barrels of crude at sea as they wait for demand to pick up and prices to rise.

So far oil companies have booked ships capable of holding up to 10 million barrels, brokers have said, more than the daily output of top exporter Saudi Arabia.

On Thursday U.S. oil trader Koch and Royal Dutch Shell (nyse: RDSA - news - people ) were the latest to confirm bookings of additional Very Large Crude Carriers (VLCC), brokers said. The companies were not immediately available for comment.

Brokers said the cost of hiring vessels at current depressed rates would be less than the gains from waiting for an upturn in crude prices and in refiners' profit margins. More oil and trading firms were also considering floating storage, they said.

Who was the politician who reported seeing tankers berthed outside NYC in 1980 and concluded Big Oil was up to no good?

[copious.abundance]

Pirate bait.

[pup55]

Brokers said the cost of hiring vessels at current depressed rates would be less than the gains from waiting for an upturn in crude prices and in refiners' profit margins.

They did this a year or two ago, and once demand picked up a little, it really screwed up the whole inventory situation for awhile, because if these guys are parked somewhere, it restricts the overall amount of imports that are on the sea at a given moment.

I wonder what China's demand is these days.

[bratticus]

First cars and now oil. I wonder how many other things are being stored at the point of arrival?

[seldom_seen]

Maybe some of them will be "hijacked" while they're sitting out at sea to help encourage the oil market along? No! That would never happen silly.

[DaleFromCalgary]

In similar fashion, it is easier and less conspicuous to slow down pumping from conventional oil wells.

In Alberta, new oilsands projects are being postponed, officially because of high construction costs. Unofficially this has the effect of storing oil for at least five years, because it takes that long to get new projects up and running.

[copious.abundance]

Related.

--> Marketwatch <--

Energy firms socking away cheap oil
By Steve Gelsi, MarketWatch Last update: 2:14 p.m. EST Dec. 19, 2008:
NEW YORK (MarketWatch) -- While cheap oil bites into the fortunes of crude production and refining, the oil storage business remains robust as energy players sock away plentiful crude to wait out the current multi-year trough until prices come back.

Storage of oil also offers an instant return of $10 a barrel or more tied to the so-called "contango" structure of the futures market - a condition where the expected price of oil in coming months trades higher than current prices.

And in another storage-based wrinkle to the 2008 oil sell-off, the lack of tank space for oil is pressuring some market players to sell contracts - and thus depress prices further -- in order to avoid taking delivery of expensive-to-store oil. [...]

[vaseline2008]

Maybe some of them will be "hijacked" while they're sitting out at sea to help encourage the oil market along? No! That would never happen silly.

Last I heard they were being "parked" in the Gulf of Mexico. But at any rate, the perception will be that there is still an over abundance of supply thus putting downward pressure on oil prices.

[eastbay]

Won't this eventually lead to a shortage of tankers?

[Revi]

I really didn't expect this to happen. We are drowning in crude.

When is peak oil supposed to happen?

Maybe this is part of the process. Huge glut now, shortages later.

[copious.abundance]

Won't this eventually lead to a shortage of tankers?

Good question.

I read somewhere recently that there was a spate of oil tankers recently finished or about to be finished that suddenly aren't needed. Perhaps they're using those to store all this oil.