Yet it happens over and over again. And can be immensely profitable if you can locate stock to short.
I get the same feelings looking at this story. It's been three weeks since "L’embarras de richesses, crude oil edition" appeared at FT Alphaville and shared the industry's dirty little secret with the world. Front-month WTI was changing hands at $49.25, down $1.56 by the time we got around to linking the following Monday and has only fallen to this morning's $48.56 and although I can do the "frisson-of-anticipation" as well as the next guy I always wonder if I'm missing something.
Usually the answer is no.
From Bloomberg:
Overflowing storage tanks could lead to another drop in prices
Seven months ago the giant tanks in Cushing, Okla., the largest crude oil storage hub in North America, were three-quarters empty. After spending the last few years brimming with light, sweet crude unlocked by the shale drilling revolution, the tanks held just less than 18 million barrels by late July, down from a high of 52 million in early 2013. New pipelines to refineries along the Gulf Coast had drained Cushing of more than 30 million barrels in less than a year.Here's one of those bankruptcy stories
As quickly as it emptied out, Cushing has filled back up again. Since October, the amount of oil stored there has almost tripled, to more than 51 million barrels. As oil prices have crashed, from more than $100 a barrel last summer to below $50 now, big trading companies are storing their crude in hopes of selling it for higher prices down the road. With U.S. production continuing to expand, that’s led to the fastest increase in U.S. oil inventories on record. For most of this year, the U.S. has added almost 1 million barrels a day to its stash of crude supplies. As of March 11, nationwide stocks were at 449 million barrels, by far the most ever.
Not only are the tanks at Cushing filling up, so are those across much of the U.S. Facilities in the Midwest are about 70 percent full, while the East Coast is at about 85 percent capacity. This has some analysts beginning to wonder if the U.S. has enough room to store all its oil. Ed Morse, the global head of commodities research at Citigroup, raised that concern on Feb. 23 at an oil symposium hosted by the Council on Foreign Relations in New York. “The fact of the matter is, we’re running out of storage capacity in the U.S.,” he said.
If oil supplies do overwhelm the ability to store them, the U.S. will likely cut back on imports and finally slow down the pace of its own production, since there won’t be anywhere to put excess supply. Prices could also fall, perhaps by a lot. Morse and his team of analysts at Citigroup have predicted that sometime this spring, as tanks reach their limits, oil prices will again nosedive, potentially all the way to $20 a barrel. With no place to store crude, producers and trading companies would likely have to sell their oil to refineries at discounted prices, which could finally persuade producers to stop pumping....MORE
Northwest's reorganization jolts investors
Updated 5/31/2007 6:14 AM
Anthony Hicks thought he was getting a bargain when he saw Northwest Airlines stock trading for $1.70 per share.
Tempted by that low price, the 39-year-old Detroiter bought 2,000 shares earlier this year, knowing that the airline was restructuring in bankruptcy. It was in bankruptcy that Northwest's stock had skyrocketed from 60 cents to $7.50 in January, on speculation that the company would merge with another airline.Hicks saw that surge and hoped to catch it on a second wave.There was no second wave. What Hicks didn't know was that those Northwest shares would be worthless the day the company emerged from bankruptcy.That day is today. After 20 months of shedding billions of dollars in debt and costs, Northwest is set to leave bankruptcy protection.The airline had warned since it filed for bankruptcy in September 2005 that its stock could be cancelled....
The company was warning for twenty months that the stock would be canceled!
I guess it's not beyond belief that the oil crowd can't believe what's coming but man-o-mandingo it keeps me on my toes.
Some of our recent posts on storage:
