Where Do We Put All This Oil?

For the first time in forever, our nation is presented with a problem we wish we had in the past… where do we put all the oil? Think about it, some might argue that wars have been started over how much oil we have. Bloomberg is out with a chart showing Cushing Oklahoma could run out of storage in a just a couple of months if projected growth in supplies continues. Projected growth is a little bit like saying, if everything goes as planned and nothing out of the ordinary happens, this is what could happen. Which we all know, rarely happens… but we digress.

Storage has become such a hot commodity, that the CME is actually launching a Crude Oil Storage contract. So now traders can just buy the futures, in theory, instead of the complicated trade of leasing an oil tanker and storing your Oil in the Gulf of Mexico. This makes sense if you consider that analysts are saying producers are pumping 1.5 million barrels a day more than the word needs. Which in turn means that once the oil gets to Cushing it could be there for years…. Which is promoting some concerns over how to get rid of it all… Now, we don’t want to step into a political quagmire. But one proposal to get rid of it has been the creation of a certain pipeline…. Another is the removal of the Energy Policy and Conservation Act which prohibits exporting crude oil. And while all that debate is going on, the oil producers are moving full steam ahead (literally), putting millions of gallons of oil on trains to get out of the oversupplied shale area. What could go wrong hurtling flammable liquids around the country on antiquated infrastructure… oh, I don’t know – maybe something like this in Galena, Illinois yesterday:

Galena Crude OilPhoto Courtesy: Associated Press

According to the Associated Press, the train was carrying 103 car loads of crude oil, luckily only 6 derailed, two of those bursting into flames, like seen above. Only one family had to evacuate their home and no one was injured. At 70,000 gallons per tank [er] car, that’s 140,000 gallons, and since there’s 31.5 gallons in a barrel, that comes out to 4,444.44 barrels. That’s just over 4 contracts (1,000 barrels).  Needless to say, this isn’t going to make a dent in the plethora of supply. But there is a side effect to all this supply that’s worth noting from the Associated Press:

“According to the Association of American Railroads, oil shipments by rail jumped from 9,500 carloads in 2008 to 500,000 in 2014, driven by a boom in the Bakken oil patch of North Dakota and Montana, where pipeline limitations force 70 percent of the crude to move by rail.”

We’ll leave the politics of how to solve this issue to the politicians…

3 comments

  1. Actually, regarding the recent derailment near Galena, IL, 20 cars derailed and five burned. One is still burning. Trucks and heavy equipment have been passing our house ever since, at the rate of four per minute. They have been filling pumping trucks at the hydrant ear our house around the clock and hauling the water out to the crash site. What’s happening to all that water? Where is it going? Into the Mississippi? I don’t trust BNSF to tell the truth.

  2. Your math is off related to the rail car capacity. The typical heavy-axle tanker car would have a maximum net weight of 220,000 lbs (+/- 2,000). At 7.21 lbs per gallon, a car would be able to carry about 30,500 gallons. A non heavy-axle car (200,000 lbs +/- 2,000) would be able to carry about 27,700 gallons.

  3. Also, a barrel is 42 gallons.

Write a Comment

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

logo