Category: zerohedge

The last time the US Treasury had a solid 2Y auction the paper was trading very special in repo, suggesting a major short squeeze was inevitable, and that is precisely what happened.  However, there was no explanation why today’s just concluded sale of $26 billion in 2 year paper was as blisteringly hot as it was: it certainly wasn’t the repo market, as the paper was trading comfortably north of the Y-axis all day, suggesting there was no forced squeeze into the auction.

First, the high yield printed at just 0.92%, over 2 bps through the 0.943% When Issued. Indicatively, this was just shy of the 0.948% Yield that the 2Y printed at in November, one month before the Fed hiked rates.

Adding to today’s unexpected strength was the jump in the Bid to Cover which rose from 2.64 to over 3.00, the highest since November. The internals were likewise solid, with Indirects taking down a fraction under 50%, at 49.8%, and the highest since February’s 55.8%. Directs took down 17.7% of the auction, the most since December, leaving Dealers with just 32.5%, the lowest since January.

But the biggest surprise is that just weeks ahead of a potential Fed rate hike when the Fed’s tightening is supposed to force investors out of the short end, there was such surprising demand for 2Y paper.

Perhaps not everyone is buying the Fed’s latest flip-flop on hiking rates: traders of the short end certainly weren’t.

via http://ift.tt/25eCsIh Tyler Durden

In observing politicians, the media, and American citizens, one thing is clear to me about the presidential, congressional, and local campaigns.  Nobody is ready, willing, or able to ask and/or answer questions of substance.

Quite some time ago, my family and I ran across one of our elected representatives, our United States Congressman, campaigning at the town square.  We observed more than 100 of our fellow Texans shaking hands with him, and offering their support, which he was grateful to accept.  Not one person asked a question about his party’s platform, or his voting record.  The congressman did not make a single statement of substance about any issue.  Sure.  There were a few comments and jokes exchanged about the personalities of other candidates, but nothing at all about policy.

Finally, our family approached him, introduced ourselves, told him where we live (in his district) and exchanged warm greetings.  I asked, “Considering that you voted for both TARP bills in 2008, the most recent of many tax-payer bailouts of bank shareholders, and considering that you reported owning more than $100,000 of JPMorgan Chase Common Stock and Employee Stock in 2007, Congressman Brady, what is your position on the Federal Reserve Banks being responsible for regulating and supervising the very same banks that own them, such as JPMorgan Chase? 

Immediately, a twenty-something woman stepped around from behind our elected representative, and in between him and us.  Our congressman stepped backwards several steps.  She said to us, without even a hint of the Texas twang used by Brady, “The congressman believes strongly in protecting our nation’s financial system for the benefit of ever American.”

I said, “Well, like the vast majority of Americans, I did not, and do not, own any bank stocks or receive any bank dividends, especially New York banks.  Back to my question, please.  Doesn’t self-regulation and bailouts put the fox in charge of guarding the tax payer’s hen house?  And hasn’t our congressman shown himself to be one of the foxes?”

Congressman Brady was smiling, waving, and making his escape to a waiting vehicle.  One of children shouted, “Dad!  He’s getting away!” 

I laughed and nodded.

The un-elected twenty-something woman simultaneously smiled and glared at me.  She said, “America has the strongest banking system in the world, and the most stringent regulation.  Your congressman has worked hard to ensure that.  Thank you.”  Then she also left the town square. 

I love the United States of America.  But as a parent, I have learned that two very important parts of love is not accepting wrong behavior and holding our loved ones accountable.  If we do not, then we are enabling wrong behavior, and that is not loving.

Many years ago, in high school journalism class, I was taught that journalists held politicians accountable.  In fact, the media used to be known as The Fourth Estate.  However, today, I see no evidence of this.  I only see the media as tools of propagandists and sellers of advertising and advertisers’ products and services.  Nobody in the mass media appears ready, willing, or able to ask our politicians any questions of substance.  When they do, rarely, and the politician is not responsive, usually, journalists are totally incapable of holding the politician accountable for an answer.

As I have described in a previous ZH article, I have spent many days with Donald Trump on several occasions.  I found him to be intelligent, honest, and hard working.  However, I am not yet willing to vote for him, even though he has never held political office, and is using his own money, which are both very admirable and appealing traits in a political candidate.  Below are five of the questions I need to hear answers to before I would consider supporting Trump, or any politician.

As a side note, mostly because of the way the electoral college works, I do not currently subscribe to the idea of voting for anyone except __________.  Voting for the Libertarian candidate, such as Gary Johnson, and not voting for any candidate at all, are both rational options.  The candidate that represents me may not be able to win this election, but my vote will encourage him or her and others to be a voice crying out in the wilderness.

So, first things first.

I wouldn’t go to war again as I have done to protect some lousy investment of the bankers. There are only two things we should fight for. One is the defense of our homes and the other is the Bill of Rights. War for any other reason is simply a racket.

 

-Major General Smedley Butler, USMC, Two-Time Congressional Medal of Honor Winner

1)  Would or could you ever support amending the Bill of Rights?  If so, which, how, and why?

2)  Do you consider the recent actions of the United States military in Ukraine, Pakistan, Syria, and Libya, to be violations of the War Powers Act?  If no, then why?  If yes, then what actions would you take on this if elected?

3)  What is your position on the Federal Reserve Banks being responsible for regulating and supervising the very same banks that own them?

4)  What are the similarities between unlimited campaign contributions and bribery, and what actions would you take to reform campaign finance, if elected?

Bribery is the act of giving money, goods or other forms of recompense to a recipient in exchange for an alteration of their behavior (to the benefit/interest of the giver) that the recipient would otherwise not alter. Bribery is defined by Black’s Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or other person in charge of a public or legal duty.

 

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5)  The invasion and 14-year occupation of Afghanistan represents the longest war in American history. Explain your personal understanding of why, exactly, US soldiers and airmen are still killing Afghani people in their homes, schools, fields, shops, and hospitals? 

 

 

I hope ZH readers read and act on my article, hedgeless_horseman’s Revolutionary Call to Arms, and find the courage to ask your politicians some of these questions.

Peace!

h_h

via http://ift.tt/1s7x23z hedgeless_horseman

As we reported three weeks ago, the notorious Romanian hacker Marcel Lazar known also as Guccifer who first exposed Hillary Clinton’s private email address made a bombshell claim when he claimed that he also gained access to the former Secretary of State’s “completely unsecured” server. “It was like an open orchid on the Internet,” Lazar told NBC News. “There were hundreds of folders.”

This took place shortly after Lazar was extradited from Romania to the US to face hacking charges.

In the latest twist, Politico reports, Lazar is now expected to plead guilty this week, clearing the way for his unfettered cooperation with federal prosecutors, suggesting that all of his heretofore unverified claims about hacking into Hillary’s server will be duly investigated. If confirmed, this could open a new chapter in the FBI’s criminal probe into Hillary’s email use and/or abuse.

As Politico adds, Lazar is scheduled to appear in federal court in Alexandria, Va. Wednesday morning for a change of plea hearing, according to court records. A prosecution spokesman did not immediately respond to a message seeking confirmation that the guilty plea is part of a plea bargain with prosecutors. A defense attorney declined to comment. Such plea deals usually oblige a defendant to assist authorities in all ongoing investigations.

Lazar was indicted in 2014 on nine felony charges stemming from his alleged hack into the emails of several prominent Americans, including former Secretary of State Colin Powell, a relative of former President George W. Bush and George H.W. Bush, and former Clinton adviser Sidney Blumenthal. A set of Blumenthal’s emails were published online in 2013, disclosing a private email address Clinton used. She later changed the address.

Allegedly, Hillary’s personal email server was also among those hacked.

Clinton’s email arrangement is the subject of an ongoing FBI investigation, believed to be focused on how email messages deemed classified wound up on her server. Some reports have speculated that Lazar could demonstrate how vulnerable Clinton’s unusual email set-up was to foreign hackers, but it’s unclear how significant that fact would be to a decision about whether to seek criminal charges against Clinton or others involved in creating or using the unofficial email system.

If the DOJ’s ongoing “effort” to squash the probe – often in direct confronation with the FBI – is any indication, even full data dump by the Romanian may not spur any action, unless of course it is Obama’s intention to thaw the DOJ out of its deep freeze slumber right before the Democratic convention and somehow insert Joe Biden as the presumptive presidentical candidate.

via http://ift.tt/1s7x3o9 Tyler Durden

Submitted by Dan Calabrese via CanadaFreePress.com,

We didn’t do anything wrong, but we’ll stop doing it.

That’s pretty much what Facebook said late Monday by changing the policies it insisted did not need to be changed in order to stop the suppression of news stories that appear favorable to conservatives in its Trending Topics section.

Reuters:

Facebook Inc (FB.O) said on Monday that it had changed some of the procedures for its “Trending Topics” section after a news report alleging it suppressed conservative news prompted a U.S. Congressional demand for more transparency.

 

The company said an internal probe showed no evidence of political bias in the selection of news stories for Trending Topics, a feature that is separate from the main “news feed” where most Facebook users get their news.

 

But the world’s largest social network said in a blogpost that it was introducing several changes, including elimination of a top-ten list of approved websites, more training and clearer guidelines to help human editors avoid ideological or political bias, and more robust review procedures.

 

Earlier this month, a former Facebook contractor had accused the company’s editors of deliberately suppressing conservative news. The allegations were reported by technology news website Gizmodo, which did not identify the ex-contractor.

 

The report led Republican Sen. John Thune to write a letter demanding that the company explain how it selects news articles for its Trending Topics list.

Based on the various stories I read, it sounded like the key here was the list of approved web sites. Editors were told that if they found something on a conservative site like this one, they had to affirm it on a “trustworthy” site like, er, the New York Times. So it’s not as if they were told, “Don’t post stories about Fast and Furious or the IRS scandal!” They were told to make sure the New York Times and other MSM sites were also covering them. And since we all know the MSM likes to ignore stories that are trending on conservative media, voila! De facto bias.

But if the Gizmodo story was accurate, Facebook editors were at least in some instances putting their fingers on the scales by promoting pro-left movements like Black Lives Matter. If they’re not doing “more training” to stop that, I suspect that probably means they’re changing earlier training that very much encouraged it.

By the way, I remain troubled by the fact that the U.S. Senate got involved with this, and I hope that they drop it now that Facebook is changing their policies. As much as I didn’t like Facebook’s bias, which was impossible not to notice, it’s a private company (not privately held but operating in the private sector) and they can do whatever they want. Is the Senate going to haul Arianna Huffington before an investigative committee for making Huffington Post both liberal and completely inane? If the Democrats take back the Senate this year, will Harry Reid be issuing subpoenas to Herman, Rob and me? (Actually, I guarantee we would make that entertaining.)

That said, it does matter – a lot – when the news media tilts the scales in favor of the left in its news coverage, and I’m glad Facebook is at least making a show of changing its procedures. We’ll see if it actually makes a difference. Far too many people rely on Facebook’s Trending Topics section for their news, and they never fail to find out when a celebrity has a nipple slip or World Turtle Day arrives. It would be nice if they also knew the effects of big government and the insane agenda of the secular left.

Maybe that will start to change now. Maybe.

via http://ift.tt/1YVZWhy Tyler Durden

French police used water cannons and tear gas to break up a picket that was blocking access to a large oil refinery in the southern port area of Marseille, as Prime Minister Manuel Valls told the unions that "enough is enough." Valls went on to say that if labor unions continue to picket and disrupt fuel supplies, that they would be dealt with "extremely firmly."

 

Valls has changed his tone on the matter, as the unions have exhibited that they can in fact disrupt fuel supplies around the country. Unions have been striking and blocking fuel supplies from being delivered ever since the government bypassed parliament and enacted unpopular labor reforms earlier this month. Rationing at many of the roughly 12,000 gas stations nationwide has already begun as the pickets have started to create significant fuel shortages in the country.

 

The government has said that there are enough emergency fuel reserves if necessary, but has taken a firm approach to breaking up the pickets as now all 8 French refineries have gone on strike, and Exxon's Gravenchon refinery reports being down 50%, as it states that the plant isn't halted but no petroleum is being delivered.

CGT union boss Philippe Martinez said that the strikes will continue until the labor law is withdrawn, and that the government was "playing a dangerous game" by refusing to back down on the reforms.

"We'll see this through to the finish, to withdrawl of the labor law. This government which has turned its back on its promises and we are now seeing the consequences."

40 busloads of riot police took part in breaking up the strike outside of the Fos-sur-Mer refineries, which CGT union member Emmanuel Lepine called "unprecedented violence.", also noting that the plan to disrupt fuel supplies is working "output is going to fall by at least 50 percent."

As if the disruption in fuel supplies wasn't enough, the CGT has also called weekly strikes on the SNCF state railways and an open-ended strike on the Paris underground and suburban commuter train networks from June 2, a week befor ethe Euro 2016 soccer tournament opens.

Bloomberg has more:

• *Prime Minister pledges further state intervention after Fos, near Marseille, unblocked by force
• *CGT: ALL 8 FRENCH REFINERIES ARE ON STRIKE
• *Exxon’s Gravenchon in Normandy down by >50%
• *Plant’s units not halted but it’s not delivering petroleum

Alas, contrary to what Prime Minister Valls would like everyone to believe, it appears that he does not have the situation "fully under control."

via http://ift.tt/20wfyJ7 Tyler Durden

The market may be surging again, but that will hardly comfort Bill Ackman who later today is expected to report later today that his hedge fund remains roughly 20% YTD, or perhaps even worse following news from the NY Post, that his most hated stock ever, Herbalife, has reached “an agreement in principle with the Federal Trade Commission to settle a years-long probe into whether it was a pyramid scheme”, as a result of which the stock is soaring.

This follows the company’s announcement earlier this month that it was close to a settlement with the FTC.

As a reminder, the FTC’s probe into whether or not HLF is a pyramid scheme is also the basis for Ackman’s massive roughly $1 billion short in the name. If the FTC says no, then Ackman may have no choice but to cover.

This is what the Post reported:

An announcement of a deal could come as soon as Tuesday, sources said, although the agreement is not final and could still fall apart. Terms of the settlement — including what could be a sizeable financial penalty — could not be learned.

 

“I do not believe the FTC is requiring a substantial change in the business model,” a source close to the matter said. Herbalife has, though, agreed to pay a hefty fine, the source said.

 

The Los Angeles-based company has been operating under a cloud since Dec. 20, 2012, when hedge fund billionaire Bill Ackman announced a $1 billion bet that Herbalife was a fraud and that its shares would go to zero after regulators found it was a pyramid scheme.

 

The company has strongly denied the accusations.

 

The FTC subsequently opened a probe into the matter as did some state attorneys general.

The stock is already trading as if Ackman will have no choice but to cover, and was up 8% on the report (which however we would urge readers to take with 2 grains of salt, coming from a publication with a known axe to grind either for or against Bill Ackman in the past).

via http://ift.tt/1OU6hd3 Tyler Durden

Submitted by Melissa Quinn via TheDailySignal.com,

Six years ago, President Barack Obama signed the Patient Protection and Affordable Care Act into law. Since then, Americans have seen their premiums increase, a dozen nonprofit insurers have closed their doors and the number of people on the Medicaid rolls has expanded.

Americans nationwide have both praised and cursed the law since the federal and state-run exchanges launched in October 2013.

Many credit the president with giving them access to coverage—the result of Obamacare’s provision prohibiting insurers from denying coverage based on pre-existing conditions. Others, meanwhile, have reported high premiums and deductibles, with the cost of their coverage increasing annually.

And for some, the cost of premiums has increased enough to leave them choosing between paying for insurance or paying the fine and going without.

Here are five graphs charting Obamacare’s six-year history.

1) The Cost of HealthCare.gov

Obamacare’s implementation in October 2013 came with the launch of HealthCare.gov, the federal health insurance exchange.

Just six people successfully signed up for health insurance on HealthCare.gov on Oct. 1, 2013, because of massive glitches and failures with the site. In the months that followed the disastrous launch, the Republican-led House of Representatives held numerous hearings to determine why the Obama administration decided to launch the website.

The Department of Health and Human Services fired CGI Federal, which was originally tasked with building HealthCare.gov, after the website’s launch and signed a new contract with Accenture to rebuild the exchange.

Though the Obama administration hasn’t formally said how much HealthCare.gov cost the taxpayers, Department of Health and Human Services Secretary Sylvia Mathews Burwell said last May that the website cost $834 million. Similarly, a report from the Department of Health and Human Services Inspector General put the cost of the exchange at $800 million.

An analysis by Bloomberg Government, though, put the total cost at $2.1 billion. Bloomberg Government took into account budgetary costs for the Internal Revenue Service and other government agencies, as well as contracts reworked to pay for the website.

 

2) Obamacare’s 2014 Enrollment Numbers

According to the Obama administration, 9.25 million consumers enrolled in coverage in 2014 on the federal and state-run exchanges. An analysis of enrollment figures conducted by Ed Haislmaier, a senior research fellow in health policy studies at The Heritage Foundation, and Drew Gonshorowski, a senior policy analyst at The Heritage Foundation, found that the majority of those enrollees qualified for Medicaid under Obamacare’s loosened eligibility requirements.

 

3) Obamacare’s Failed Co-Ops

The Affordable Care Act allowed for the creation of consumer-operated and oriented plans, or co-ops, that were intended to inject competition into areas where consumers had few choices. The Centers for Medicare and Medicaid Services awarded $2.4 billion in start-up and solvency loans to the 23 co-ops that were eventually created.

Now, 12 of the 23 co-ops that opened their doors in 2013 have shuttered, and Republicans in Congress are questioning whether the taxpayers will see the $1.2 billion loaned to those failed insurers repaid.

 

4) Obamacare’s 2015 Enrollment Numbers

Earlier this month, the Centers for Medicare and Medicaid Services announced that nearly 8.8 million Americans had “effectuated” coverage at the end of 2015, meaning they were paying their health insurance premiums.

The agency praised this number as a sign of Obamacare’s success in expanding access to coverage.

However, health policy experts noted that there was a significant drop in the number of consumers who selected plans at the start of 2015—11.69 million—when compared to those who continued paying their premiums through the end of the year—8.78 million.

 

5) Insurer Participation in Each State Declined

Though Obama credited the Affordable Care Act with expanding access to health insurance and increasing competition among insurers, insurer participation in each state and the District of Columbia found that participation in the exchanges declined from 2015 to 2016.

When compared to 2015, 22 states and the District of Columbia have fewer insurers offering coverage on the exchanges in 2016. Just 10 states have more insurers offering coverage on Obamacare’s exchange.

Among the states that saw insurer participation decline from 2015 to 2016, the number of choices consumers have on the state-run or federal exchanges varies.

In Alaska, for example, just one insurance company is selling insurance to consumers in the state for 2016.

In Colorado, though, consumers can choose from eight different insurers selling coverage on the exchange this year. Both states saw fewer insurance companies selling coverage from 2015 to 2016.

Find out how many insurers are selling coverage in your state here.

via http://ift.tt/1VgQRAW Tyler Durden

In what has turned into a never-ending saga, we learned yesterday of the acquittal of one of the Baltimore police officers charged in the arrest of Freddie Gray. As The New York Times reported: “Officer Edward M. Nero’s acquittal on four charges for his role in the opening moments of Mr. Gray’s arrest was a second blow to the prosecution’s sweeping case, announced as Baltimore was still seething after the unrest following Mr. Gray’s death in April 2015.”

Among other things, the Freddie Gray case points to the path Baltimore has taken – a path to poverty. My colleague, Prof. Stephen J.K. Walters, and I wrote about this in the Investor’s Business Daily on April 22, 2016: “One Year After: Freddie Gray and ‘Structural Statism’”

Here is some of what we wrote about how the path of structural statism has contributed to Baltimore’s poverty and associated problems.

“When Freddie Gray was born in 1989, Baltimore hosted 787,000 residents and 445,000 jobs. By the time his fatal injuries in police custody provoked riots last April, the city’s population had fallen by one fifth, to 623,000, and its job base had shrunk by one quarter, to 334,000.

Little wonder that throughout his life, Mr. Gray had never been legally employed. Nevertheless, friends and family considered him “a good provider,” according to The Baltimore Sun.

This was because he worked in the drug trade, which filled his city’s economic vacuum. An average day on the corner can yield take-home pay ten times that available in the low-skill warehousing or service jobs sometimes available to high-school dropouts like Gray.

The catch, of course, is that such rewards carry two great risks. The lesser of these is regular involvement with the justice system. Gray was arrested 18 times and served three years behind bars in his tragically brief life.

Far more dangerous is how competition works in illegal markets. When selling contraband, one does not pursue market share by advertising high quality or low prices. Sales are increased by acquiring territory from rivals, often violently.

For Baltimore’s drug cartels, the post-riot disequilibrium provided an opportunity for market expansion. Inevitably, each strategic assassination produced reprisals and collateral damage.

As a result, 2015 saw the highest homicide rate in Baltimore’s history, at 55 per 100,000 residents — over 13 times New York’s rate. This horrific suffering was concentrated in the African-American community: 93% of victims were black, of which 95% were male and 65% aged 18 to 34.

In Freddie Gray’s demographic, then, the homicide rate was 450 per 100,000 — higher than the peak U.S. combat death rates recorded in the wars in Iraq and Afghanistan.

The prevailing narrative is that all this is a by-product of structural racism and exemplifies a society “built on plunder” (according to the celebrated black radical Ta-Nehisi Coates). This is a myth.

It is not that racism doesn’t exist but rather that it is relatively constant. When explaining variations in economic and social outcomes, constants have little power.

It’s the application of destructive public policies that explain why neighborhoods like Gray’s Sandtown-Winchester are deprived. If one had to put a label on this malignant force, it might be structural statism: an addiction to market-unfriendly governmental approaches to every problem.”

via http://ift.tt/25eqnmo Steve H. Hanke

Because nothing says 'fiduciary' duty like waiting until Europe closes to dump $850 million notional of gold…

To the tick 1130ET – when European stocks close – gold started to be dumped…

 

And Silver…

 

As The USD was suddenly bid…

 

Charts: Bloomberg

via http://ift.tt/1TuWdsU Tyler Durden

Last Friday we first reported on two surprising developments: one was a record accumulation of offshore crude tankers just off the coast of Singapore in the Straits of Malacca, awaiting higher oil prices to offload their precious cargo; the second was that as a result of previously profitable contango trades now flattening and making storage no longer profitable, oil shippers are now forced to ask for bank loans to fund offshore storage costs.

Over the weekend Morgan Stanley’s analyst Adam Longson also noticed our report, and released a report focusing on the problem of floating storage which continues to grow, especially in Asia, and how he thinks it will impact the price of oil.

This is what he said, most of which is a recap of what we said on Friday.

Floating storage continues to grow despite outages and poor economics. According to Reuters reports, at least 40 supertankers laden with crude are anchored offshore Singapore as floating storage. In fact, according to Reuters, the volume stored offshore Singapore is up 10% WoW despite outages, to 47.7 mmb. The increase in floating oil comes despite disruptions in the Atlantic Basin and an out-of-the-money floating storage arb, suggesting markets are not as healthy as sentiment suggests. It also highlights the speculative nature of much of the oil bounce this year (recent disruptions aside).

 

 

 

Southeast Asia is getting worse, with offshore volumes reaching the highest level in at least 5 years. According to Poten & Partners, “the volumes of oil stored at sea in South East Asia – predominantly Singapore and Malaysia – appear to have increased significantly”. Remember that the Straits of Malacca, carry 15+ mmb/d of ~56 mmb/d of world oil maritime trade – or ~27% of all seaborne oil – primarily from the Persian Gulf.

 

 

 

Falling global refinery maintenance may help seasonally, but we don’t expect much relief. Many local refineries have already made purchases for peak summer runs. Bloomberg also calculated 74 VLCCs already bound for China, the highest in 3 weeks, and Chinese imports are elevated in all other data sources. Yet, the offshore glut persists.

 

Unprofitable storage arbs hide a growing debt-fueled offshore trade as traders search for places to store oil. We estimate the Brent 1M floating storage arb is -$0.48/bbl while 12M is -$6.11/bbl, implying no incentive to store oil on ships. Yet, banks are seeing a sharp uptick in interest to finance storage charters. This storage is not happening for profit. Rather, the market is looking for places to store oil. To profit, traders need to hope for oil prices to rise enough to pay for the new debt incurred for this storage.

 

Similar situations are being repeated in the Gulf of Mexico and North Sea, but to a lesser degree. Local supply disruptions and seasonality have reportedly allowed some of that crude to be drawn down, but unsold cargoes and congestion remain.

 

Product markets are unhealthy too. The situation in Asian gasoline is no better, with gasoline tankers floating offshore in Asia, and the contango is more notable. Gasoline stocks remain stubbornly high in available weekly data, esp in Singapore where they built counter seasonally. Total product stocks in Japan and ARA also built counter seasonally.

Finally, some additional facts: according to shipbroker Gibson, nearly 9% of the global supertanker fleet is currently on storage duty: this is an increase of 40% since December despite a contango which no longer supports profitable offshore storage. As JBC notes, “the uptick in storage appears to be more of a global trend reflecting operational and logistical issues than traditional storage plays.” It then notes the following:

After 10 consecutive quarters of implied global oil stockbuilds, we see the uptick in floating storage as an indication capacity at the more convenient onshore locations is largely full. If this assumption is correct, then we should see volumes in floating storage decrease in the coming weeks given the expected Q3 stockdraw.

When it comes to onshore storage, JBC is right: as we pointed out last week using Genscape data, “Inventories At Cushing Are Close To Maximum Operating Capacity“, but it is not just Cushing – it is virtually every other land-based storage too. As for JBC’s conclusion: “this situation (growing floating storage and flattening market structure) should not be sustainable, potentially providing a key reason why prices have failed to break above $50 so far.”

They also warn that if the situation does not improve, it will become a drag on front-end prices. The only question is when.

via http://ift.tt/1NJBVKb Tyler Durden