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209:(SPR) is the world's largest supply of emergency crude oil—727 million barrels— stored in huge underground salt caverns along the coastline of the Gulf of Mexico. An emergency oil stockpile was recommended by several Presidents throughout the twentieth century, in 1944, in 1952, 1956 and in 1970. The SPR is a "deterrent to oil import cutoffs and a key tool of foreign policy" but it has rarely been used.
216:(GAO) recommended reducing the size of the Reserve. According to the report, the amount of oil held in reserve exceeds the amount required to be kept on hand since the need for foreign imports of crude oil have decreased in recent years. The report said the U.S. Department of Energy agreed with the GAO’s recommendation.
193:, combined with the $ 12 million upfront well drilling and construction costs, provide incentives to oil producers to continue to flood the already glutted market with under-priced oil in spite of crude oil storage limitations. Many less efficient and less productive older wells were shut down but these
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The strategy works because oil prices for delivery in the future are trading at a premium to those in the spot market - a market structure known in the industry as contango - with investors expecting prices to eventually recover from the near 60 percent slide in oil in the last seven
141:
From June 2014 to
January 2015, as the price of oil dropped 60 percent and the supply of oil remained high, the world's largest traders in crude oil purchased at least 25 million barrels to store in supertankers to try and make a profit in the future should prices rise.
44:
Investors can choose to take profits or losses prior to when the oil delivery date arrives or they can leave the contract in place and physical oil is delivered on the set date to an officially designated delivery point. In the United States, that is usually to
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By 5 March 2015, as oil production outpaced oil demand by 1.5 million barrels a day, storage capacity globally dwindled. Crude oil is stored in old salt mines, in tanks and on tankers. In the United States alone, according to data from the
116:"The trend follows a spike in oil futures prices that has created incentives for traders to buy crude oil and oil products at current rates, sell them on futures markets and store them until delivery."
100:
The concept started to be used by oil traders in the market in early 1990. But it was in 2007 through 2009 that the oil storage trade expanded. Many participants—including Wall Street giants, such as
49:, Oklahoma. When delivery dates approach, they close out existing contracts and sell new ones for future delivery of the same oil. The oil never moves out of storage. If the forward market is in "
61:—the strategy is very successful. While new tanks have been added in Cushing for a storage capacity of 6.6 million barrels, by March 2015 all the tanks were fully leased through 2015.
453:
206:
190:
112:—turned sizeable profits simply by sitting on tanks of oil. By May 2007 Cushing's inventory fell by nearly 35% as the oil-storage trade heated up.
41:
in which they agree on a contract basis, to buy or sell oil at a set date in the future. Crude oil is stored in salt mines, tanks and oil tankers.
138:
By the end of
October 2009 one in twelve of the largest oil tankers were being used more for temporary storage of oil than for transportation.
315:"Oil Glut Sparks Latest Dilemma: Where to put it all as storage tanks near capacity, some predict spillover will send crude prices even lower"
76:
In 2015, global capacity for oil storage was out-paced by global oil production and an oil glut occurred. Crude oil storage space became a
29:, is a market strategy in which large, often vertically-integrated oil companies purchase oil for immediate delivery and storage—when the
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were reported as booked with storage options, rising from around five vessels the prior week. Each VLCC can hold 2 million barrels.
213:
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178:, U.S. crude-oil supplies were at almost 70% of the U.S. storage capacity, the highest supply to capacity ratio since 1935.
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480:
367:"Where Has All The Oil Gone? After Sitting on Crude, speculators Unload It. The World's Eyes Fall on Cushing, Oklahoma"
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continue to increase production while making a profit in a market where crude oil is priced as low as $ 50 a barrel.
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is low— and hold it in storage until the price of oil increases. Investors bet on the future of oil prices through a
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contracts in March 2015. Traders and producers can buy and sell the right to store certain types of oil.
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began to book oil storage supertankers for up to 12 months. By 13 January 2015 at least 11
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454:"U.S. Oil Exports Would Lower Gas Prices, Government Report Says - WSJ - WSJ"
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279:"Why speculators are stashing vast quantities of crude oil on tanker ships"
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25:
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168:
Very Large Crude
Carriers (VLCC) and Ultra Large Crude Carriers (ULCC)
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249:"Oil traders to store millions of barrels at sea as prices slump"
134:(1979-2010), a ULCC supertanker and the longest ship ever built.
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433:Office of Fossil Energy, U.S. Department of Energy
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343:"Tankers store oil as futures prices rocket"
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212:On October 20, 2014, a report by the U.S.
191:hydraulic fracturing in the United States
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404:Why Cheap Oil Doesn't Stop the Drilling
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277:Yglesias, Matthew (25 December 2014),
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384:Norris, Michele (17 December 2008).
429:"Strategic Petroleum Reserve (SPR)"
386:"Contango In Oil Markets Explained"
341:Wright, Robert (17 November 2009).
14:
313:Friedman, Nicole (5 March 2015),
201:Strategic Petroleum Reserve (SPR)
176:Energy Information Administration
214:Government Accountability Office
365:Davis, Anne (6 October 2007).
1:
207:Strategic Petroleum Reserve
57:is higher than the current
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185:, the efficiency of newer
226:Contingent payment sales
452:Berthelsen, Christian.
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23:, also referred to as
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35:financial instrument
481:Oil and gas markets
371:Wall Street Journal
319:Wall Street Journal
121:Financial Post 2009
90:oil-storage futures
205:The United States
183:Bloomberg Business
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78:tradable commodity
255:. 13 January 2015
21:oil-storage trade
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16:Market strategy
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181:According to
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84:— which owns
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55:forward price
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457:. Retrieved
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409:, retrieved
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257:. Retrieved
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71:Reuters 2015
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31:price of oil
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486:Oil storage
132:Knock Nevis
88:— offering
39:oil futures
475:Categories
459:20 October
438:21 January
288:21 January
259:20 January
232:References
96:Chronology
59:spot price
187:shale oil
144:Trafigura
82:CME Group
220:See also
119:—
110:Citicorp
69:—
51:contango
26:contango
411:6 March
324:6 March
253:Reuters
66:months.
47:Cushing
152:Gunvor
108:, and
53:"—the
160:Shell
148:Vitol
86:NYMEX
80:with
461:2014
440:2015
413:2015
326:2015
290:2015
261:2015
156:Koch
130:The
19:The
283:VOX
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263:.
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