Oil on the Water

 12/12/2025

 

Oil on the Water

Dark barrels of oil are accumulating on the ocean.

Wall Street Journal, 12/11/2025

Russia, Iran, and Venezuela are all sanctioned. Those barrels at sea are referred as ‘dark barrels.’  This means they are not officially counted as oil production. Dark barrels may be as high as 1.4 billion barrels, that’s a lot of oil on the water so to speak. This is sharply higher than 2024 we the number ran between 1.1 and 1.2 billion.

15% of the world’s oil supply are now under sanctions. Putin is promising India uninterrupted oil shipments. His ‘shadow’ fleet of tankers has been able to eventually deliver to Russia and China in the past.  China has been adding about 290,000 barrels a day to storage.  This dampens the ‘extra’ supply of oil literally floating around the world.

As they are in China, the oil reserves do not officially count. Were that oil in Cushing, OK the situation would look like 2020 when the market literally ran out of storage. The oil price went negative as there was not enough space to accommodate all the supply.   But since the oil is in China the price has remained steady around $60 for WTIC, higher for Brent.

The International Energy Agency is located in Paris, France. Did you really think they would choose, say Libya? 

OPEC output has slowed due to problems in Kuwait and Kazakhstan.  Official supply has dropped 1.5 million barrels a day. OPEC is based in Vienna, not Kuwait, no surprise there!  OPEC is set to add another 137,000 barrels a day in December

Meanwhile in the Caribbean, Venezuela’s export income is 90% based on oil.  The US seized one of the tankers Wednesday carrying $80 M of oil. That is about 5% of what the country spends on imported goods. So even one seizure has real meaning for Maduro’s regime. It seems a safe bet that Trump has not deployed 20% of the entire US Navy to seize one or two or three tankers. Dissident Machado is in Oslo, Norway accepting the Noble Peace Prize for her opposition to Maduro. In disguise, she  passed ten military checkpoints, boarded a boat and finally a private aircraft to get there. Time is running out for Maduro.

Our   forecasts for the stock market have been incorrect. The Industrials rose about 1,000 points the last two days.  That index is down 327 Friday morning. I can cite many statistics about how there are more bulls than ever, consumer confidence is falling, gold and silver are rising but alas the market us up. I have no further suggestions at this point.

My predictions about the bond market have proven correct. Despite the FED cut of a quarter point, which merely now matches the three-month T-bill, ten-year rates are up a full 1.18% today.  Higher long-erm rates lie ahead.

Dennis.elam@att.net