Want to Make a Big Bet on Oil Prices? Try Measuring Shadows | WSJ

Want to Make a Big Bet on Oil Prices? Try Measuring Shadows | WSJ


(projector buzzing) – [Narrator] This is the world’s largest oil processing plant, located in the Eastern
Province of Saudi Arabia. Early on Saturday, September
14th, a series of explosions rocked the facility, and the
world woke to see it burning. – [Reporter] Satellite
images show thick black smoke billowing from the Aramco
Oil Facility in Abqaiq. – [Reporter] The nation’s
state-run oil company, Saudi Aramco, has temporarily
closed its facilities, which many experts expect
will cause a lack of supply leading to higher global oil prices. – [Narrator] But while the
world was looking over here, energy traders on Wall
Street and elsewhere were also looking over
here and here and here at thousands of storage
sites around the world where companies and
countries stockpile oil. What’s inside these tanks can be valuable information for traders who make big bets based on
how much supply is available and where in the world it’s located. For traders, an event like
the one in Saudi Arabia can be an opportunity.
(dramatic orchestral music) – So in the event of, you
know, market crisis situations or disaster events,
there’s a natural increase in volatility, and we do
see increased interest from our client base and
from prospective clients. – [Narrator] Mario De La
Ossa is an energy specialist at Orbital Insight, a
company that estimates the tanks’ contents
using satellite imagery, artificial intelligence, and
a lot of complicated math. – I guess to say, well, we are quite proud of our coverage levels,
which are on the order of seeing about 80% of the
world’s oil tanks every week. – [Narrator] Orbital is
at the vanguard of firms that sell data to hedge
funds, energy companies, and others who are looking to
anticipate oil price moves. To get their hands on the data, the first thing Orbital had to do was find as many of
these tanks as it could. Employees train computers to spot them by feeding them image
after image of oil tanks. Once the computers got the picture, they scanned satellite imagery and found more than 25,000
tanks around the world. Orbital is constantly
collecting images of each tank which its computers then examine
to estimate their contents. The key to doing that lies in the shadows, particularly those cast
upon the tops of the tanks. – [Mario] A floating roof
tank goes up and down according to the volume of
oil that’s inside of the tank, and that’s done to prevent
a vapor space from forming that would be very bad in
terms of explosion risks. – [Narrator] Orbital’s computers
measure the shadows cast on and around the area of each tank. The shadow cast to the outside is used to determine
the size of each tank, which can range from 50,000
barrels to more than a million. The shadows cast inside the structure is used to measure how much
oil is inside the tank. Generally, the bigger the shadow, the less oil there is inside. – So we have that going for us, that where the position of the roof is, it will correspond to the volume
of oil inside of the tank, but then to actually
calculate the specific volume, this does become, you know, complex in terms of aligning the exact
position of the satellite, the position of the sun to adjust for the shadow
length that was cast. – [Narrator] Orbital
then adds up the volumes and compares them over time, noting when stockpiles grow and
shrink in different regions. The company is able to do this quickly, beating official reports by
weeks and sometimes even months, and they can offer insight
to parts of the world where supply data are scarce or suspect. – So how much is there in,
let’s say, Cushing, Oklahoma, and that’s fairly well-tracked. What’s not fairly well-tracked, and this is one of the big problems for people on the marketplace,
is how much oil is in China, because the Chinese don’t
openly disclose that. Historically, 80% of the
market has just been very dark. (pleasant electronic music) – [Narrator] Knowing how
much oil is out there and where it’s stockpiled is useful to a range of businesses. Energy producers use it to
decide whether to drill wells. Refiners that turn crude
into products like gasoline and jet fuel wanna know when
to buy their main ingredient. Hedge funds and other speculators
simply wanna make money. These traders might act on clues that stockpiles are dwindling by buying oil now and selling
it later once other buyers realize supplies are low
and the price goes up. Predicting changes in the availability and thus the price of oil
can be incredibly lucrative. Andy Hall, who advises Orbital, is one of the most successful and well-known oil
traders of recent decades. He made a fortune buying
boatloads of cheap oil before Saddam Hussein
invaded Kuwait in 1990, which touched off the first Gulf War and sent crude prices soaring. Traders like Hall are always looking for ways to gauge oil supply. They count the rigs
that are drilling wells and measure what’s
passing through pipelines. They train cameras on import
and export loading docks and count tankers moving through waterways like the Houston Ship Channel
and the Strait of Hormuz. Firms like Orbital have
taken this kind of detection to a whole new level. Before the attacks on Saudi Arabia, Orbital observed a lot
of shrinking shadows on the tops of the kingdom’s oil tanks, suggesting that it was
building up its stockpiles, but after the attacks,
the shadows began to grow, which meant that Saudi Arabia was tapping reserves to satisfy customers, but the firm didn’t just look there. It looked at China, where tanks were full, and the U.S., which
were also well-stocked, and in Japan and South
Korea, which were not, and in India, where the
shadows were growing as imports from Saudi Arabia dwindled. Meanwhile, back on Wall
Street and in Houston and London and Singapore,
traders placed their bets. (dramatic piano music)

100 Comments

  1. Attacks like this happen when certain groups notice when a US administration has no real backbone and thinks "we can do whatever we want" now. It's sad that theres a group of Americans who either dont care or are too uneducated to understand how far reaching the effects of a spineless, money hungry and selfish government can reach. In this particular case, the worldwide economy suffers

  2. This "artificial intelligence" phrase is such a hype. It's just image recognition software, people are doing this for so many years. The diference is today's big computational power alowing you to analyse huge data

  3. And now the sell off continues. Oil prices are actually LOWER now than before the attack. Clearly OPECs scheme to raise oil prices has not worked

  4. 1. Just have an additional cover on top painted in Black? (May obsorb heat but have some layer of space for ventilation.)
    2. Have an additional permanent cover on top.
    3. There could be 400 other creative ways to hide the shadows .
    I feel sorry for their business model.

  5. Wouldn't it be nice if we could funnel some of this human ingenuity (i.e. traders/trading system) towards something that's actually productive?

  6. What about GEORGE SOROS??
    Funding ANTIFA all around the world to destabilize countries and profit from the falling market!! Like America, Paris yellow vests, Hong Kong protesters!! All ANTIFA!

  7. Yes, we had that before. 10 inches of Snow mean prices for Saudi rude oil are going up again. Proudly presented by Kamill.com

  8. kayrros is a french start up that does this tech way better. they are considered the leaders in this field. https://www.kayrros.com/

  9. Funny how fast both the Saudis and the market reacted. Basically, no disruption, prices quicky normalized. Hence, the little guys who tried to bet on market volatility, were crushed. Technology is a serious advantage … to those who can afford it.

  10. Lots of you are saying that they should try to conceal the contents of the tanks by covering them or filling them with water. Here's an example to show why that's ridiculous:

    Imagine that you own a rare car that was built in 1950. Only 1000 were built, and nobody knows exactly how many are still in existence. Is it in your best interest to spend a large amount of money in order to conceal the existence of your car? Whether there are believed to be 500 or 501 cars remaining, the market really doesn't care. Now, if you owned several hundred of those cars, you might be able to make a real impact on the market by hiding them.

    Long story short, it's just not worth it for the individual owners of these tanks to spend large amounts of money on concealing their contents.

  11. So they are trying to tell me that those tanks are not sealed on top. Cause the only say to see shadows inside is if the top have no covers. Also, with enough installation of powerful light sources, no shadows will be cast.

  12. I'm not as tired of the 'media' spreading the truth as much as I'm sick of hearing that nerd tell me to buy HIS media 'truth'.

  13. Good content, but not really digging this edgy VICE/Vox/Atlantic like style. Feel like hipster millennials are taking over this channel…

  14. So why don't those that store oil just build their oil storage facilities…underground? I understand that the cost would be much greater but wouldn't it benefit them to do so anyway?

  15. Oil is yesterday STOCK. Is a DONT BUY! Saudis did a SELF INFLICTED hit on themselves then blamed others. Just to up the price.

  16. Ah, The old measuring shadow to check on things trick. I mostly used shadow to check time. Wonder how accurate this method is.

  17. this company tells you when to hoard. hoarding in any form would lead to widening of the income gap between the rich and the poor in favor of the first. the outcome is a definite deterioration in the poor's standard of living.

  18. All I hear is that governments that like to sponsor massive hacking groups are going to try to get full access to the Orbital data. Then they will know precisely when and where to strike critical petroleum assets in advance of declaring war or launching a surprise attack.

  19. Not all stored oil is in above-ground tanks. Many countries like the United States store oil underground. How do you monitor that?

  20. As impressive as their efforts are, its not accurate enough. All this is is another tool traders can use to aid their speculations.

  21. Nothing happened. No investor rush. Why cause they had the info that enough oil was stored. Leading to no volatility

  22. At 1:19 what is the name of that Oreilly book with butterfly cover ..is it javascript..and the orange book behind that?

  23. Long story short, a lot of people don't actually produce anything, they just manipulate the mechanics of capitalist systems to earn fortunes.

  24. Instead of investing in clean energy with their millions, they just seek to earn that million dollars more just to have it.

  25. Big oils like Shell, Total and Chevron don't built external floating roofs for safety reasons. So bulk of the data is missing here!

  26. Next stage is for new tanks to be built in to the ground with the bottom below ground level and keeping height the same. Piping would have to go under too… see what I'm saying?

  27. Yeah, that's bs, what about if a tank is out of service, inspection mode or its being torn down or new tank is going up, you gonna be off by a large percentage 20% or more.
    Also don't forget all those tankers out at sea and underground storage as well.

  28. This video makes a good case for how this is a monopoly against your average person who may want to start a stock trading business, they don’t have a fair playing field, plain and simple.

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