Chapter 610
Holding Hundreds of Millions of Barrels of Oil
at the same time.
Calgary, Canada.
At Husky's headquarters, Hutchison Whampoa CEO Simon Murray and Husky CEO Art are meeting with representatives of the Chan family, 'Chan Sze-kei' and 'Chan Chak-lai'.
Art was a friend of Chen Wenjie, and it was he who guided the Chen family to acquire Husky.
At this moment, Art, however, could not remain optimistic and said:
"Dubai crude oil has fallen from $21 per barrel at the beginning of the year to $12.8 per barrel. Our 20 million barrels of Dubai crude oil reserves have incurred a book loss of up to $70 million (reserves began in March), not including the cost of the reserves."
He continued, "In the first half of this year, the global oil market was in a state of 'oversupply.' Tempted by the high crude oil prices at the beginning of the year (Dubai oil at $21 per barrel, Texas Intermediate oil at $24 per barrel, and London Brent oil at $23 per barrel), coupled with many predictions that supply and demand would tend to balance in 1990 and oil prices would rise steadily, OPEC, apart from slightly reducing production in January, started producing 23.8 million barrels of oil per day from February onwards, which is 1.6 million barrels per day more than the quota."
After he finished speaking, he looked at the Chen siblings.
The Chen family sent people to be in charge of this oil reserve, and Husky's oil reserve facilities have also seen a significant increase in capacity in recent years.
2000 million barrels, which is equivalent to 300 million tons of oil, is actually not a lot.
Chen Zeli said confidently, "President Art, since our family is in charge of this oil speculation, we will not shirk any responsibility. We are confident that oil prices will rise sharply in the second half of the year. Please give us some time."
He respected his father's friend and did not regard him as a 'vassal'.
Art knew that this operation was being directed by Chen Wenjie, the head of Cheung Kong Holdings, so he said with relief, "Alright. Since you are so confident, I won't say anything more. Victory (Chen Wenjie) is an excellent entrepreneur, and I trust his judgment."
At this point, Ma Shimin said, "Ah, Husky will need to buy oil in the futures market this time. Hutchison Whampoa will temporarily allocate US$1 million as margin. The matter will be handled by Chen Siqi and Chen Zeli, and it will be in Husky's name."
Art was surprised and said, "This is a gamble."
Chen Zeli replied, "We are confident, and we have also conducted a thorough analysis."
"Alright. Since headquarters has made the decision and the parent company is responsible for the funding, I will cooperate with your actions."
"Thank you, President Art."
With the decision made, the four-person team acted swiftly, each starting to buy Brent crude, Dubai crude, and Texas Intermediate crude futures.
On the private jet bound for New York, Chen Zeli asked his sister Chen Siqi curiously, "Sister, Father has always valued stability and would never decide to invest in futures trading. Why do you think it is this time?"
As his children, how could they not know that their father was always cautious and sought stability to protect the business passed down from their grandfather? Development without forgetting stability, and stability without forgetting development—this was a true reflection of their father.
29-year-old Chen Siqi inherited her grandmother Yan Renmei's genes. Although she is not as beautiful as Yan Renmei was in her youth, she is still capable and pretty. She is already married and was introduced to a promising young man by the elders of the family. Chen Siqi continues to serve the 'Chen family', and in some ways even surpasses her aunt Chen Mengyi. She is deeply respected and trusted by her grandfather Chen Guangliang.
At this moment, Chen Siqi was still reviewing documents on the private jet. Hearing her brother's question, she didn't even look up and replied, "Grandpa is in very good health."
Chen Zeli instinctively asked, "I know, I..."
Before he could finish speaking, Chen Zeli stopped abruptly, realizing something, and said, "I was wondering how Father would dare to do such a thing."
Chen Siqi immediately raised her head and said, "What did you say?"
Chen Zeli smiled awkwardly and said, "I said that my father has always listened to my grandfather's teachings and does not make risky investments. This time he is acting strangely because he consulted my grandfather."
Chen Siqi is a law master's graduate and is responsible for the legal counsel of the family and family business. She is usually very serious and has a lot of authority in front of her younger brothers.
Chen Zeli is 27 years old this year. He has been in charge of the 'World Expo Project' in Canada since 1988. His participation in the investment of spot and futures oil was just a learning experience.
On the contrary, Chen Siqi, who is in charge of legal matters, has begun to get involved in other businesses of the family business and is the main person in charge of this investment in oil futures.
This is also Chen Guangliang's intention; people with legal backgrounds have great potential to become senior executives and CEOs. Among Chen Wenjie's four children, there's no consensus yet on who will ultimately succeed him; anything is possible, and they are all being groomed.
After arriving in New York.
Chen Siqi immediately took charge of buying oil futures, not only in the New York market, but also in the London and Singapore markets, but mainly in the New York market.
Her grandfather personally instructed her to make a 40-day purchase, with a margin of 100 million US dollars, divided into two batches: 50 million US dollars as margin, with a leverage of 10 times, equivalent to buying 500 million US dollars worth of crude oil futures; and the other 50 million US dollars was just as a reserve margin to avoid being liquidated.
"Ms. Chen, Saudi oil prices have dropped by $0.2 per barrel!" a white trader reported.
Chen Siqi crossed her arms and said efficiently, "From now on, you don't need to report prices to me. We just need to buy every day, keep buying. Of course, we need to be careful to avoid margin calls and add margin in time."
"Yes"
The traders immediately resumed their operations, seeing absolute confidence on Chen Siqi's face.
Early November.
At Jeddah Port in Saudi Arabia, Chen Wenming looked at a super VLCC oil tanker that was already loaded with 'Middle Eastern heavy crude oil' and seemed to be in a good mood. This was the last ship to be loaded by Global Shipping.
In the past two months, Chen Wenming personally orchestrated the process, first by utilizing a 400 million-ton oil tanker from Global Shipping, and then by leasing a 600 million-ton oil tanker, for a total of 1000 million tons of oil tankers.
This includes the 'Sea Giant' (56.6 tons), formerly owned by the Tung Chao-yung family, which was also leased by Global Shipping. This super VLCC oil tanker was hit by a missile during the Iran-Iraq War, and after repairs, it was renamed 'Happy Giant' and subsequently sold to the Norwegian tanker company Loki Stream for $3900 million, renamed 'Jahre Viking', and used as a floating oil depot. The Norwegian company happened to be willing to sell, so it leased it to Global Shipping.
A tanker carrying a full 1000 million tons of oil is equivalent to 7000 million barrels of oil, which is only about four days' worth of OPEC production.
It may seem like only four days' worth of production, but if the world lacks four days' worth of production, it will impact the economies of all countries. Of course, the fact that OPEC's production exceeded demand in the first half of this year conveniently facilitated Chen Wenming's actions.
"Chen, I still don't know which oil company your oil is being transported for?" The Saudi Crown Prince spoke with Chen Wenming on the dock.
Starting with Chen Wenming's father, the family maintained good relations with the Saudi royal family and the heads of Middle Eastern oil-producing countries. Although Chen Guangliang was betrayed by the Saudi royal family during the Jeddah Agreement, the relationship was not greatly affected, because everything was due to pressure from the United States. "Your Highness, to be honest, this oil is not for other oil companies to store, but is part of the oil trade."
The Crown Prince was not surprised. Instead, he said, "Your family also owns oil companies and refining businesses, but this time your purchase is huge. It seems that you, like your father, like to 'buy at the bottom'."
"Haha, I can't compare to my father, but thank you for your praise, Your Highness!"
Chen Wenming was in a good mood. The cost price for this 7000 million barrels of oil was only about $14 per barrel, which included the storage costs for the next four months.
Of course, the storage method for this 1000 million tons of oil was to have dozens of VLCC oil tankers fully loaded and then sail to ports around the world. These ports all share the characteristics of being convenient for immediate sale to demanding countries and having low port berthing fees.
For example, those sold to the United States will dock at a port in Mexico or South America; those sold to Europe will dock at ports in Spain, Morocco, Algeria, or other regions; and those sold to Japan will dock at ports in Southeast Asia or Hong Kong.
The Saudi Crown Prince naturally did not believe that the Chen family was only involved in the oil trade, and he reported this to his father after returning home.
"The Chen family and its oil companies Husky Energy and Hong Kong Electric have purchased a total of 9500 million barrels of oil, sourced from Saudi Arabia, as well as OPEC members such as Kuwait, Iraq, and Algeria."
The king exclaimed in surprise, "This is already 4 to 5 days' worth of OPEC production. What are they trying to do?"
The Crown Prince said, "Perhaps they anticipate a surge in crude oil prices and are preparing to stockpile. Their oil tankers, docked in ports around the world, are not supplying crude oil to other countries."
The impact of more than 9000 million barrels of oil is no longer a simple matter.
Not only do people in the Middle East already know that these oils haven't been sold, but even some of their spies in Europe and America have gotten wind of it.
"The only thing that could go wrong is the negotiations between Iraq and Kuwait."
At this time, Iraq hopes that Kuwait will reduce production, or even the entire OPEC, in order to lower output and raise crude oil prices.
Kuwait, Saudi Arabia, and other countries naturally don't want this; they want to sell more oil and seize a larger share of the global supply market. Moreover, the United States is behind these countries, hoping to suppress global oil prices and further damage the economies of oil-exporting nations like Iraq and even the Soviet Union.
Lamma Island, Hong Kong.
Chan Man-kit inspected the Hong Kong Electric Power Plant on Lamma Island, accompanied by Hong Kong Electric CEO Hears and his entourage.
Hong Kong Electric is just a subsidiary of Cheung Kong Holdings, but its market value is quite high, and its annual profit has exceeded HK$2 billion. It owns Hong Kong Electric Company and nine wholly-owned subsidiaries, including Fortress and Ka Wan, as well as five joint ventures, including International City. Its business covers a wide range of sectors, including power, real estate, engineering, industry, trade, retail, and insurance.
Moreover, at the peak of the stock market in 1987, HK Electric spun off a non-electricity listed company, Ka Wong International, which had an annual profit of around HK$8 million.
"Mr. Chan, HK Electric currently has a total oil reserve of 150 million tons. Of these, 60 tons are stored in the Lamma Island oil depot, and the remaining 90 tons are stored in oil tankers at Lamma Island."
It is a normal practice to lease out some oil tankers that are about to be scrapped or are idle and use them as offshore oil storage facilities.
Chen Wenjie nodded and said, "Hong Kong's demand for crude oil last year was 1100 million tons, so 150 million tons is not much. We should not use the reserve crude oil recently, and buy the cheapest crude oil we can."
"it is good"
Since the 1980s, Hong Kong has encouraged electricity use, resulting in a surge in power generation by Hong Kong Electric and CLP Holdings, and their profits have also increased year by year.
In addition, HK Electric is the parent company of Fortress Electrical Appliances in Hong Kong, a major electrical appliance retailer in Hong Kong. Since the mid-1980s, HK Electric has also been expanding overseas, investing in power plants, power transmission networks and other projects in Southeast Asian countries such as Thailand, the Philippines and Malaysia.
And this is just the beginning. Next, countries such as India, Australia, and the United Kingdom will consider investing in power transmission networks and power plants.
As July progressed, crude oil prices did not change significantly.
But in late July, news suddenly broke that negotiations between Iraq and Kuwait were not going well, and international crude oil prices began to climb, though not significantly at that time.
Ping An Bank Building, Central.
In his office on the 70th floor, Chen Guangliang was listening to work reports from Chen Wenjie and Chen Wenming.
This very office controls a global business empire, affecting the fate of millions of people, and is worth nearly a hundred billion US dollars.
Hearing that everything was ready, Chen Guangliang said with satisfaction, "The signal has been sent! Negotiations between Iraq and Kuwait are not going well, and Kuwait is Iraq's major creditor. However, Iraq has a strong and well-equipped army and naturally does not want to repay its debts, but instead will directly annex Kuwait. At that time, the flames of war in the Middle East will reignite, and the third oil crisis will naturally come."
Chen Wenming was delighted and said, "Father is like the chess player, everything is under your control."
Chen Guangliang smiled and said, "The international situation changes constantly, but the underlying principles remain the same; everything is traceable. Of course, we cannot be greedy this time. It is expected that oil prices will peak within three months, but the Americans will never allow the oil crisis to spread, so they will inevitably intervene. Therefore, we must act quickly and decisively, without greed, and without trying to squeeze out the last penny. For example, when Middle Eastern oil rises to $25 per barrel, we should quickly start cashing out; for Texas oil and Brent oil, we should cash out when they reach around $30. Do you understand the specific operations?"
"clear"
With their family's network of connections and channels, they naturally have no worries about selling their oil. They have channels and relationships in the United States, Japan, Europe, and even many other countries.
After all, having been in the shipping business for over fifty years, their network of connections has always existed and has only grown larger.
After his two sons left, Chen Guangliang smiled.
This oil crisis could potentially generate two billion US dollars in profit, given the holding of physical oil and the fact that the average purchase price was at its lowest point.
In addition to holding nearly 1 million barrels of crude oil, Husky also bought futures in the New York futures market. Furthermore, the "second office of the Chen Guangliang family" also invested $3600 million in buying oil futures.
During the first and second oil crises, the futures market was neither large nor mature. Chen Guangliang made some money by using oil tankers; for example, during the second oil crisis in 1973, he earned hundreds of millions of US dollars.
On August 2, Iraq invaded Kuwait and quickly occupied the entire territory.
On August 7, U.S. troops were deployed to Saudi Arabia.
Following Iraq's invasion of Kuwait, it faced international economic sanctions, which disrupted Iraq's oil supply and damaged Kuwaiti oil facilities, causing a sharp rise in international oil prices. (End of Chapter)