Home › Forums › Refining Community › Refinery News › Update2 – (BN) Speculators Morgan Stanley/Citigroup Seek Supertanker store Crude › RE: Update3 – (BN) Oil Traders/Speculators Miss Boat as Contango Shirnks
Oil Traders May Miss Boat as Contango Shrinks: Chart of the Day
By Alexander Kwiatkowski and Alaric Nightingale
Jan. 22, 2009 (Bloomberg) — Oil companies and banks may have lost
the chance of profiting from storing crude at sea, a trade that
tied up almost a day of global demand for the commodity.
Companies including Citigroup Inc.s Phibro LLC, Royal Dutch
Shell Plc and BP Plc have stored oil on tankers as the so-called
contango, a market where buyers pay more for supplies later in
the year than now, allowed them to profit from hoarding crude.
With a wider spread, traders could buy oil for immediate
delivery, sell futures and pocket the difference as long as it
was greater than storage, insurance and finance costs. The CHART
OF THE DAY shows a narrowing difference between European crude
for delivery now and December futures, the red line, and higher
freight rates, the blue line.
The opportunities are disappearing, said Ehsan Ul-Haq,
head of research at oil market consultant JBC Energy GmbH in
Vienna. Freight rates have been rising. It is becoming
difficult to store crude on tankers.
Traders are storing as many as 80 million barrels at sea,
seeking to profit from the contango, Frontline Ltd., the largest
owner of supertankers, said last week. The contango is likely to
narrow further as the Organization of Petroleum Exporting
Countries cuts supply, Ul-Haq said.