Oil traders see glimmer of profit in hoarding crude at sea

Singapore

OIL traders once again believe it's worth heading out to sea.

The market structure for Brent crude, the benchmark for more than half the world's oil, now makes it viable to store supplies in a ship to potentially lock in profits on a sale six months later, according to a Bloomberg survey of six traders and analysts. In August, cargoes for later delivery have averaged US$2.78 a barrel higher than prompt shipments, more than covering the cost to hire a tanker for storage for half a year.

This discount of near-term supplies versus cargoes for later, known as contango, was as little as 70 US cents in April, when shipping costs were higher as well, making it unlikely then that traders could potentially profit from floating storage. But with front-month futures sliding since early June and tumbling into a bear market this month amid swelling onshore stockpiles, the market structure has changed while freight has also become cheape…