A Farewell Contango?

The storage of crude oil and petroleum products at sea has been an important factor in the tanker market throughout 2009. It can be argued that the use of tankers as floating storage by refiners, oil majors, and traders has helped support freight rates by providing term employment for ships in a challenging rate environment. The contango structure in crude oil markets which inspired the uptick in storage fixtures has narrowed since the first quarter of this year and there are indications that the dynamics of floating storage are in flux. Some players who have been storing crude oil on tankers appear to have changed their strategy, as the amount of oil in floating storage has fallen in recent weeks. It is unclear whether these market players continue to dance with the contango or are merely finding another home for excess barrels. Download here