London: Holding crude oil for storage at sea no longer makes commercial sense because contango market conditions have narrowed, according to Statoil’s trading chief.
Brent crude prices have rebounded from a 52-week low of $45.19 on January 13 to $57.54 today, which has squeezed the price differential between the spot price and futures contracts.
Rune Bjoernson, Statoil’s head of marketing and trading, told Reuters on Wednesday that, although contango market conditions persist, the profits are not high enough to warrant storing oil at sea. Some selling has commenced, he said.
It costs an average of $1.00 to $1.20 to profitably store oil in VLCCs at sea, Bjoernsen said.
Reuters reports that contango between the first and second months for Brent LCOc1-LCOc2 contracts was just 36 cents on Wednesday, down from over $1.30 in February. Contracts for August delivery were today trading at $3 above the spot price, it said.
Only half the tankers booked to hold crude oil at sea two months ago are still earmarked for storage, the report said.
