Oil traders hoard crude at sea

The collapse of global oil prices has prompted commodity traders to start hiring supertankers again because they can make a profit from stockpiling crude oil at sea.

The oil giant Shell and energy traders Vitol and Trafigura have recently booked tankers for up to 12 months, shipping sources told Reuters yesterday.

Experts say the move suggests they are looking to store oil at sea in a repeat of behaviour seen in 2009. Then the sight of ships filled with crude moored off the British coast caused outrage over oil “speculators” supposedly pushing prices higher, not least among motorists.

But it’s a move based on a situation known in the markets as a “contango”, when spot or current prices fall below the cost of buying oil for delivery at a future date. Traders can currently buy a barrel of Brent oil for less than $51, while barrel for delivery in August is going for more than $57, a “contango” of more than $6. Analysts reckon the contango needs to be about $6.50 a barrel to cover associated costs such as tanker hire, finance and insurance and give traders a profit on offshore storage.

Vitol, the world’s largest independent oil trader, is understood to have booked the TI Oceania Ultra Large Crude Carrier, one of the biggest ocean-going vessels in the world.