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Contango shrinks- Shell sells by the sea shore

Posted by WARREN MOSLER on January 27th, 2009


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OPEC cuts starting to bite.

Saudis back in control of price as excess inventory dissipates.

Shell Sells Oil Cargoes, Phibro Tanker Leaves Orkney

by Alexander Kwiatowski

Jan 27 (Bloomberg) — Royal Dutch Shell Plc sold a cargo of crude stored off the U.K. and a vessel hired by Citigroup Inc.’s Phibro LLC left its anchorage in Scotland for the U.S. as the incentive to keep oil in tankers disappears.

Shell sold 600,000 barrels of North Sea Forties crude for delivery in mid-February at Scapa Flow near Scotland’s Orkney Islands to oil trader Vitol Group yesterday, the companies said. The cargo, already on board the supertanker Oliva, has been anchored off the U.K. coast since at least December, according to Bloomberg vessel tracking data.

Oil companies and traders have stored as much as 80 million barrels of crude on tankers

That’s not quite one day’s world consumption of crude.

as the so-called contango, a market where buyers pay more for supplies later in the year than now, allowed them to profit from storing crude. The incentive to store oil on vessels is shrinking as the spread between first- and 12th month crude narrows to about $10 a barrel from $17 in early December.


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2 Responses to “Contango shrinks- Shell sells by the sea shore”

  1. Mike Norman Says:

    Vitol’s back in the game again after trying to run a corner last summer, until the CFTC got wind of it. (Remember, Warren broke the story here!)

    With regulatory fervor now all but gone, Vitol will lead the way for other specs and commercials pretending to be commercials, but really speculating.

    I’m long crude.

    Reply

  2. warren mosler Says:

    good to know, thanks!

    watch out for the extreme contango in the front month due to funds rolling. might be better to be long rbobs with the forward cracks still reasonably narrow? any pickup in demand should widen them?

    Reply

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