Jan. 14 (Bloomberg) -- Frontline Ltd., the world’s biggest owner of supertankers, said about 80 million barrels of crude oil are being stored in tankers, the most in 20 years, as traders seek to take advantage of higher prices later in the year.

Traders are seeking to profit from a market situation called contango where futures prices are higher than the cost of immediate supplies. A purchaser could buy oil now, keep it for months at sea and fetch better prices by selling oil futures that are higher than the spot price.

“In this current financial situation I guess it’s one of the more safe bets to do,” Jens Martin Jensen, Singapore-based interim chief executive officer of the company’s management unit, said by phone today. Thirty to 35 very large crude carriers, each designed to haul 2 million barrels of crude, are storing oil, with the rest on ships half the size called suezmaxes, he said.

Investment banks, which tend not to hire supertankers, are among those attempting the trade, Jensen said Jan. 9. Phibro LLC, the commodities-trading unit of Citigroup Inc., stationed the 1 million-barrel carrier Ice Transporter off the coast of Scotland for the purpose, people familiar with the matter said last week.

The contango pricing structure has been caused by excess near-term oil supply as demand slows and speculation that output cuts by the Organization of Petroleum Exporting Countries will reduce the glut later this year.

The benchmark supertanker rental rate, based on the cost of shipping Saudi Arabian crude to Japan, has risen 56 percent since Jan. 1. Thirty-five supertankers represent about 7 percent of the global fleet, according to data from London-based Drewry Shipping Consultants Ltd.

Commodities Decline

Commodities prices fell the most in five decades last year, with crude dropping more than $100 from the peak of $147.27 a barrel in July, as simultaneous recessions hit the U.S., Europe and Japan. Oil demand in 2008 fell for the first time since 1983, according to the International Energy Agency. It will fall again this year according to OPEC.

The amount being stored is equal to about four days of U.S. consumption. The cost of storing on supertankers works out at about 80 to 90 cents a barrel per month depending on the length of the contract, according to Denis Petropoulos, head of tankers at Braemar Shipping Services Plc, the world’s second-largest publicly traded shipbroker.

Frontline, based in Bermuda, has advanced 6.8 percent in Oslo trading this year. The five-member Bloomberg Tanker Index has gained 2.2 percent.

To contact the reporter on this story: Alaric Nightingale in London at Anightingal1@bloomberg.net

Last Updated: January 14, 2009 03:22 EST