Oil Glut Seen Setting Sail as Contango Widens: Chart of the Day
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Get ready for the revival of an oil trade that became a hallmark of the 2008-09 global recession: tankers storing millions of barrels of crude off the coasts of Singapore, eastern England and in the Gulf of Mexico.
The CHART OF THE DAY compares today’s forward curve for oil and the one from six years ago. It shows how prices in August are about $5.50 a barrel higher than in February. To cover the costs associated with storing oil at sea -- hiring a ship, fuel, insurance, finance -- that gap needs to widen to $6.50 a barrel, according to E.A. Gibson Shipbrokers Ltd. When future costs are above immediate ones, the market structure is called contango, the opposite is backwardation.