Do High Spreads Float All Boats?
05 Feb 2016: Will increasing time spreads lead to increased floating storage?
In 2009 and 2010, the tanker market received a huge boost from the extra demand generated by floating storage. Floating storage was briefly back in vogue in early 2015. Despite the well documented “glut” of oil in world markets, storing the excess crude oil on tankers has decreased rather than increased over the last six months. The market was not there to make an arbitrage profit on the tanker storage play. However, in recent weeks, crude time spreads (the price difference between commodity prices in one period versus another period) have increased again, as the front of the market has fallen more than future prices. At the end of last week, reports surfaced that one of the trading companies put a number of VLCCs into floating storage. Is this the start of another floating storage boom or was this just a special deal?
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