29 May 2009 17:37 [Source: ICIS news]
LONDON (ICIS news)--Oil previously kept on floating storage is being unloaded as the ICE futures Brent forward curve has become less steep, a trader said on Friday.
“The market structure has changed and it is no longer possible to store oil on floating storage and sell it at a profit in the future,” a physical oil trader said.
“Market participants will be looking at unloading their previously stored cargoes,” the trader went on to say.
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During the past few months, a combination of low freight rates and low demand resulted in a steep contango, whereby the front end of the futures curve is much lower than the outer months.
This opened the economics for traders to hold on to the physical oil by storing it on tankers and making a profit by selling the barrels in the future at a higher price by using the futures markets.
The spread between the first and second month contract on the ICE Brent forward curve has narrowed from more than $1/bbl to around $0.70/bbl.
On Friday, prices reached new six-month highs over a weakening US dollar, sharp drops in the US oil stock figures on Thursday, OPEC’s decision to leave output unchanged and gains in the equity markets reflecting optimism over a possible global economic recovery.
By 16:15 GMT, July Brent crude was trading at $65.41/bbl, a gain of $1.02/bbl from the Thursday close of $64.39/bbl.
At the same time, July NYMEX light sweet crude futures were trading around $66.12/bbl, up $1.04/bbl.
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