Floating Storage Down as "Super Profit" in Crude Market is "Just Not There"

Super contango is not there at the moment, said Beard.

Demand for oil tankers as floating storage has waned as price volatility in the crude markets makes it a risky strategy, The Wall Street Journal reports.

"Demand for oil tankers [for storage] is now minimal compared to the flurry we saw a few weeks ago," said one Singapore shipbroker, adding that of 25 to 30 tankers taken last month only ten were still being used as floating storage.

"The evidence is that a number of shipowners are pushing to get their ships chartered for storage but there are no takers."

Earlier this year, oil traders were said to be looking to capitalise on a contango in the crude market leading to a surge in at-sea oil storage, but the difference in the future price of oil and its current level is said to have since narrowed, leaving less room for profit.

Using tankers as floating storage is more expensive than land based storage, and it is understood that there is some land based capacity still free.

"To justify the more expensive floating storage, the economics need to work out," said Mark Keenan, head of Asian commodities research at Societe Generale.

But the difference between current prices of Brent crude and prices for delivery in a year has narrowed from $10 per barrel earlier this year to $6 at present.

"Super Profit" Not There at the Moment

In a separate report, Glencore's head of oil Alex Beard said "the super contango and the super profit in the crude oil market is just not there at the moment."

"When you see current spread conditions, they are attractive.

"They pay for land-based storage and a small profit on top of that.

"They are by no means, at current spread levels, attractive enough to encourage large amounts of floating storage."

However, one trader said that the crude oil market could be experiencing a "dead cat bounce," or temporary rally before continuing its slide.

"Demand for tanker-based storage is going to be there," said another.

"But you can lose a lot of money if you don't play it right."

Glencore CEO Ivan Glasenberg said 2015 could be a "blowout year" for oil trading as volatility in the market is high.