Contango is back

[TraDaToR]

Traders in the Brent oil market have started to use a word that was almost forgotten in the last four years - "contango" in industry jargon, which could also be described as "music to the ears of sellers".

The market has not seen a prolonged contango time structure - with front prices lower than future prices - since at least 2010.

Back then, oil traders racked up hundreds of millions of dollars by storing fully loaded cargoes at sea. With each week and month that the oil was in storage, it gained in price.

http://af.reuters.com/article/commo...0U20140716?pageNumber=3&virtualBrandChannel=0

 

[ogarbitrage]

Still a bit premature. They both seem to be stubbornly backwardated for the moment.

 

[maninjapan]

Is this move towards Contango in Brent due to increased production ( or the expectation of) from Syria?

 

[ogarbitrage]

Large overhang of African cargoes weighing on the market coupled with Libyan supply coming back online and poor refinery margins in EU.

Lagos, Nigeria tankers:

Lome, Togo tankers:

Primary crude tanker routes:

TD7 - North Sea to UK (80k MT).
TD17 - Primorsk (Urals) to Wilhelmshaven, UK (100k MT).

 

[maninjapan]

Ogarbitrage, thankyou for the insight. Where do you get your information tracking the tankers from?

 

[ogarbitrage]

Glad to see some discussion in this forum. I get the tanker rates from Marex Spectron and I monitor www.marinetraffic.com for port loads. Word of warning, marinetraffic is addicting as hell (or maybe it's just me).

 

[maninjapan]

'Discussion' maybe a little too much credit..... a bit closer to Question and answer here. just trying to learn a few things from those who know more than I do (ie a lot of people).

Must admit, that marine tracker a pretty cool 'toy' there. How much a role does this play in your market analysis? Monitoring the traffic closely or just keeping an eye out for situations that are out of the ordinary. I'm sure you have to have to have enough experience with it to be able to put it in context though......

 

[ogarbitrage]

Any is better than none.

How much a role does this play in your market analysis? Monitoring the traffic closely or just keeping an eye out for situations that are out of the ordinary. I'm sure you have to have to have enough experience with it to be able to put it in context though......

In terms of WTI or Brent, very little, however I think it helps to monitor some of the large exporting ports to gauge traffic or compare live traffic to media reports.

I also monitor the primary ports for the products to see where gas/heat/resid are flowing, which arbs are open essentially, and how much volume is actually moving from one place to another. If an arb is open on liquid hubs and large volume is moving to close the gap, then I may take position in the paper derivatives.

 

[TraDaToR]

http://af.reuters.com/article/commo...A220140820?pageNumber=3&virtualBrandChannel=0

 

[maninjapan]

Interesting piece of information that Tradator.
Does anyone have any idea if people starting to hoard oil like this is a sign that things are set to continue (ie are these guys the smart money?) or whether it's more of a contrarian indicator?
Would be interesting to see what ogarbitrage has to say....