Arbitrage

The arbitrage opportunity in storing oil has not gone away. I'm surprised at how persistent it has been. This is despite a 20% increase in oil storage in the U.S. since September. China, as well, has been importing massive amounts of oil, which I expect is for storage, not consumption. Here are the future prices from Poten & Partners: (I had to delete all data except the last price)

CRUDE OIL Delayed Futures -09:40 - Monday, 22 December - [ Go to Daily Price Listing ]
Contract Last
January '09 ( CLF9 ) 33.87
February '09 ( CLG9 ) 41.85
March '09 ( CLH9 ) 44.62
April '09 ( CLJ9 ) 46.47
May '09 ( CLK9 ) 48.73
June '09 ( CLM9 ) 49.26
July '09 ( CLN9 ) 50.31
August '09 ( CLQ9 ) 52.06
September '09 ( CLU9 ) 51.87
October '09 ( CLV9 ) 52.91
November '09 ( CLX9 ) 54.50
December '09 ( CLZ9 ) 54.25
January '10 ( CLF0 ) 56.04

Look at Janruary 2009. $33.87. Now look at November 2009. $54.50. You can buy oil for delivery in Jan. and sell the same oil for delivery in November. All you have to do is store it. This would be a 60% profit instantly. How much does storage cost? Well, if you rent a VLCC for $50K/day (see Intertanko) and stuff it with 2,000,000 barrels from Jan through November, that costs $9/barrel. You can still make a 26% profit.

Today, we have been given a gift: Analysts Cut Oil Tanker Stocks. The guy might have something there with the new supply, but I think that FRO is worth a play as long as it pays to part oil in storage.

And one more thing: oil is going MUCH lower.