Discrepancy Explained

For the past few months, I have been searching for an answer. Commodities such as copper, coal, and iron ore have plunged in price. The Baltic Dry Index, not surprisingly has fallen as well. Oil is now down 72% from the peak. But oil tanker charter rates, while down from absurd levels have rebounded to normal.

The question is, "Why is there this discrepancy between dry shipping and tankers?" The economy is not doing well. However, the normal price of tankers left me with a nagging doubt as to whether the BDI or tanker rates was a better sign of current economic conditions.

I just got my answer from Bloomberg:

In the worst year ever for oil, investors can lock in the biggest profits in a decade by storing crude.

Traders who bought oil at the $40.81 a barrel on Dec. 5 could sell futures contracts for delivery next December at $54.65, a 34 percent gain.

Royal Dutch Shell Plc sees so much potential in the strategy that it anchored a supertanker holding as much as $80 million of oil off the U.K. to take advantage of higher prices for future delivery. The ship is one of as many as 16 booked for potential storage instead of transporting crude, said
Johnny Plumbe, chief executive officer of London shipbroker ACM shipping Group Plc.

Oil Storage

The tankers, if full, hold about 26 million barrels worth about $1 billion, more than the 22.9 million barrels sitting in Cushing, Oklahoma, where oil is stored for delivery against Nymex contracts. U.S. crude inventories rose
11 percent this year to 320.4 million barrels, according to the Energy Department.

Problem solved! The demand for oil use is not there. It's just that the futures market still does not believe that the global economy is as bad as it is.