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The Trend of Floating Oil Storage Brought About by Low Prices

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Published on : Feb 03, 2015

The global crude oil market is currently witnessing high demand for crude oil driven by a situation known in the trading world as contango, which is brought about by futures contract prices being higher than the current prices. Thus, there seems to be an incentive for purchasing crude oil right now and then hoard the same till the prices reach the normal levels. The prominent trading houses of the world till date have chartered tankers and also the shares of oil tanker firms have been surging over the past few weeks. 

As per industry experts and specialists, it is anticipated that the storage bids will be coming from different types of commodities. Since June 2014, the oil prices have declined by almost 60% from being more than US$100 a barrel down to US$40 a barrel. In fact, it was in 2009 during the global financial slowdown that the prices of crude oil had declined to such an extent. During that time the prices of crude oil had fallen from US$140 a barrel to US$35 a barrel. This caused the traders to cash in via huge volumes being bought at extremely low rates and eventually selling these at a higher price. 

At present, majority of the oil tankers have the capacity for storing to a maximum limit of 30 million barrels. In the oil price mechanism of 2008-2009 close to seventy million barrels were hoarded in floating storage till that point of time when the prices became competitive in the global market.  

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