Royal Dutch Shell Plc sold a cargo of crude stored off the U.K. and a vessel hired by Citigroup Inc.’s Phibro LLC left its anchorage in Scotland for the U.S. as the incentive to keep oil in tankers disappears.
Shell sold 600,000 barrels of North Sea Forties crude for delivery in mid-February at Scapa Flow near Scotland’s Orkney Islands to oil trader Vitol Group yesterday, the companies said. The cargo, already on board the supertanker Oliva, has been anchored off the U.K. coast since at least December, according to Bloomberg vessel tracking data.
Oil companies and traders have stored as much as 80 million barrels of crude on tankers as the so-called contango, a market where buyers pay more for supplies later in the year than now, allowed them to profit from storing crude. The incentive to store oil on vessels is shrinking as the spread between 1st- and 12th- month crude narrows to about $10 a barrel from $17 in early December.
“If the contango continues to flatten, then even the most optimistic of those companies storing crude will try to get rid of their oil,” said Ehsan Ul-Haq, head of research at oil market consultant JBC Energy GmbH in Vienna. Higher spot prices may encourage traders to release cargoes back into the market now rather than waiting, he said.
Leaving Scapa Flow
A second tanker hired by Phibro to store Forties near the Orkney Islands left for the U.S. Gulf last week, a port official said yesterday. The 1-million barrel Ice Transporter left Scapa Flow anchorage area late Jan. 23, Captain William Sclater, harbor operations manager, said in an e-mail....MORE
Prior posts on this rather remarkable trade:
Dec. 2, '08: Oil speculation: It's back
Dec. 8, '08: Contango Pays Most in Decade as Shell Stores Crude. And: Shell to quit wind projects
Jan. 7, '09: Oil: Record Inventories at Cushing. And: Oil Traders Seek Another 10 Tankers for Storage