U.S. oil curve steepens, revives storage play

NEW YORK (Reuters) – The premium for long-dated U.S. crude oil futures has grown dramatically since mid-July, which should spur traders to hoard more crude on land and at sea to turn a profit.

The discount of front-month to second-month oil futures has nearly doubled since July 13, to $1.75 per barrel from 89 cents — a level that more than covers the cost of storing crude in tanks or vessels to sell for higher prices in later months.

“The expansion in the crude curve has been dramatic during the past three weeks, along virtually all portions of the term structure,” said Jim Ritterbusch, president of oil consultancy Ritterbusch & Associates.

“(The current contango) is large enough to trigger a fresh round of buy and store programs that will be filling up offshore vessels that were offloaded last May when the curve strengthened dramatically.”

Reuters