Energy firms socking away cheap oil

NEW YORK (MarketWatch) — While cheap oil bites into the fortunes of crude production and refining, the oil storage business remains robust as energy players sock away plentiful crude to wait out the current multi-year trough until prices come back.

Storage of oil also offers an instant return of $10 a barrel or more tied to the so-called “contango” structure of the futures market – a condition where the expected price of oil in coming months trades higher than current prices.


And in another storage-based wrinkle to the 2008 oil sell-off, the lack of tank space for oil is pressuring some market players to sell contracts – and thus depress prices further — in order to avoid taking delivery of expensive-to-store oil.

Market observers say that condition has led to more losses in oil future prices this week with the expiration of January contracts looming on Friday.

Either way you look at it, it’s good to be in the oil storage business.

Marketwatch