LONDON (Dow Jones)–Two oil tankers have been booked for use as floating storage vessels off the U.S. Gulf Coast this month, shipping brokers told Dow Jones Newswires Monday.
The use of floating storage became popular at the end of 2008 when the crude oil market flipped into contango, when the front-month futures contract is cheaper than the subsequent months. Such a trading pattern can make the use of floating storage economic if freight rates are low enough as higher crude prices in the future can lock-in profit for traders.
However, since the second half of 2010 the number of vessels used for floating storage has dwindled to a handful and it is rare to hear of new vessels chartered for storage purposes.
The news comes as Brent crude flipped back into contango last week, following the International Energy Agency’s commitment to release 60 million barrels of crude piles from its emergency stocks in the coming month.
However, shipbrokers said that interest in floating storage preceded Brent’s return to contango and was more likely the result of low freight rates and tight storage capacity on the Gulf Coast.
-By Sarah Kent, Dow Jones Newswires
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