BP: Declining contango makes storing oil less profitable.
BP Plc Chief Financial Officer Byron Grote said that the current contango in oil markets ?doesn't offer particularly interesting opportunities? for trading. This structure, in which future prices are higher than oil for prompt delivery, is known as contango and allows buyers to profit from storing crude oil.
?There is not very strong contango,? Grote said in an interview in London. ?The structure that was in place in the fourth quarter and first quarter of last year was a once-off occasion and provided very attractive opportunities.?
Oil traders cut the amount of oil they are storing in tankers by 13 percent in December as they start delivering record cargo volumes amassed at sea, Simpson, Spence & Young Ltd., the world's second-largest shipbroker, said Jan. 8. There were 148 oil tankers storing 131 million barrels of oil products and crude at the end of December, the broker said.
In the first quarter of 2009, BP earned $500 million more than from normal range of trading because of some ?interesting trading opportunities? including the contango market, Grote said today. ?The fourth quarter of last year wasn't as attractive as the first quarter was? and contribution from supply and trading operations ?was much less.?