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Contango Pays Most in Decade as Shell Stores Crude

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ben_meyers Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-07-08 11:44 PM
Original message
Contango Pays Most in Decade as Shell Stores Crude
Source: Bloomberg

Dec. 8 (Bloomberg) -- In the worst year ever for oil, investors can lock in the biggest profits in a decade by storing crude.

Traders who bought oil at the $40.81 a barrel on Dec. 5 could sell futures contracts for delivery next December at $54.65, a 34 percent gain. After taking into account storage and financing costs investors would earn about 11 percent, according to Andy Lipow, president of Houston consultant Lipow Oil Associates LLC. The premium, known as contango, is the biggest for a 12-month span of futures since 1998, when a glut drove crude down to $10.

Stockpiling crude may provide higher returns than commodities, stocks and Treasuries as the U.S., Japan and Europe endure simultaneous recessions for the first time since World War II. Crude sank 72 percent in New York since peaking at $147.27 in July. The Standard & Poors 500 Index fell 40 percent this year and two-year government notes yield 0.9 percent.

The bottom line is that you buy crude at a low price and lock in a profit by selling it forward, said Mike Wittner, head of oil market research at Societe Generale SA in London. Its low risk. The contango can definitely pay for storage and the cost of capital and leave plenty left over.

Royal Dutch Shell Plc sees so much potential in the strategy that it anchored a supertanker holding as much as $80 million of oil off the U.K. to take advantage of higher prices for future delivery. The ship is one of as many as 16 booked for potential storage instead of transporting crude, said Johnny Plumbe, chief executive officer of London shipbroker ACM Shipping Group Plc.



Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aL2...



"The Hague-based Shell, Europes largest oil company, last month chartered the supertanker Leander with an option to store North Sea Forties crude, according to Paris shipbroker Barry Rogliano Salles. The vessel arrived at Scotlands Hound Point, the loading port for Forties, on Nov. 20, according to tracking data compiled by Bloomberg. Sally Hepton, a London-based spokeswoman at Shell, declined to comment."

Isn't it ironic that Shell is based in the Hague, and some people think that Bushco will be sent to a so-called world court there, what a joke!

And how do we impose a windfall profits tax on these bastards?

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Billy Burnett Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 12:13 AM
Response to Original message
1. Good find.This is where Chavez has his stolen loot invested.
:sarcasm:


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ben_meyers Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 01:05 AM
Response to Reply #1
2. Wouldn't surprise me in the least
Hugo seems to be reasonably intelligent and as I recall is educated in both military and political science. Reading about the Contango scheme, I would assume that it would take a pretty smart person to understand the intricacies of the investment.

Hugo wouldn't be the first "man of the people", with access to his countries wealth, to provide for his future comfort by looting the treasure of his nation.
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formercia Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 01:55 AM
Response to Reply #2
3. It's a clever scam
He's in cahoots with poor people all over North America to store his stolen oil in their home heating system storage tanks. :rofl:
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EFerrari Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 11:24 AM
Response to Reply #3
5.  . . . .
:spray:

:rofl:
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formercia Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 12:31 PM
Response to Reply #5
6. Chavez has figured out the cleverest scam of all:
Edited on Mon Dec-08-08 12:32 PM by formercia
If you leave it in the ground, you can always run off with it later.
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sandnsea Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 03:23 AM
Response to Original message
4. 1998 was the dotcom bubble
There was massive growth which supposedly increases energy demand, and yet this article wants us to believe a glut drove prices down in 1998. lol. Nooo, everybody put their money in dotcoms, duh.

Investor Class. America was supposed to be the investor class and the rest of the world was supposed to do the work. The Investor Class got greedy and fucked it all up - per usual.

I wish people would stop believing this supply/demand shit. It's all about where the money is being invested. Or at least it has been since 1980.
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