The Most Profitable Trade: ‘Oil All Over the Oceans Right Now’ - Bloomberg
▻https://www.bloomberg.com/news/articles/2020-04-04/the-most-profitable-trade-oil-all-over-the-oceans-right-now
To outsiders, the oil trade of the day is so astonishing that even President Donald Trump sounded flabbergasted when he described it.
“There’s oil all over the oceans right now. That’s where they are storing oil; we have never seen anything like that,” Trump said this week from the podium of the White House. “Every ship is now loaded to the gills.”
With oil demand in freefall, traders are resorting like never before to using the world’s fleet of supertankers as temporary floating storage facilities, filling them with millions of unsold barrels until better times. It’s an unusual trade, but one that’s among the most lucrative around right now, just when everyone on Wall Street struggles to make money.
From the coast of Singapore to the North Sea, the tankers are starting to slow down, ready to drop their anchors, holding crude the world economy doesn’t need as fuel demand plummets due to the coronavirus outbreak. And more tankers probably will be needed, as oil supply still runs well above demand.
“The world is overproducing oil at a historic rate,” said Robert Hvide MacLeod, the head of Frontline Management, one of the world’s largest operators of supertankers. “Land-based storage is limited and selling out fast. Storage on ships will be the only solution.”
What Trump didn’t say is that the most intriguing facet of the floating storage trade is just how profitable it is. In the industry, it’s often described as a money printing press: traders buy oil on the cheap, and immediately sell their cargo forward in the futures market, locking in a chunky profit — with very little risk. Before oil prices rallied on Thursday on talk of an OPEC+ output cut, traders were easily able to lock-in a 20% annualized return on their money.