Brent Crude trading at a 7 Dollar premium to West Texas Intermediate is like the SUN rising in the west and setting in the east –
Spiking VLCC Rates Reflect “The Movement to Tangibles”
The spike in spot tanker rates is actually the result of the low oil prices. Many tankers are being leased on the spot market as storage tanks. Oil producers, for whatever reason, do not want to significantly slow their oil production, but at the same time do not want to sell it for $45 a barrel. So they are leasing tankers to store oil in the hope or belief that oil prices will recover shortly.
Ask yourself why smart money has recently become engaged in buying ‘relatively illiquid’ physical crude oil, in a world allegedly awash in the stuff, for resale at a later date – instead of playing futures, accepting promises and holding cash?
Smart money is in the process of losing confidence in cash.