There was a lot of talk earlier this year about the vast amount of floating storage offshore in VLCCs. Those who did not understand the contango and the mechanics of the storage trade predicted that oil was due for a fall.

I post this article just as a follow-up to some earlier posts I did trying to explain why that storage would not necessarily lead to plummeting oil prices. Supply/demand has been a little dis-associated from price all year, but the storage trade didn't mean there was a glut of oil with nowhere to go, it was just people working the contangoed futures curve for an easy profit.

NUMBER OF TANKERS STORING CRUDE IN US GULF FALLS
Nov 05, 2009
[Dow Jones] The number of tankers storing crude oil in the U.S. Gulf has fallen to 7 from around 10-11 a month ago, data from a shipbroker tracking storage volumes shows. As of early November, there are 6 VLCCs and 1 ULCC being used for floating storage in the Gulf, holding up to 15 million barrels of crude.

Crude storage in the Gulf hit its peak back in May with a reported 20 VLCCs holding oil as a wide spread between the front and forward month contracts in the futures market made it profitable for oil traders to carry barrels forward. But that forward spread has narrowed in recent months, making the storage deal less attractive.