what-is-oil-contango-th

Context: Tanker owners have remained insulated from the disruption in global trade due to the COVID-19 pandemic that has resulted in charter rates of dry bulk and container carriers crashing as demand has dried up.

Analysis

  • That’s because a crash in crude oil prices earlier this year had led to a situation known as ‘oil contango.’
  • Contango is a situation where the futures price of a commodity is higher than the spot price. 
  • Contango usually occurs when an asset price is expected to rise over time.
  • This sparked a rush for booking vessels to be used as floating storage.