Floating Crude Oil Storage Economics & Supertanker Arbitrage

When oil production sharply outpaces refinery throughput, crude futures curves enter steep contango—where forward delivery contracts trade at steep premiums over immediate spot prices. Advanced trade structuring in the Hormuz oil tanker shock simulator reveals how physical commodity merchants exploit this spread using floating storage arbitrage.

To execute a floating storage trade, an oil trading desk buys physical crude at distressed spot prices, charters a VLCC for three to twelve months, and simultaneously sells 6-month or 12-month forward futures contracts to lock in an absolute price spread.

The trade remains profitable as long as the contango spread exceeds the all-in carrying cost, defined by daily vessel charter rates, bunker fuel consumption for hoteling, boil-off/degradation losses, ocean cargo insurance, and working capital financing rates.