And could knowing the answer lead to any good stock picks?

Here's a good article on this topic.

http://www.npr.org/sections/parallel...cess-oil-going

It sounds like you believe the oil market is in contango. I think this would be very difficult to trade through stocks since it is never as simple as, oil goes up, such and such stock goes up. A company that is one of the shrewdest traders and who is always trying to game moves in commodities is Goldman Sachs. However, the impact of their oil trading on the overall company will surely not be very large. A good company will hedge to some extent so getting a pure play on the direction of the price of oil through the stock market would be very difficult. If you do have a crystal ball and think you have an edge over the smart and ruthless guys that spend their lives trading commodities my suggestion would be to open a commodities account and trade oil futures.

There is a massive bid in the year or so out futures in the high 30s range. I have no idea who that bid is, but given the size of it (a couple million barrels/day bought each of the last few days) it seems certain to me that it's a hedging participant, not a speculative one.

That spread relative to spot is right about at the floating storage cost (which is historically $1/barrel/month but has probably dropped a bit). So we're right at the point where storage is taking tankers out of operation.

Seems the safest place to store oil is in an oil formation in the ground. It's not going anywhere. I did buy FRO and NAT recently.

https://www.eia.gov/petroleum/supply...pdf/table1.pdf

Supply is up, storage is up yoy. I would think refineries would have some storage.

Put solar panels on your roof and drive an electric car.

where exactly are you seeing this?

The most active is the Dec16 WTI contract on Globex. This morning 18M barrels have changed hands at a current price of 37.90.

a lot of volume going through there can come from other parts of the curve or spreads against the dec contract. not a huge participant imo.

I am talking about the actual physical oil. Buying it now to use later.

There's a list of companies here, although this article is over a year old.
http://www.wsj.com/articles/worlds-l...oil-1421689744

One way to play this has already been suggested by brianthemick: Buy stock in oil tanker companies. Contract rates are volatile and would give you some leverage if supply buildup starts to strain the capacity for holding inventories, although I believe there's a fair amount of supply coming on in the next 12 months in the form of new tankers.

It's very unlikely any consumer of size is doing that. If you need oil in the future, that's what futures are for. Let the guy delivering on the contract figure out how to store it. Not your problem.

The present rental rate for a VLCC which holds 2,000,000 bbls is $48,000 a day. If the December Future is 37.90 which is about 299 days away. If the present price is $29.90, if you store it you can earn $8x2mm = $16 million profit. 48K x 300 days = $14.4 million. Thus, you can earn a risk free hedged profit of $1.6 million holding oil in a large tanker until December. Oil expiration is 11/21 for December futures.

Tanker stocks might be storing oil too. There are probably mlps devoted to oil storage. However, there is probably a small oil company hedged that offers the best value somewhere.

Steelhouse: Where did you get the VLCC rates? And do you have a source for historical rates?

VLCC rates came off shipper stock news release. You can look at latest press releases of FRO, NAT, and in this case

http://finance.yahoo.com/news/wall-s...210506153.html

But, remember, the cheapest gas is solar electric car at $.40 a gallon equivalent. With a little bit of optimism is $.04 a gallon equivalent.

Enbridge, Plains All American Pipeline, and Semgroup store aver 10 million barrels each at Cushing Oklahoma. You can buy a 2025 oil future. United States Oil etf, USO, started near the price of oil in 2006 today it is $8.54, it does not match the price of oil over time. It is 1/3 less.

Your belief that there are more tankers coming online in the future is correct.

Yes and for the record I think it's a good idea, and was just trying to give credit where credit is due.

Here's an interesting article related to the discussion:
http://www.bloomberg.com/news/articl...-amid-contango

Thought I would go ahead and question OP's assumption. What excess oil? What makes you think there is excess oil?

2,000,000 * 29.90 = 59,800,000.
1,600,000 / 59,800,000 = 2.675%

Not a bad return, I suppose, for just under a year. But possibly smaller return than people who have $60M cash lying around for investments hope to get on their money? Also, I don't have any knowledge of these charters -- are they all inclusive in some manner that actually makes the investment "riskless" and the number what you've worked out? Like, a) does it include staff, gas, etc? b) does it include insurance for things like spills or pirates?

?

Its pretty well known china has been stocking up their strategic reserves for the past year, although recently they have slowed. Rest has gone into storage, although the storage build doesnt equate to the oversupply we are told there has been for last year.

GMP (the investment bank) has some good research arguing oversupply is much less than we believe based on builds in storage they are seeing worldwide.

the biggest investment opportunity was HERE

ive been fading the crude/chicken spread for like 15 years and its finally paying off

gonna buy some franchises with my profits

and I thought cost of carry on fried chicken was to much...

Seekingalpha, bloomberg, wsj have all had articles on this since article qouted date. That said, those tankers could end up floating around for longer than 12 months given the madness in Syria and the sanctions being lifted on Iran. Its a very very unprecedented moment in time regarding oil, moreso based on the later.

http://peakoil.com/business/worlds-l...s-to-store-oil

Quote:

World’s Largest Traders Use Offshore Supertankers to Store Oil

World’s Largest Traders Use Offshore Supertankers to Store Oil thumbnail
Companies Are Buying Oil Now to Sell Later When Prices Rise

The supertanker TI Oceania was built to ferry vast quantities of oil across oceans, but for the next year it is expected to remain anchored off the coast of Singapore, storing millions of barrels of oil for Vitol SA, a giant trading house.
The TI Oceania supertanker which is being used by oil trading house Vitol to store oil until the commodity’s price rises. ENLARGE
The TI Oceania supertanker which is being used by oil trading house Vitol to store oil until the commodity’s price rises. Overseas Shipholding Group