The search for storage

In the fourth of a six-part series, our trader looks back at a time when oil was the best commodity one could hold

Contango benefits anyone with access to storage because the prompt price of crude is cheaper than crude bought in the future. So it works really well for a refinery that has excess storage. When managing supply and hedging around a 200,000-barrel-a-day refinery we had crude storage of close to 2m barrels. The company had rarely kept storage completely full but the contango was too large to have empty space, and so a plan was created to secure a long-term ratable supply of crude from a Middle Eastern producer. We wanted to maintain 1.8m barrels of inventory at the refinery. As soon as we were confident enough of securing the supply, we bought front-month futures contracts and sold those we ha