Covid-19 is destroying the market for tankers that deliver about a fifth of the world’s crude oil. The result is likely to be booming trade on the beaches of Bangladesh, India and Pakistan, where obsolete ships go to get blow-torched and sold for scrap.
North Sea oil prices are finally strengthening, catching up with other markets that already rallied on the back of rising buying interest from Asia, where demand in many places has already recovered from Covid-19.
In a recent article I described the mechanisms which drive the market structures of backwardation and contango, which explained how and why the market got into negative territory, with a steep contango forward curve. But having got there, how does that same understanding of market behaviour help us form a view of where we go from here?