It always intrigues me to learn how easy it is to make money, in this case, without substantial risk, in the trading world if you only had the “tools” to do it. This morning I read that three trading companies have chartered four crude oil carriers off Singapore and locked in short term trades to make, what I consider big money.
The receipt for doing so are the following:
- The spot market for VLCC crude oil carriers has dropped recently from $47,500 per day a year ago to about $27-33,000 per day today
- With the British EU exit vote, Brent crude dropped to about $48/bbl
- The forward curve shows a Brent price of about $52/bbl in the next few months
- The traders chartered the carriers for a month with an option to extend
- The traders will use their bank credit to purchase the cargos of crude
Details of the four crude carriers are shown below. The total crude oil volume of the transaction is about 6,359,256 barrels.
And the transaction, assuming Brent price for both purchase and sale, shows a profit of $21 million on essentially no investment – only creditworthiness!
So all you need is creditworthiness, know-how and be watching both the spot market for carrier rates and physical and futures market prices for crude and then wait for the perfect timing. Of course, if the spot market rate for carriers has dropped so much in a year and the forward curve shows higher price for crude it must mean that worldwide inventories are dropping and this “special timing” opportunity may repeat itself often in the coming months. Are you ready to do the next deal?!