Taking Stock of New World Oil
Source: Seeking Alpha, Investment U (1/20/09)
"The contango could last for longer than we thought."
Alaric Nightingale at Bloomberg is reporting that Morgan Stanley has hired the supertanker Argenta to store 2 million barrels of oil out at sea for $68,000. A quick "back-of-the-envelope" calculation shows a profit of $10 million in the 31 days between today and the March futures expiration.
They've got to find new ways to profit, since that whole "investment-banking" thing didn't work out.
We also received some valuable insights on the state of the Middle East from our friend Porter Stansberry at Stansberry & Associates:
"According to a report from the Council on Foreign Relations, the six members of the Gulf Cooperation Council lost $82 billion in 2008 alone, leaving them with 'just' $1.2 trillion. And these losses came despite some $300 billion in oil profits when crude neared $150 a barrel. It will get worse—much worse. Dubai is going to be the largest financial disaster in history."
The contango could last for longer than we thought.
Meanwhile, tanker companies like Frontline sell for 2.8 times trailing earnings due to low oil prices. To me, that makes for a good bet.