The waters between Singapore and Malaysia used to heave with wooden ships carrying exotic spices. Now the Straits of Malacca are filled with vessels carrying a very different sort of commodity. Oil traders awaiting a recovery in crude are turning to floating storage after benchmark Brent prices more than halved over a span of two years, according to Morgan Stanley analysts led by Adam Longson. Unlike previous oil storage trades , however, this one is unusual in that current oil prices and storage costs ought to make it unprofitable. Morgan Stanley estimates that the one-month Brent storage arbitrage currently produces a loss of $0.48 per barrel, while its six-month equivalent loses $6.11 per barrel. That suggests “no incentive to store oil on ships,” the analysts write. “Yet, banks are seeing a sharp uptick in interest to finance storage charters. This storage is not happening for profit. Rather, the market […]