Physical Tanker Floating Storage Arbitrage Model
Underwrite physical crude oil floating storage arbitrage economics across VLCC and Suezmax charter rates, forward contango spreads, boil-off, financing carry (SOFR), and net PnL.
Forward contango spread covers vessel charter and financing carry.
| Expense Component | Total ($) | Per Bbl | Share |
|---|---|---|---|
| Vessel Time Charter Hire | $0 | $0.00 | 0% |
| Bunker Fuel & Idle Steam | $0 | $0.00 | 0% |
| Inventory Financing (SOFR) | $0 | $0.00 | 0% |
| Marine & War Risk Insurance | $0 | $0.00 | 0% |
| Boil-off & Volumetric Loss | $0 | $0.00 | 0% |
| Port, Lightering & Demurrage | $0 | $0.00 | 0% |
| Total All-In Floating Carry | $0 | $0.00 | 100.0% |
Matrix shows net profit per barrel ($/bbl). Green denotes profitable carry, red denotes negative carry loss.
| Contango Spread | -30% Day Rate | -15% Day Rate | Base Day Rate | +15% Day Rate | +30% Day Rate |
|---|
Prime global hub for Asian physical crude blending, HSFO/VLSFO floating bunkers, and Iranian/Russian STS transfer operations sheltered from monsoons.
Major deepwater bunkering hub outside Strait of Hormuz chokepoint. Preferred for Middle East sour crude floating stockpiles and war risk management.
Primary reverse lightering zone for VLCC exports loading WTI light sweet and Midland barrels for European and Asian refiners.
Physical Tanker & Floating Storage Arbitrage Simulator
Simulates physical offshore crude oil floating storage arbitrage during super-contango episodes, calculating net carrying cost per barrel, VLCC time-charter day rates, bunker fuel consumption, cargo financing, and annualized return on capital.
Target Audience Application
Structure floating storage time charters on Very Large Crude Carriers (VLCCs) to monetize steep forward market contango.
Forecast clean and dirty tanker charter day rate spikes triggered by fleet capacity withdrawal into offshore storage duty.
Identify structural bottoms in physical oil supply gluts when onshore storage fills to nameplate capacity and floating storage becomes the marginal pricing mechanism.
Underwrite secured inventory financing, letter of credit (LC) lines, and cargo insurance covenants for maritime storage operations.
Floating Storage Net Arbitrage Profit Equation
Profit = [Q × (F_T - S_0)] - [Charter Cost + Bunker Fuel + Financing + Insurance + Port Fees]2. Monthly Total Carrying Cost ($/bbl/month):
Carry Cost = [(Day Rate × 30) + (Aux Fuel × 30) + (S_0 × Q × SOFR / 12) + Insurance] / Q3. Maximum Breakeven Charter Day Rate:
T_max = [(F_T - S_0) × Q - Financing - Insurance] / Storage Duration Days
VLCC Logistics & Historic Super-Contango Benchmarks
- VLCC Capacity Benchmark: A standard Very Large Crude Carrier (VLCC) holds exactly 2,000,000 barrels (approx. 300,000 deadweight tons). Suezmax vessels hold 1,000,000 bbls, and Aframax hold 650,000 bbls.
- The 2020 Super-Contango Episode: In April 2020, WTI futures crashed into negative pricing (-$37.63/bbl) and Brent 6-month contango exceeded $10/bbl, driving VLCC charter rates to record highs of over $250,000/day as global onshore tanks hit maximum fill capacity.
- Minimum Contango Hurdle: Floating storage requires at least $0.65 to $0.95/bbl per month in forward curve contango to cover tanker charter, boil-off/auxiliary fuel, and working capital interest rates.
Institutional Methodology & Underwriting Dossier
Simulates physical offshore crude oil floating storage arbitrage during super-contango episodes, calculating net carrying cost per barrel, VLCC time-charter day rates, bunker fuel consumption, cargo financing, and annualized return on capital.
1. Target Audience & Practical Application
How different financial market participants apply this quantitative model to real-world capital allocation:
Structure floating storage time charters on Very Large Crude Carriers (VLCCs) to monetize steep forward market contango.
Forecast clean and dirty tanker charter day rate spikes triggered by fleet capacity withdrawal into offshore storage duty.
Identify structural bottoms in physical oil supply gluts when onshore storage fills to nameplate capacity and floating storage becomes the marginal pricing mechanism.
Underwrite secured inventory financing, letter of credit (LC) lines, and cargo insurance covenants for maritime storage operations.
2. Floating Storage Net Arbitrage Profit Equation
Profit = [Q × (F_T - S_0)] - [Charter Cost + Bunker Fuel + Financing + Insurance + Port Fees]2. Monthly Total Carrying Cost ($/bbl/month):
Carry Cost = [(Day Rate × 30) + (Aux Fuel × 30) + (S_0 × Q × SOFR / 12) + Insurance] / Q3. Maximum Breakeven Charter Day Rate:
T_max = [(F_T - S_0) × Q - Financing - Insurance] / Storage Duration Days
3. VLCC Logistics & Historic Super-Contango Benchmarks
- VLCC Capacity Benchmark: A standard Very Large Crude Carrier (VLCC) holds exactly 2,000,000 barrels (approx. 300,000 deadweight tons). Suezmax vessels hold 1,000,000 bbls, and Aframax hold 650,000 bbls.
- The 2020 Super-Contango Episode: In April 2020, WTI futures crashed into negative pricing (-$37.63/bbl) and Brent 6-month contango exceeded $10/bbl, driving VLCC charter rates to record highs of over $250,000/day as global onshore tanks hit maximum fill capacity.
- Minimum Contango Hurdle: Floating storage requires at least $0.65 to $0.95/bbl per month in forward curve contango to cover tanker charter, boil-off/auxiliary fuel, and working capital interest rates.