Jonathan Christopher

Cramer's Mad Money - Two Tell Stocks for Crude Oil (5/15/09)

For contango to continue, the cost of holding oil in ships needs to be lower than the difference in the forward price compared to the spot price. One thing that reduces shipping cost is low demand compared to shipping capacity.

If shipping rates hold at low levels (compared to the peaks of last year), that confirms low near-future demand, and prospective oil prices.

The profits available from contango are decreasing (look at the oil futures curves, and the difference between spot and future prices).

Expect contango to vanish by December, freeing up tankers and resulting in a sharp decrease in shipping rates and shipping company stocks?