[riot]

Hopefully this is an easy question for the experts out there. I have been looking at what I believe to be the brent crude futures curve here http://sites3.barchart.com/pl/vsn/quote ... BM9&mode=i. If you plot a chart of this data you will hopefully agree that the price steps up at a fairly constant rate (roughly $1.70 per month) up until the June expiry and then flattens out. By may 2010 the stepsize for one further month's expiry is <$0.50.
I have a hard time understanding this as I'd have thought that there should be a very tight relationship between the spot price (plus storage and interest costs) and the futures. I do understand that futures markets reflect speculation (and I am aware that oil has previously exhibited backwardation, which I also find difficult to understand) but surely this situation is easily exploitable by those with the resources to trade large quantities of oil at the spot price. I believe that the cost of storing oil is <$1/month and so the short term slope appears too steep i.e. by buying at today's spot and selling May or June futures one would make a guaranteed profit, which I'd expect the market to correct for.
Any comments appreciated, sorry if this has been covered before but everywhere I've looked appears to take this as a given.

[nero]

Yes other people have noted this and there have been news items out about people storing oil to take advantage of the trade you point out . It all depends on the price for storage capacity. The marginal world storage capacity for oil is the VLCC fleet. Right now the cost of chartering a ship is very low so I think it would still make sense to perform this trade. I'm suprised though since I would expect the charter rate to have gone up in the past few weeks not down.