The energy sector has seen huge amounts of volatility recently. The coronavirus pandemic has brought vast swathes of the global economy to a standstill, and demand for oil and natural gas has plunged in response. Yet very few investors expect those conditions to last for very long, and as a result, there have been huge disparities in the oil market between what market participants are willing to pay for oil right now and what they'd be willing to pay six or 12 months down the road.
The difference between spot oil prices and what investors can get in the oil futures markets has created an opportunity for arbitrage for those able to store oil for a period of months. Some inventive oil traders have realized that oil tanker ships are a great place to keep their crude, and that's lifted many companies that specialize in transporting crude by sea. However, the obvious question shareholders should ask is this: Will those stocks fall just as fast when the energy markets return to normal?
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Source: Motley Fool
(April 30, 2020 - 11:22 AM EDT)
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