By Julia Payne and also Florence Tan LONDON/SINGAPORE, Feb 11 (Reuters)– The oil market today deviated that might motivate investors to think about keeping oil overseas as an expanding crude excess endangers to get worse.

The coronavirus episode in China, the globe’s most significant oil importer, has actually caused a loss of greater than $10 in Brent unrefined futures as China’s state-owned and also independent refiners minimize outcome despite rolling gas need.

The Brent market turned right into contango recently << LCOc1-LCOc2> > for the very first time given that July 2019 as punctual costs dropped listed below ahead costs.

But what began as a light dip has actually powered past $1 per barrel looking better in advance.

The six-month Brent contango spread << LCOc1-LCOc7> > from April to October onFeb 10 expanded to around $1.22 barrel, a degree not seen given thatDec 2018.

The six-month spread on West Texas Intermediate (WTI) << CLc1-CLc7> > struck $1.

Read: Singapore’s Floating Storage Flotilla Grows Ahead of IMO 2020

The action has experts considering drifting storage space possibilities as investors might acquire fairly affordable oil currently and also re-sell it at a revenue later on.

“The entire forward curve has also shifted into contango now,” ING financial institution stated in an everyday study note.

“There are reports of increased interest in floating storage as Chinese refiners push for deferred deliveries.”

Freight prices and also storage space costs have actually dropped as the infection has actually struck need and also given that the united state partly raised assents on subsidiaries of Chinese delivery company COSCO.

However, physical investors warn that while there are troubled freights, lasting storage space is not yet a method as the Dubai criteria, which guidelines Chinese acquiring, has actually not done the same.

“Some cargoes will have to be floated…no one wants to buy a prompt cargo,” stated a Singapore- based investor, including that investors will likely need to take some losses.

“Right now, (the market structure) cannot cover the cost as February/March Dubai and dated Brent are still backwardated, which doesn’t make any sense.”

A representative for the port of Qingdao stated that of its 2 unrefined storage space websites, Dongjuakou, still had room.

“Even though the call on crude in its storage areas has slowed due to the virus, there is no congestion yet,” a Qingdao representative stated.

Further, the Organization of the Petroleum Exporting Countries (OPEC) and also its allies might grow current outcome cuts and also thus eliminate the contango.

“It’s a big change especially after the strong backwardation we had in the Brent curve. To have that large money-maker contango, we’re not there yet. It’s really just the first step,” stated Olivier Jakob of working as a consultant Petromatrix.

(Additional coverage by Muyu Xu in Beijing; editing and enhancing by Jason Neely)

( c) Copyright Thomson Reuters 2019.