Europe Choking on Oil, Apparently

Crude in floating storage in Europe is at an 18-month high, almost 13 million barrels. How did this happen?

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There is a glut of tanker tonnage out there for which there is no work.  Rather than scrapping the excess, older tonnage, arbitragers that have bought physical product have chartered this tonnage for peanuts and are sitting on the stuff in this storage for future delivery.  The higher prices on their contracts will leave them a nice profit even after subtracting the demurrage on the tankers, mostly because the day rates are depressed due to the surplus capacity of tankers. 

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