Storage Cost
The fees paid to store a physical commodity — tank rental for crude, vault charges for gold — a key driver of contango in storable markets.
Storage costs are the physical expenses of holding a commodity in inventory: tank or warehouse rental, handling fees, and insurance. They are a direct input into the cost of carry and therefore into futures pricing.
When storage is abundant and cheap, the contango on storable commodities like crude oil widens — the market pays holders to store. When storage fills (as in April 2020 for WTI crude), the spot price can collapse dramatically relative to deferred contracts as physical holders scramble to place barrels.
Gold storage costs are low (vaulting fees of ~0.1–0.15%/year), which is why gold rarely goes into deep backwardation. Crude oil storage is expensive and capacity-constrained, making storage economics central to oil curve dynamics.
Related Terms
Carry / Cost of Carry
The net cost of holding a physical commodity position — storage, insurance, and financing minus any income or convenience yield.
AdvancedContango
A market structure where futures prices are higher than the current spot price, creating negative roll yield for long futures holders.
AdvancedConvenience Yield
The implicit benefit of holding physical inventory of a commodity rather than a futures contract — what justifies backwardation.
AdvancedWTI Crude
West Texas Intermediate crude oil — the US benchmark grade traded on NYMEX, priced in $/barrel and settled at Cushing, Oklahoma.
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