(Corrects gasoil stocks in penultimate paragraph to 4.19 million tonnes)
* Floating storage more likely prospect for gasoil than crude
* Contango to give storage companies welcome relief
* Market structure provides breathing space to sellers
LONDON, July 16 Traders in the Brent oil market have started to use a word that was almost forgotten in the last four years - "contango" in industry jargon, which could also be described as "music to the ears of sellers".
The market has not seen a prolonged contango time structure - with front prices lower than future prices - since at least 2010.
Back then, oil traders racked up hundreds of millions of dollars by storing fully loaded cargoes at sea. With each week and month that the oil was in storage, it gained in price.
The opposite time structure - backwardation - then prevailed, up until this week when it reversed back to contango.
This led some analysts to predict a repeat of the 2008-2009 bonanza. Bank of America Merrill Lynch said it even saw a "super-contango" returning.
But traders and most analysts are cautious for now, saying that Brent prices for future months will have to rise much further relative to prices for immediate delivery to encourage large storage operations.
The contango now is more limited, giving trading houses and oil companies more scope to take their time in selling cargoes, but it is not enough to make it economic for them to keep fleets of tankers at sea.
"Players who have onshore stock options will use them, and there will be a bit more unsold on the water because it gives traders more time, but I don't think we have the structure to have real floating storage," said Olivier Jakob, an analyst at Petromatrix in Zug, Switzerland.
The recent shift to contango also could provide relief to storage companies, which have been struggling with a backwardated market and an increase in global storage capacity for years.
The premium of September Brent contracts to August contracts has spiked to $1.50 per barrel, but it will become irrelevant after the Brent August contract expires on Wednesday.
The premium of September to October stood at just 20 cents and then evaporated for later months.
Analysts and traders say premiums need to be at least $1 per month to cover costs enough to trigger substantial volumes of floating storage.
"I'm not convinced we're going to see floating storage as a strategic play yet, rather short-term storage as prompt sellers are forced to float crude and deliver into later requirements," a trader of West African crude cargoes said.
Crude traders in Europe have been struggling with lacklustre demand and relatively robust supply. Even as refining margins in Europe have spiked this month following a fall in Brent prices, traders have struggled to place barrels with refiners due to poor appetite for extra volumes.
The benchmark Qua Iboe Nigerian crude oil grade has fallen to a two-year low around $1 above dated Brent from a premium of more than $3.50 in May BFO-QUA, and Russian Urals prices also have remained at unseasonably depressed levels.
For gasoil, which attracts stronger demand in the winter for heating, the contango may yet become strong enough to encourage floating storage.
ICE gasoil futures have been in contango since the end of May, widening to $5.50 a tonne this week, leading buyers to increase their storage in Europe's Amsterdam-Rotterdam-Antwerp (ARA) storage hub.
According to industry monitor Genscape, gasoil stocks at the ARA and Flushing storage hubs rose for an eighth straight week to 4.19 million tonnes on July 4.
The deepening contango is now opening further storage opportunities for traders. With a contango of around $7 a tonne over two or three months, storing gasoil on 100,000 tonne long-range (LR2) vessels becomes economical, according to traders. (Reporting by Simon Falush and Ron Bousso, additional reporting by David Sheppard, writing by Dmitry Zhdannikov; editing by Jane Baird)