Oil plunges below zero for first time with May contract ending • Hacker News Board

Re: Oil plunges below zero for first time with May contract ending

#101

Post by unexpected » Mon, Apr 20, 2020, 3:19 PM UTC

pjc50 wrote: post #39

DuskStar wrote: post #31

Earlier quoted context omitted.

Saudi Arabia is trying to build tourism? From where?

Dubai is definitely a tourist destination for a small number of hyper-wealthy people. The tourists get to be in the part of the bubble that serves alcohol.

Dubai is definitely a tourist destination, and it's not just for hyper-wealthy people. They get a huge amount of middle class tourism from South Asia and China. There's a wide variety of hotels, from 2* to 7* and you can stay in a superb 5* hotel for $150/night.

It feels like a destination for the hyper-wealthy to Americans because our tourist offerings here are so much better - but not everyone can come here. My best analogy for Dubai is that it's like Vegas without the gambling - and while that may suck for some people, it can definitely be done. Vegas is also done at every price point!

Re: Oil plunges below zero for first time with May contract ending

#102

Post by wonderwonder » Mon, Apr 20, 2020, 3:19 PM UTC

bob33212 wrote: post #20

What happens when Saudi Arabia collapses? Does the royalty get the fuck out of town on their private jets with as many gold bars as they can carry?

I doubt they collapse, this is a war of attrition started by the Saudis and Russia. They are attempting to force all of their competition (primarily each other) out of business by continuing to flood the market with oil. They are betting that they can outlast the other. These are both nations that care very little for their citizenry outside of the elites so both are willing to go to lengths other democratic nations would not.

Either side could likely stop this with the consequence only being loss of face.

Re: Oil plunges below zero for first time with May contract ending

#103

Post by bluedino » Mon, Apr 20, 2020, 3:22 PM UTC

bob33212 wrote: post #20

What happens when Saudi Arabia collapses? Does the royalty get the fuck out of town on their private jets with as many gold bars as they can carry?

"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Lamborghini, his son will drive a Lamborghini, but his son will ride a camel"

Re: Oil plunges below zero for first time with May contract ending

#104

Post by stevesimmons » Mon, Apr 20, 2020, 3:22 PM UTC

SilasX wrote: post #95

Danieru wrote: post #43

Earlier quoted context omitted.

Brent would not be impacted by storage in America, since Brent is a product of the oilfields near the old Brent oilfield in north Europe. Which brings up the topic of oil prices: there are many. Every blend, every location, has its own price. In fact the same oil can be sold at different prices if the seller so chooses. Of note Saudis have reportadly raised the price they offer americans as part of the deal, while lo…

>Which brings up the topic of oil prices: there are many. Every blend, every location, has its own price. In fact the same oil can be sold at different prices if the seller so chooses. True but largely irrelevant. WTI is a widely-cited benchmark because all those oil prices are highly correlated and so it's a good general measure.

Highly correlated, in normal market conditions!

Re: Oil plunges below zero for first time with May contract ending

#105

Post by yaitsyaboi » Mon, Apr 20, 2020, 3:23 PM UTC

wonderwonder wrote: post #102

bob33212 wrote: post #20

What happens when Saudi Arabia collapses? Does the royalty get the fuck out of town on their private jets with as many gold bars as they can carry?

I doubt they collapse, this is a war of attrition started by the Saudis and Russia. They are attempting to force all of their competition (primarily each other) out of business by continuing to flood the market with oil. They are betting that they can outlast the other. These are both nations that care very little for their citizenry outside of the elites so both are willing to go to lengths other democratic nations…

Interesting. Russia is less oil dependent than SA, but the Saudi's have more oil per capita.

Re: Oil plunges below zero for first time with May contract ending

#106

Post by missedthecue » Mon, Apr 20, 2020, 3:24 PM UTC

frankchn wrote: post #50

Note that this is for the May contract, which closes tomorrow, and anyone left with a contract then will have to actually take delivery of the physical product. Since we are in supercontango (oil storage is full, causing spot prices to be significantly lower than forward prices), I am guessing that traders who are still holding on to contracts and don’t have available storage have to unload contracts pretty quickly.…

>Note that this is for the May contract, which closes tomorrow, and anyone left with a contract then will have to actually take delivery of the physical product.

Not really. Almost all contracts are cash settled.

Re: Oil plunges below zero for first time with May contract ending

#107

Post by lazyjones » Mon, Apr 20, 2020, 3:24 PM UTC

DevX101 wrote: post #2

Someone's going to find a creative way to store large amounts of oil and make a lot of money in a few years.

Or, we could just burn it, heat up the planet and not need to heat during the coming winter.

Re: Oil plunges below zero for first time with May contract ending

#108

Post by cletus » Mon, Apr 20, 2020, 3:27 PM UTC

missedthecue wrote: post #106

frankchn wrote: post #50

Note that this is for the May contract, which closes tomorrow, and anyone left with a contract then will have to actually take delivery of the physical product. Since we are in supercontango (oil storage is full, causing spot prices to be significantly lower than forward prices), I am guessing that traders who are still holding on to contracts and don’t have available storage have to unload contracts pretty quickly.…

>Note that this is for the May contract, which closes tomorrow, and anyone left with a contract then will have to actually take delivery of the physical product. Not really. Almost all contracts are cash settled.

> Not really. Almost all contracts are cash settled.

The parent comment is 100% correct. You're missing the nuance of how commodity futures trading works. Yes most are cash-settled but there is a date after which if you hold the contract you're promising to make or accept physical delivery. The commenter is saying we reach that point for the May oil contract tomorrow so anyone who wants to settle in cash has to do so by tomorrow.

Re: Oil plunges below zero for first time with May contract ending

#109

Post by unexpected » Mon, Apr 20, 2020, 3:28 PM UTC

at-fates-hands wrote: post #80

bob33212 wrote: post #20

What happens when Saudi Arabia collapses? Does the royalty get the fuck out of town on their private jets with as many gold bars as they can carry?

They've been talking about the House of Saud falling for decades now and it hasn't happened yet. Although I thought A few years ago the young prince was going to make a bunch of drastic moves away from oil in order to secure the economic future of the country? Beyond a few articles in 2017, I haven't seen much of an update on that, anybody know if it was all just bluster, or are real things happening that would softe…

Every Arab ruler has tried to do this for decades, but this is a HARD problem:

1) Their climate sucks 2) They have very little arable land and lack water 3) Production of electricity is expensive 4) A lot of interior cities - not a lot of port access

So, from a geographical perspective, what is SA supposed to produce that gives them a comparative advantage against the rest of the world? Then you move into the political/religious aspects:

1) Uneducated workforce, despite offering scholarships to study abroad for every one of their citizens 2) They import most of their labor from other countries, ergo, their labor costs are higher with respect to the rest of the world. A factory in India will be cheaper than a factory in SA, all else being equal.

These disadvantages make the only real route to a viable economy a service-based one. This is what Dubai has done - Dubai has done their damndest to establish free trade zones, a legal framework, and a tax regime to get companies to establish their MENA HQ's there (and they've done so accordingly). SA is WAY behind on this (I would argue irrecoverably behind).

Re: Oil plunges below zero for first time with May contract ending

#110

Post by frankchn » Mon, Apr 20, 2020, 3:29 PM UTC

missedthecue wrote: post #106

frankchn wrote: post #50

Note that this is for the May contract, which closes tomorrow, and anyone left with a contract then will have to actually take delivery of the physical product. Since we are in supercontango (oil storage is full, causing spot prices to be significantly lower than forward prices), I am guessing that traders who are still holding on to contracts and don’t have available storage have to unload contracts pretty quickly.…

>Note that this is for the May contract, which closes tomorrow, and anyone left with a contract then will have to actually take delivery of the physical product. Not really. Almost all contracts are cash settled.

The CME Crude Oil Futures Contract is settled through delivery at Cushing, OK: https://www.cmegroup.com/trading/energy/crude-oil/light-swee...