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Oil plunges below zero for first time with May contract ending

bloomberg.com

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

#121

Post by protomyth »

at-fates-hands wrote: post #96
protomyth wrote: post #69

Earlier quoted context omitted.

Different industries, different people. Saudi needs a higher price to pay for their country than frackers in ND and TX need to make a profit regardless of actual extraction cost. We were going to have a drop in price just because of the global slowdown. Frankly, we need to get to the next generation of nuclear because renewables will not be enough.

> Frankly, we need to get to the next generation of nuclear because renewables will not be enough. How close are we to seeing this right now?

Technically? I think we have multiple paths

Politically? not a damn chance because ignorance is a thing.

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

#122

Post by thinkcontext »

lonelappde wrote: post #54

I understand that it's hard to stop oil production, leading to pileups. But even after 2 months it's still unstoppable?

For many oil companies when the price of oil goes down they have to produce more in order to pay their heavy debt loads. With many companies producing as much as they can to stay afloat this forces the price down even further.

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

#123

Post by bradstewart »

onlyrealcuzzo wrote: post #91
bb611 wrote: post #30

Earlier quoted context omitted.

Gasoline and other petroleum derivatives are not a stable as their underlying source. However consumer gas will last a few years with proper care and storage, the real issue will be when appropriate storage runs out.

So what happens if you have gas in your car and don't drive it for 4 months???

There's a decent chance your car won't start. The gasoline in the tank is probably fine, but the gasoline in the fuel lines and so forth has likely turned in useless gunk.

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

#124

Post by burger_moon »

unexpected wrote: post #49
yur3i__ wrote: post #26

Earlier quoted context omitted.

UAE and Saudi Arabia imo will be ok. They are trying to build themselves into big entertainment and tourism hubs with their ventures into sports and investment in tourism etc I think though they will definitely suffer they may be able to weather the storm. Kuwait and Qatar on the other hand I'm not so sure about

Qatar makes 95% of their revenue on LNG. These are long-term contracts at fixed prices. Kuwait and Qatar also have the fewest amount of actual citizens that it would need to "pay off". Ex: During the Arab Spring, Kuwait handed out $500k checks to all Kuwaiti males above 18 years old. He also told the citizenry that he would forgive all car loans - population went and bought ferraris, range rovers, etc. and got the lo…

I never heard of this before and tried to look it up without success.

I did find this Reuters article which mentions "In 2011, to mark three major anniversaries, ruler Sheikh Sabah al-Ahmad al-Sabah granted 1,000 dinars to each Kuwaiti and free food rations for 13 months."

1000 dinars ~$3200

https://www.reuters.com/article/us-kuwait-parliament-debt/ku...

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

#125

Post by bluGill »

cletus wrote: post #108
missedthecue wrote: post #106

Earlier quoted context omitted.

>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…

True, but there will be checking to ensure that you want oil if you are not normally a destination for oil. Trying to deliver oil to someone without a loading dock will be a problem that hurts many people trying to correct.

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

#126

Post by missedthecue »

frankchn wrote: post #110
missedthecue wrote: post #106

Earlier quoted context omitted.

>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...

Yes, but a very very low percentage of the contracts that expire result in delivery. Delivery is expensive. It's cheaper to get oil through a supplier.

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

#128

Post by enkid »

ccozan wrote: post #48
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?

After the WW2 House of Saud made an agreement [1] with USA that in exchange for the US Army support of Saud, they will pump any amount of oil that is needed. Now not sure how long this will last, since the current price war is directly affecting the US producers. Time will tell. [1] https://www.vox.com/2016/1/6/10719728/us-saudi-arabia-allies

The US is currently a net exporter of oil, or at least was until the recent price drop. Saudi Arabia's capacity of pumping oil is completely based on what they view as their best interest in making money while maintaining market share. That's why they tried to take US Shale oil out, and why they tried over producing recently to get Russia to come to the table for a production cut. They've also embargoed the US in the past.

https://en.wikipedia.org/wiki/1973_oil_crisis

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

#129

Post by snarf21 »

protomyth wrote: post #75
MrGilbert wrote: post #63

I'm a software developer, which translates to being somehow smart, but I'm not that into economics: Will this have a rubber band effect? E.g., the price will skyrocket in the next 2 - 5 years, because of this?

I have my doubts. TX and ND can reopen wells pretty quickly, so there is a max limit on the price going up. Plus, fracking efficiency is going to go up with better techniques.

I was listening to some a podcast when oil first dropped and they were saying the issue is that a lot of the small producers are on leases and then may have to pump at a loss just to keep it and try to make it up later. Or burn everything they already spent. A lot went all in and levered up and are now stuck.

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

#130

Post by ping_pong »

cletus wrote: post #108
missedthecue wrote: post #106

Earlier quoted context omitted.

>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…

Yes, this almost happened to me once when I was trading futures. My broker called me several times throughout the day and I couldn't take the call. When I finally did, he told me to roll my contract forward that day otherwise I would have to take delivery of 1000 bushels of corn.
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