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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

#131

Post by mrow84 »

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…

> During the Arab Spring, Kuwait handed out $500k checks to all Kuwaiti males above 18 years old.

Do you have a reference for this? I had a look, but it's one of those things that is a bit difficult to search for.

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

#133

Post by exhilaration »

chki wrote: post #119
unexpected wrote: post #111

Earlier quoted context omitted.

Saudi makes up shit when they say their extraction costs are $3/barrel. A lot of clever accounting in that one. Actual extraction costs are roughly $10-$15/barrel.

Why do they or why would they make up extraction costs? (Genuinely interested)

Posturing. They want to intimidate producers (and their investors) that have much higher extraction costs, like U.S. frackers and Canadian oil sands firms. "We can bring oil to $10/barrel and still be profitable," you can imagine them saying threateningly.

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

#134

Post by whatok »

missedthecue wrote: post #126
frankchn wrote: post #110

Earlier quoted context omitted.

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.

The percentage of contracts that result in delivery is only a marginal factor in this case. The fact that physical delivery exists makes it so that positions must be closed out; even if the May contract is down 44% on the day and you thought you would be clever buying the dip on Friday when oil couldn't possibly go lower.

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

#135

Post by SilasX »

stevesimmons wrote: post #104
SilasX wrote: post #95

Earlier quoted context omitted.

>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!

And most abnormal ones. Even now they're correlated. And when e.g. one region has abnormalities, it doesn't really affect the purpose most people use this measure for.

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

#136

Post by TheOtherHobbes »

pixl97 wrote: post #94
onlyrealcuzzo wrote: post #76

Earlier quoted context omitted.

So you're saying KSA has a higher military budget than 1) The US, 2) China, or 3) Russia?

1 No. 2 No. 3 Yes. The KSA spends 8.8% of its GDP on military expenditure. Seemingly the largest of any country. https://en.wikipedia.org/wiki/List_of_countries_by_military_...

But KSA has no ambitions towards becoming a global military superpower. For a long time it had a choke point on the economy through its resource monopoly. Until recently that was a much more potent weapon than any number of aircraft carriers.

Russia does have superpower ambitions, which is a rather more expensive business.

My cynical suspicion is that much of the KSA military budget is really just a form of kickback - or possibly protection money, depending how you look at it - to the US mil-ind establishment.

While the Saudis are some of the worst people in the world, their ambitions are limited to keeping the ruling dynasty outrageously rich and maintaining power on their own patch of turf.

The Russian establishment is far more dangerous. It not only has links to organised crime, it also has a complement of nukes, bio, and chem weapons. And it has a very developed infowar, hacking, and social destabilisation arm, based on techniques pioneered by the US, with some home-grown twists to increase effectiveness.

This oil war and related COVID crash are going to do huge damage to the economies of both countries - and a lot of others besides - with increased prospects for instability everywhere.

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

#137

Post by WrtCdEvrydy »

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'm a software developer, which translates to being somehow smart

LOL, no, the opposite.

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

#138

Post by sjwright »

NicoJuicy wrote: post #71
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

It's artificial. You are forgetting the costs of running a city in the middle of a dessert.

Indeed it would be no mere trifle to run a city in the middle of a dessert.

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

#139

Post by [deleted] »

nicholas73 wrote: post #97
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?

Yes, but the magnitude can vary widely. The world used to use 100m barrels per day (bpd), and the last oil crash in 2016 had 2m bpd of oversupply. Just 2% unbalanced in supply/demand caused wildly fluctuating prices, due to the same reason as today - nowhere to store oil. Now we've knocked off some 35m bpd of demand, and have millions of bpd of voluntary and involuntary shutdown, some of which will not return. This i…

[deleted]

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

#140

Post by pm_me_ur_fullzz »

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?

Supply and demand: it sounds reductive and patronizing but that's really it.

Oil is not being used much because demand has been halted, while supply has been ramped up because some countries are filling in their budget holes as fast as possible.

We pretend that these are controversial political problems, but the way the world was before was the market manipulation.

You may be familiar with the story of De Beers, how diamonds had no demand so De Beers created a demand with their story, and also constricted supply so that prices of diamonds would go up. The same happens with oil in the OPEC+ nations. They fundamentally exist to collude on oil prices to keep them high by limiting the supply of oil well under their capacity to extract it.

This "balance", or lack thereof, exists at any oil price. Oil has crashed FROM 23 cents before. Its all about the quantity that exists and the demand for it.

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