Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Oil plunges below zero for first time with May contract ending

bloomberg.com

Post reply on HN
Print view View original

141–150 of 546 posts

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

#141

Post by exhilaration »

yaitsyaboi wrote: post #105
wonderwonder wrote: post #102

Earlier quoted context omitted.

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.

Russia is less oil dependent than SA...

Are you sure? Everything I've read has said some variation of _Russia is heavily dependent on oil exports_ [1]. Russia has a massive cash reserve to weather this crisis but they're still being hurt just as badly as KSA.

[1] https://www.npr.org/2020/03/12/814824039/how-russia-is-react...

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

#142

Post by umeshunni »

bluedino wrote: post #103
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"

Actual quote was by the Sheikh of Dubai:

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

https://en.wikipedia.org/wiki/Rashid_bin_Saeed_Al_Maktoum

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

#143

Post by caseysoftware »

ping_pong wrote: post #130
cletus wrote: post #108

Earlier quoted context omitted.

> 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.

I'd love to hear from someone that got stuck with the 1000 bushels of corn (or similar). What do you do? How in the world do you manage that?

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

#144

Post by aspenmayer »

fmajid wrote: post #56
jdxcode wrote: post #35

Earlier quoted context omitted.

technically wasn't the ayatollah that had to pay that price? You're talking about https://en.wikipedia.org/wiki/Iranian_frozen_assets right?

Yes. He thought he’d be able to live his exile in luxury, but what he thought of as his assets (really belonging to the Iranian people he looted, of course) were frozen by Carter.

Not just Carter, the Supreme Court too. After Congress made a law to specifically make the seizure legal, the bank challenged the constitutionality of changing laws to be interpreted against the bank only when applied to that bank’s seized Iranian linked account. The Court sided with the government 7-2.

https://en.wikipedia.org/wiki/Bank_Markazi_v._Peterson

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

#145

Post by [deleted] »

bluedino wrote: post #103
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"

[deleted]

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

#147

Post by frankchn »

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.

That’s true but not really relevant here. if traders are holding on to any open contracts for May past tomorrow, then I believe they will have to take physical delivery.

Thus, traders who still have contracts open but cannot take physical delivery will have to close their positions out today or tomorrow, thus causing the dip we are seeing.

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

#149

Post by nopinsight »

If the pandemic lasts longer than 6 months, which is quite likely, many high-cost oil producers might not survive. Some would argue this could lead to shortage and a much higher price later on, but long-term oil demand could also be affected.

There might be some semi-permanent change in people's behaviors if the epidemic continues for many months. Many people will form a habit of doing more things at home/online: more takeouts, more online shopping, live/recorded video classes, virtual meetings, telehealth, etc. Better online services will also spring up to support the habits/practices.

Since online activities often save time, the new habits could become a new equilibrium: people/companies who adopt them will often have an economic advantage, influencing others to do the same. Thus, oil demand could be significantly diminished long-term as well.

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

#150

Post by jobu »

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?

Saudi Arabia still has the cheapest oil production costs in the world at $8.98/barrel (https://en.wikipedia.org/wiki/Price_of_oil#Comparative_cost_...)

They probably aren't making enough right now to pay for all of their commitments, but they definitely aren't losing money and they can likely borrow in the short term.

Post reply on HN