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You'll also see the economy in the fourth largest city in the US - Houston - collapse. It's not just the large energy companies here, but the entire ecosystem of companies that support the energy industry here.
Are there any signs of this starting to happen given how low prices have gone?
“ The upcoming May contract’s expiry means traders are shifting their positions to June as they try to avoid taking deliveries of cargoes because of the lack of space to store them. That has opened up an unprecedented discount of more than $10 between the two nearest contracts. This situation—in which the price of the June contract is far above that of the May one—apparently delights in the name “super contango.” Peo…
Same as negative electricity spot prices, really. Hard to stop and restart a nuclear power plant.
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It’s called super contango. And storage has not run out yet. Cushing is not full. The problem is traders are anticipating storage will become very expensive as remaining capacity decreases, so if you’re holding on to May contracts and you’re not using the oil because there’s a glut right now then you’re going to be paying a lot more to keep storing the oil for future months as storage costs go up. The huge discount r…
Sorry to miss it, but how does this answer my question? I asked why they weren't prepared on Friday. Storage has been expensive and getting more expensive for weeks. We've been in a massive contango for weeks. Why weren't they prepared on Friday for physical delivery?
It's a great time to own a supertanker. You can get a 300% return on investment by buying a May contract and selling a contract for August.
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Sorry to miss it, but how does this answer my question? I asked why they weren't prepared on Friday. Storage has been expensive and getting more expensive for weeks. We've been in a massive contango for weeks. Why weren't they prepared on Friday for physical delivery?
It's only a paper loss until you sell. Everybody was hoping and praying things would change and now that it's abundantly clear that it's not changing, they're desperately trying to unwind their positions.
Most oil traders just want to profit off price movements and not actually own physical oil. There’s no volume on May contracts now they’ve all moved on to June.
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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?
There's a great Planet Money story on the Onion King. https://www.npr.org/sections/money/2018/09/19/649273647/epis...
Crude spot at $10.80 right now. 40 percent crash in an day.
Earlier quoted context omitted.
You'll also see the economy in the fourth largest city in the US - Houston - collapse. It's not just the large energy companies here, but the entire ecosystem of companies that support the energy industry here.
Are there any signs of this starting to happen given how low prices have gone?
We're already starting to see some of this, but it's also getting swept up with the pandemic lockdown, so it's hard to tell one apart from the other ATM, except that oilfield services are shedding employees quicker than other large firms, anecdotally.
Edit: it's worth noting that while the last downturn was heavily impactful on the energy, manufacturing, and real estate sectors, the recovery was pretty quick as the overall impact to the economy was about 1.6% down, and the rest of the overall economy was booming.