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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

#241

Post by markus_zhang »

jliptzin wrote: post #231
tempsy wrote: post #207

Earlier quoted context omitted.

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…

If cushing is not full, why aren't people buying at $2 a barrel now and storing for one month, selling the June contract at the same time and collecting a $20k profit per contract?

Mostly the storage cost. Let's go extreme, say you managed to grab the contract at $0, which may actually happen today. Now you need to 1) Find transportation and storage 2) Sell it on the market as quickly as possible, at a reasonable cost.

Pretty tough TBH, unless someone is planning a war in Middle East and is grabbing up the contracts and you know about it...

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

#242

Post by CountSessine »

tempsy wrote: post #220
jjallen wrote: post #213

Earlier quoted context omitted.

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?

Most oil traders don’t actually want physical delivery. They are just trying to profit off price movements. Traders have moved on to June contracts already. There’s no volume on May contracts at this point. No one wants to actually pay for physical delivery so the price is tanking since there are no bids as we get closer to expiration tomorrow.

So does this mean that without bids there are potentially many traders, not refiners or tank farms, holding those contracts still? That those traders will get stuck with taking delivery because they couldn't unload their contracts?

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

#243

Post by foepys »

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

Being a software developer doesn't make you intelligent. Way too many devs have kind of a god complex just because they can tell a finite state machine what to do. This is especially ridiculous because a large portion of devs are writing glorified CRUD web apps in some opinionated web framework.

There are many different layers to intelligence. Social intelligence is often dismissed but still very important to society.

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

#244

Post by symplee »

altcognito wrote: post #175
symplee wrote: post #127

Anyone still talking about peak oil? :) https://en.wikipedia.org/wiki/Predicting_the_timing_of_peak_...

I have to imagine you are being facetious. "good oil" peaked a long time ago, and while it is still being produced, the only reason we have oil at all is because of all the dirty fracking, shale and sand oil out there.

The comment was to lightheartedly point out the incorrect doom and gloom predictions over the last 100 years, where people have been predicting that we're going to run out of oil "soon." Now we have so much we can't get rid of it.

For example:

https://paleofuture.gizmodo.com/weve-been-incorrectly-predic...

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

#245

Post by [deleted] »

bluGill wrote: post #165
yingw787 wrote: post #158

Earlier quoted context omitted.

If this comes to pass, I'm all for it. If we could take the demand we saw for oil, and put it into demand for high-speed Internet, we could see completely new, blue ocean markets. Imagine a surgeon being able to control a robotic surgery tool from the comforts of his/her home, where you have to have extremely low-latency or guaranteed low-latency networks. Or imagine mecheng offices running simulation jobs in the clo…

Nice to imagine, but the speed of light is too slow for a lot of low latency applications. After you allow the infrastructure some latency. A dedicated line might work, but without the network that is expensive.

[deleted]

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

#247

Post by pythonaut_16 »

yingw787 wrote: post #170
bluGill wrote: post #165

Earlier quoted context omitted.

Nice to imagine, but the speed of light is too slow for a lot of low latency applications. After you allow the infrastructure some latency. A dedicated line might work, but without the network that is expensive.

If last-mile network is too much, you could have a colocated office park / operations center next to a hospital with a dedicated high-speed network. Then each surgeon can schedule / manage a patient without having to walk to a different OR, change scrubs, or be exposed to contagious viruses. Mecheng tasks could be async / queue-based and latency wouldn't matter too much. Regardless, I think it's really important to k…

How common are robotic surgeries today? Are there benefits to having a machine do the cutting?

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

#248

Post by tempsy »

CountSessine wrote: post #242
tempsy wrote: post #220

Earlier quoted context omitted.

Most oil traders don’t actually want physical delivery. They are just trying to profit off price movements. Traders have moved on to June contracts already. There’s no volume on May contracts at this point. No one wants to actually pay for physical delivery so the price is tanking since there are no bids as we get closer to expiration tomorrow.

So does this mean that without bids there are potentially many traders, not refiners or tank farms, holding those contracts still? That those traders will get stuck with taking delivery because they couldn't unload their contracts?

Yes

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

#249

Post by greenshackle2 »

tempsy wrote: post #232
jliptzin wrote: post #231

Earlier quoted context omitted.

If cushing is not full, why aren't people buying at $2 a barrel now and storing for one month, selling the June contract at the same time and collecting a $20k profit per contract?

What are you going to do with the oil after one month? No one needs oil right now so if you take physical delivery it’s going to be sitting there for longer than a month.

> selling the June contract at the same time

They would not be the one holding that particular bag.

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

#250

Post by dang »

koheripbal wrote: post #153
dd36 wrote: post #78

Earlier quoted context omitted.

EPA isn’t enforcing right now.

This is obviously wrong. You cannot dump oil, and anyone found to be dumping will be prosecuted. READ THE EPA STATEMENT.. https://www.epa.gov/sites/production/files/2020-03/documents... > The enforcement discretion described in this temporary policy do not apply to any criminal violations or conditions of probation in criminal sentences. ... > This policy does not apply to imports. They are relaxing REPORTING require…

It's good to provide accurate information but please don't use allcaps for emphasis. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html.
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