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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

#301

Post by puranjay »

at-fates-hands wrote: post #80
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?

They've been talking about the House of Saud falling for decades now and it hasn't happened yet. Although I thought A few years ago the young prince was going to make a bunch of drastic moves away from oil in order to secure the economic future of the country? Beyond a few articles in 2017, I haven't seen much of an update on that, anybody know if it was all just bluster, or are real things happening that would softe…

To be fair, 2020 is proving to be the year all those long heard warnings are coming true

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

#302

Post by OJFord »

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?

Because storage is not free, and if that were such obvious profit, why would the guy writing you a May contract not do that themself, and write June instead?

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

#303

Post by rechristened »

TMWNN wrote: post #270
lgleason wrote: post #208

[edited for typos/grammar] The US was going to top up the strategic reserves, but that was stopped in congress. Seems like an ideal time to make that happen with such low prices. Irregardless of environmental concerns, nobody is at a point where they are not dependent on oil and a supply disruption that this is designed to address currently would have dire consequences without it. IE: food shortages etc..

There is no reason for the US government to pay to take oil out of the ground to put it into the ground elsewhere. Fracking has made the US an oil exporter. As others mentioned, fracking has made the US the world's lowest cost producer.

The breakeven point for US shale producers is around $40-50. For the Saudis it is at around $10. In what way is the US the lowest cost producer?

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

#304

Post by rechristened »

jes5199 wrote: post #146
csours wrote: post #132

As "nice" as this is, it's realllllly gonna suck on the other side when the price snaps back up and keeps going up because some oil producers have gone out of business.

seems like a good time to invest in electric cars

Tesla Semi isn't even a thing yet. EVs won't be looking so hot when they can't get parts delivered to their factories.

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

#305

Post by option_greek »

tempsy wrote: post #210
SilasX wrote: post #206

Earlier quoted context omitted.

>I am guessing that traders who are still holding on to contracts and don’t have available storage have to unload contracts pretty quickly. Good call! Now it’s about $5.30, and has dipped as low as $4.04. (Insert joke about “energy market not found”.) Edit: wow. Just wow. Below $1 a barrel and kissed $0.01 at one point! That’s gotta be a record.

It’s not that there’s no storage capacity left, it’s that if you have May contracts you are going to pay a big premium to store oil in Cushing as capacity decreases in future months. The discount reflects the storage cost premium.

Any idea how much it takes to store oil in Cushing during normal times ?

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

#306

Post by grezql »

typon wrote: post #295
symplee wrote: post #290

Earlier quoted context omitted.

Now trading at -$37.00. That's right. Negative thirty seven dollars. Today: -54.67, -299.23%. https://www.marketwatch.com/investing/future/crude%20oil%20-...

I wonder if that negative int broke a bunch of code in software around the world

Son I sure hope thats not an Int. Its double, float or something else

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

#307

Post by sdffdsfdsfsddsf »

vkou wrote: post #280
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?

Because you can't just rent a U-Stor-it space, and dump a bunch of full oil barrels into it. You need a specialized facility. And all of those facilities are full. The ones that aren't are charging an arm and a leg for storage services.

What about tankers?

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

#308

Post by OrangeMango »

bluGill wrote: post #239
thoraway1010 wrote: post #196

Earlier quoted context omitted.

100% false. Where are these facts coming from? The specs for delivery are always very clear because price depends on where it needs to be delivered! "Delivery shall be made free-on-board ("F.O.B.") at any pipeline or storage facility in Cushing, Oklahoma with pipeline access to Enterprise, Cushing storage or Enbridge, Cushing storage." What does it mean to be "normally not a destination for oil" and who is doing this…

Not everyone is allowed to trade, there are rules if you don't have ability to accept oil they make it hard to get a contract that doesn't sell automatically. (not impossible, but a mistake guns up their processes so they have procedures to avoid it)

And you get the entire month of may to take delivery. If you become an accidental owner of crude oil tomorrow, you still have time to arrange a solution with someone that can take it. Financially, it doesn't sound like a good situation to be in though.

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

#309

Post by rechristened »

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?

50 years

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

#310

Post by clairity »

jjallen wrote: post #205
frankchn wrote: post #50

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. Since we are in supercontango (oil storage is full, causing spot prices to be significantly lower than forward prices), I am guessing that traders who are still holding on to contracts and don’t have available storage have to unload contracts pretty quickly.…

What I don't understand is why the sudden move today? Did the longs think they had a place to put the oil on Friday but found out over the weekend they had no place to put it? Just seems like you would know what to do with the oil on Friday. Note this is not a rhetorical question, I would sincerely like an answer.

> "What I don't understand is why the sudden move today?"

time is information, so closing out an option (like a short or a futures contract) prematurely tends to eat value on average.

however, in this case, the new information was so material and overwhelmingly bad, that you're probably correct that most should have closed out early and taken a smaller loss.

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