Why wasn't the oils producers reducing their production fast enough to prevent the price from crashing. This to me looks like a lag and inelasticity in how the oil producers are responding to demand.
Oil plunges below zero for first time with May contract ending
321–330 of 546 posts
Re: Oil plunges below zero for first time with May contract ending
#322I'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…
"somehow" is the important part here. I meant to be humble, but obviously a lot of people are sleeping not that well at the moment.
Re: Oil plunges below zero for first time with May contract ending
#323If 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: mor…
This was at least originally about a strange oils price war between Saudi and Russia.
It just happened to coincide with the pandemic. Though I'd guess by now the pandemic adds fuel to the non-fire.
Re: Oil plunges below zero for first time with May contract ending
#324I'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?
Ok folks - I'll never ever use some kind of "joke" here again. Do you really want to discuss that being a software developer requires at least a glimpse of being "smart"? I wanted to use it in a way to express "humbleness", that's why the stress should be on "somehow". I need a break, seriously.
> Do you really want to discuss that being a software developer requires at least a glimpse of being "smart"?
Pretty sure that'll be a topic of conversation on HN for decades to come.
Re: Oil plunges below zero for first time with May contract ending
#325Earlier quoted context omitted.
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?
Also full. The proportion of the global tanker fleet that is just full of oil sitting off coast near refineries is at an all time high.
A lot of speculators were betting that oil prices were going to go up and had rented ships and filled them with oil they though was cheap, before COVID-19 even hit. Since then, oil prices have absolutely cratered.
Re: Oil plunges below zero for first time with May contract ending
#326I'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…
I know that I shouldn't contribute to this, since a dozen others also latched onto that introductory statement of the OPs to say, essentially, that software developers aren't intelligent. But I feel obligated to respond in defense of my profession.
> 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.
The role of a software developer is to refine ideas of business people, codify them, satisfy stakeholders, and otherwise serve and protect business interests. It's not just writing code - you have to make decisions large and small that can have significant impacts on your company and customers. In any CRUD app, this quickly reaches a very high level of complexity which requires a high degree of engineering and social ability to manage.
It's easy to diminish any profession (oh you just use numpy, oh you just go golfing with executives, oh you just type in symptoms and prescribe pills that have been marketed to you for years, oh you just use formulas discovered by other people). Let's not do that, because one might start to look foolish quite quickly.
Re: Oil plunges below zero for first time with May contract ending
#327Which groups are most likely to lose from this crazy development. A few weeks ago there was a story about plunging oil prices exposing Capital One to scrutiny for its surprising exposure to futures.
What others are out there?
Re: Oil plunges below zero for first time with May contract ending
#328Western Canadian oil was -$0.15 today, i.e. you can be paid to take oil from the producers! https://twitter.com/zeroshorts/status/1252108066843054097 n.b. you'll still have to also pay the cost of piping the oil to somewhere that might want it...
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-...
That's US oil (WTI). Canadian oil is WCS.
Re: Oil plunges below zero for first time with May contract ending
#329If 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: mor…
But a key part of this is simply how much Russia and Saudi Arabia want to pump. The whole purpose of the price war was to drive high cost producers out of business, but that combined with the severe drop in demand sent the price to oblivion.
Also, this could catalyze a shift to people doing more things remotely. But will that reduce oil consumption significantly? Don't forget about induced demand.
Right now, I can head down the freeway in what used to be rush hour without any traffic. If that persists for any length of time, people will start buy McMansions on former farmland until the freeways get packed back up again. They will perhaps order their products that will be produced with petroleum in China, and shipped on container ships, and trucked to Amazon facilities, and then delivered in gas-burning vans.
I think as long as the economy keeps growing oil consumption will keep growing, until something cheaper than oil comes along (either through technological breakthrough or subsidy).
Re: Oil plunges below zero for first time with May contract ending
#330Note 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.…
>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 at -$30 as of 1:15 Mountain...