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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

#341

Post by greenshackle2 »

throwaway_USD wrote: post #59

Usually by the time you see commodities activity hitting the front page of HN the bets are in and the market is about to take a wild swing in the other direction. It is very easy to side with the news on oil right now that there is a historical over supply (so much so we have no place to store it any longer, and even considering paying producers to leave it in the ground) and we have a historical drop in demand...so…

WTI was at -36.25$ just now. I hope you didn't put your money where your mouth is.

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

#342

Post by MattGaiser »

billfruit wrote: post #321

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.

How do you choose who reduces? A lot of the lower-cost producers are happy with this as long term their competitors will fail.

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

#343

Post by asdfman123 »

wonderwonder wrote: post #102
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?

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…

I cannot imagine they meant for it to get this bad, though. I'm guessing they underestimated how bad the COVID-19 shutdown would be. They wanted it to hurt, but not this bad.

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

#344

Post by edoceo »

colinmhayes wrote: post #317
aguyfromnb wrote: post #260

Earlier quoted context omitted.

> 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? Good question. The answer is because they don't think it will be profitable. Why aren't you ?

I've never been to Cushing Oklahoma. I feel like it should be possible to build a big tank in a week or two. Why isn't available storage space skyrocketing?

It's not possible to build a tank in two weeks, even if you had all the material and equipment at the ready. Plus, capital intensive for what may only be a spike in storage.

These physical goods are much harder to store than bits.

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

#345

Post by asdfman123 »

LatteLazy wrote: post #168
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?

Yes, except they already took almost all the wealth out of the country so no need for gold bars rolling about on planes...

Why take gold bars on airplanes when you can hire accountants to create shell companies with foreign bank accounts?

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

#346

Post by alasdair_ »

colinmhayes wrote: post #317
aguyfromnb wrote: post #260

Earlier quoted context omitted.

> 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? Good question. The answer is because they don't think it will be profitable. Why aren't you ?

I've never been to Cushing Oklahoma. I feel like it should be possible to build a big tank in a week or two. Why isn't available storage space skyrocketing?

There are regulations covering storing enormous quantities of oil, including certification of the holding tanks etc.

For example, any container over 55 gallons is subject to EPA regulation and counts towards the total permitted site quantity. Storing more than 1,320 gallons above ground requires the site to have an approved SPCC (Spill Prevention, Control, and Countermeasures) plan.

You can store 42,000 gallons below ground but that requires excavation, permits etc.

Basically: it's difficult to do on short notice.

Further reading: https://www.epa.gov/ust/aboveground-storage-tanks

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

#347

Post by WJW »

colinmhayes wrote: post #317
aguyfromnb wrote: post #260

Earlier quoted context omitted.

> 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? Good question. The answer is because they don't think it will be profitable. Why aren't you ?

I've never been to Cushing Oklahoma. I feel like it should be possible to build a big tank in a week or two. Why isn't available storage space skyrocketing?

There is a little bit more to an oil tank than just steel walls. You need proper foundations, fire prevention systems, disaster plans, probably get hooked up to the pipeline network, etc etc etc. Even if it were quick, the amount of oil being pumped up is massive and you need more than a few tanks to store it all. Finally, tanks are long term infrastructure and it might not be profitable to build out storage too much just in the hope of catching once-in-a-lifetime negative pricing events.

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

#349

Post by eru »

edoceo wrote: post #338
eru wrote: post #278

Earlier quoted context omitted.

How to prepare: Sell futures on Friday, buy today (to close out the position). Profit from the predictable price difference.

Was it predictable tho?

Well, that was exactly the question!

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

#350

Post by TwoFactor »

koheripbal wrote: post #331
typon wrote: post #295

Earlier quoted context omitted.

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

CME website itself crashed for over an hour.

Do you have a source on this? I don't see anything in the news.
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