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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

#461

Post by hermitdev »

mcv wrote: post #407
tempsy wrote: post #248

Earlier quoted context omitted.

Yes

People with just a paper office, used to deal in numbers rather than anything physical, and with no place to store physical goods, will now have to figure out where and how to store lots of oil?

Having worked in the finance industry my entire career, most (responsible) firms have means for dealing with taking physical delivery. Less responsible firms, not so much and may be royally screwed if they have to take delivery. I've heard anecdotally of a firm that had to take physical delivery of a shipment of coal. They didn't have plans in place, but because they had an address on a river, the coal arrived via barge. No, I don't recall the name of the firm, and yes, it's just an anecdote/hearsay.

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

#462

Post by beervirus »

giarc wrote: post #353
hcs wrote: post #332

Earlier quoted context omitted.

Here's June: https://finance.yahoo.com/quote/CLM20.NYM?p=CLM20.NYM

So tomorrow the price on say Yahoo Finance page will just show the June price of $22 or whatever it will be at opening? So it's not really a continuous price.

Well, it's the price for a different contract. The June contracts already exist, and their price is more or less continuous.

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

#463

Post by hermitdev »

thedudeabides5 wrote: post #397
ToFundorNot wrote: post #313

Earlier quoted context omitted.

I'm going to try and translate the simplest concept that tempsy is saying. The sellers were looking to sell for most of last week, however there fewer buyers as the contract approached its end, and those who were willing to buy wanted a lower price: Volume of transactions on Friday was 344k, Thursday was 111m, Wednesday was 147m. In the past 30 days, the low was 686k (ex Friday), and the high was 459m. Traders slowed…

Because trading is hard and sometimes humans are dumb. -Former dumb oil trader

> -Former dumb oil trader

+1 just for admitting it. :)

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

#464

Post by s1artibartfast »

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?

Our intuitions are so different I'm not sure if you are joking or not.

My guess is that the build time is 1-2 years with 5 years of permitting up front. I also imagine building capacity is capped with a limited number of trained engineers/welders.

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

#465

Post by beervirus »

altcognito wrote: post #395
symplee wrote: post #285

Earlier quoted context omitted.

Really not sure why both of my comments are getting down-voted into oblivion, but case and point, oil is now trading at -$37.00 ( negative thirty seven dollars) https://www.marketwatch.com/investing/future/crude%20oil%20-... Can someone explain the down-votes?

"Running out of oil" and "peak oil" would be two completely different things. Lightheartedly pointing out something as if it didn't happen when in fact it did happen, will get you downvoted. It is easy to agree that "running out of oil" sometimes was conflated with "peak oil", but alas, that's just ignorance.

Except it hasn't happened yet.

https://en.wikipedia.org/wiki/File:Global_liquids_and_US_tig...

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

#466

Post by beervirus »

fortran77 wrote: post #229

I don't understand why this makes the stock indexes drop though. Shouldn't this be a boost to everyone but oil companies in the S&P 500? Or is dropping oil prices considered a good leading indicator for a slowing economy?

It's good for some companies, bad for others. Even some companies where it seems like it'd be a good thing (say, airlines) might be fully hedged against the price of oil.

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

#467

Post by phyalow »

paxys wrote: post #204
bluedino wrote: post #103

Earlier quoted context omitted.

"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Lamborghini, his son will drive a Lamborghini, but his son will ride a camel"

People (justifiably) criticize the middle-eastern countries for a lot of things, but they are all aware that all the oil revenue is eventually going to dry up. Most of them have been hard at work transforming their economies for decades, not an easy thing to do when you're in the middle of a desert.

They havent been transforming in a remotely sustainable manner, Softbank, Neom etc.

https://en.wikipedia.org/wiki/Neom

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

#468

Post by _0w8t »

jjallen wrote: post #213
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…

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?

Read “Fooled by randomness” by Nassim Taleb.

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

#469

Post by hermitdev »

cma wrote: post #396
andrewstuart2 wrote: post #394

Earlier quoted context omitted.

If you have the answer to the question you are asking, you should change careers into oil contract trading; you'll probably make a bundle. In short, the reason nobody anticipated it is because the future is unknown. The reason any market is unpredictable is because there are too many variables to account for.

I think he's asking why the market didn't have a better estimate of storage capacity and utilization and what changed in the estimate from yesterday to today.

I'm going to take a stab at a possible reason the "market" didn't see this coming: Everyone expected the US to top off its strategic reserves, which so far hasn't really been happening. Now that You could be paid like $37 (west Texas crude closed at -$37.63) dollars/barrel, maybe the US will reconsider. I certainly wish I could store a few thousand barrels...

US companies don't want to stop producing oil. Couple that with the Russia/Saudi Arabia skuffle going on over oil prices, I'm not surprised. What surprises me is the absolutely rapid/rabid decline in the price. It just seems like pure insanity to me...

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

#470

Post by semi-extrinsic »

HighPlainsDrftr wrote: post #453
mcv wrote: post #421

Earlier quoted context omitted.

If storage rate is cents per barrel and barrels cost negative dollars per barrel, is sounds like storage is still very affordable.

If you have an old oil field that is at end of life, couldn't you pick this stuff up at $-40.00/barrel and pump it back into the empty reservoirs? I'm sure there is regulation against it, but if it was once a production reservoir, why couldn't you store it there? You would have to drill. You wouldn't have to do much at all.

You would need a suitable formation in terms of geological properties and then you'd need to drill and complete an injector and a producer well. Best case, you would probably lose half the stuff you're trying to store due to multiphase flow in reservoirs being a total drag. Worst case, the oil you're storing isn't compatible solubility-wise with the residual oil left in the reservoir, and you cause massive asphaltene precipitation and lose your entire storage well.
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