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Oil plunges below zero for first time with May contract ending

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

#491

Post by baggy_trough »

MR4D wrote: post #483
hermitdev wrote: post #456

Earlier quoted context omitted.

This reminds me of Brian Hunter [0] of Amaranth fame. He was on the wrong side of a huge (multi billion USD) long trade on Natural Gas. When faced with losing it all, he doubled down. Blew up Amaranth. $9B USD hedge fund blew up basically overnight. Margin calls, etc, etc. Disclaimer: I worked for the hedge fund at the time that bought Amaranth's holdings for pennies on the dollar. Was supposed to be a joint buyout w…

One thing is clear to me - somebody is getting fired this week. Not sure if it's a hedge fund or producer, or a trader or a team, but someone is getting fired.

Everyone is getting fired.

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

#492

Post by hermitdev »

beerandt wrote: post #370
nugget wrote: post #171

Earlier quoted context omitted.

Are there any signs of this starting to happen given how low prices have gone?

One of the popular indicators is number of listings and prices for F-250 class and bigger trucks, especially in places like West Texas and North Dakota. Of course the automotive market in general is "non-typical" at the moment, so there are probably multiple interpretations to be made of whatever the market status is.

The best time to pick up a used truck/boat was to pay attention to the local plants where workers were going on strike (not even counting layoffs in times like these). I saw this extensively in the Pacific Northwest (Eastern Washington, Northern Idaho, Western Montana). Any time any of the big plants or mines striked was a good time to be buying used.

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

#493

Post by Arcorann »

hermitdev wrote: post #461
mcv wrote: post #407

Earlier quoted context omitted.

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 ba…

As told on the Daily WTF: https://thedailywtf.com/articles/special-delivery

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

#494

Post by [deleted] »

hermitdev wrote: post #461
mcv wrote: post #407

Earlier quoted context omitted.

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 ba…

[deleted]

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

#495

Post by hermitdev »

magicalhippo wrote: post #412
joosters wrote: post #148

Western 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...

I'm not at all familiar with the industry. Is the deal here that someone said to someone with an oil well "brah, I'll pay you X to pick up N barrels of oil on the day that is Y", but the buyer doesn't actually have any place to store it, instead planned to sell the oil to others later? And Y-day is approaching fast and nobody wants the oil, so the middleman has to take a loss by trying to pay someone to pick up the o…

Your intuition seems to be largely correct. With futures and a negative price, the seller is effectively paying you to take delivery.

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

#496

Post by agurk »

hermitdev wrote: post #461
mcv wrote: post #407

Earlier quoted context omitted.

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 ba…

That story, or at least a very similar one is documented on the the daily WTF:

https://thedailywtf.com/articles/Special-Delivery

I've no idea if it is true, but it makes for a funny story at least.

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

#497

Post by hermitdev »

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

I work in finance. I literally ask this question of my boss today as I deal with market data. Didn't want a negative price to fuck with our systems (I've only been at the firm for 1 year, so not entirely comfortable with all our systems). Thankfully, we don't do much with futures, so we weren't too badly affected by this.

Also, we don't use int's. We use proper decimal types for currency values.

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

#498

Post by hermitdev »

TheOtherHobbes wrote: post #136
pixl97 wrote: post #94

Earlier quoted context omitted.

1 No. 2 No. 3 Yes. The KSA spends 8.8% of its GDP on military expenditure. Seemingly the largest of any country. https://en.wikipedia.org/wiki/List_of_countries_by_military_...

But KSA has no ambitions towards becoming a global military superpower. For a long time it had a choke point on the economy through its resource monopoly. Until recently that was a much more potent weapon than any number of aircraft carriers. Russia does have superpower ambitions, which is a rather more expensive business. My cynical suspicion is that much of the KSA military budget is really just a form of kickback…

It's my understanding that KSA largely buys its military equipment from the US (certainly in regard to Army equipment and its air force). I'm pretty sure they're one of the countries approved for F-35 export, and they're known to be F-16 and F-15 customers. The F-35 is not cheap, the other two are relatively cheap (still in the millions).

I don't think anyone is expecting KSA to declare war against Russia, but they're currently at war w/ (part of) Yemen, and they're not exactly happy with Iran, either. The middle east is set to explode, even without US involvement.

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

#499

Post by tdhoot »

xur17 wrote: post #450
tdhoot wrote: post #447

Earlier quoted context omitted.

Oil companies may benefit from keeping oil expensive, but other parts of the economy that depend on oil do not. For them, tariffs are an extra tax on them and ultimately consumers.

Aren't Russia and Saudi Arabia playing a short term game to try and run US shale companies out of business? In that case, wouldn't it be logical for the government to step in and protect these companies via tariffs rather than bailing them out in a few months when they go bankrupt? It would presumably be cheaper.

I think it's inconclusive if Russia and Saudia Arabia are actually working together to drive US shale out of business or whether that's just a convenient side-effect of their own dispute.

But yes, what you describe is known as dumping and governments have enforced tariffs or quotas to prevent them. I'm not sure if it's ever been done for oil, possibly because in most cases it'd be political suicide in the US to argue for higher gas prices for consumers.

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

#500

Post by gberger »

patall wrote: post #458
typon wrote: post #295

Earlier quoted context omitted.

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

Interesting math question: When we now start at a negative price tomorrow, what does a percentage change mean? Today, we have got losses >100%, unusual but obviously possible. But if price changes tomorrow from say $-10 to $10, is that again -200%? Does a change from $-10 to -$20 mean +100%? (I obviously know percentage changes are not made for this)

I guess we'll find out tomorrow
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