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US oil prices turn negative as demand dries up

bbc.com

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Re: US oil prices turn negative as demand dries up

#121

Post by al_chemist »

paxys wrote: post #27
fennecfoxen wrote: post #20

Earlier quoted context omitted.

This sort of refusal would likely has contractual penalties associated with it. Drillers and pipeline operators can't just shut down infrastructure by flipping a switch like it's nothing; it costs real money to perform shutdown procedures or restart pipeline pumps.

I bet all the lawyers who put such clauses in futures contracts are feeling pretty smug right now. I can imagine an oil producer going "Why on earth do we need to put this in the contract? Of course they'll accept delivery. If they don't then that's great for us."

Why do we discuss this clause as something unique? Not accepting delivery is a standard clause in transport, even small internet shops handle that.

Re: US oil prices turn negative as demand dries up

#122

Post by User23 »

SilasX wrote: post #81
User23 wrote: post #17

Earlier quoted context omitted.

That's not a stupid question it's an excellent one. If you don't take delivery you're in breach of contract. The penalties for that are going to depend on how the judicial process works out. This has never happened before, so I don't know how it will play out other than that it's going to be wildly messy. Probably far messier than anyone, myself included, is imagining.

>That's not a stupid question it's an excellent one. If you don't take delivery you're in breach of contract. The penalties for that are going to depend on how the judicial process works out. That sounds incorrect. The whole point of having standardized, commodified units trading on organized exchanges is that you don’t have to reinvent the dispute-resolution wheel — or turn it over to super slow courts — for every f…

The contract[1] assumes that Cushing has storage capacity. IANAL so I don't know how material that will be, but I continue to expect that lawyers will get involved and this will be a mess.

[1] https://www.cmegroup.com/content/dam/cmegroup/rulebook/NYMEX...

Re: US oil prices turn negative as demand dries up

#123

Post by vkou »

phobar wrote: post #101
vkou wrote: post #79

Earlier quoted context omitted.

The reserve is already 90% full.

I am curious, dohappen to have a source for that statement?

Capacity of 717 million barrels. [1]

Inventory of 635 million barrels. [2]

635/717 = 88.5%

[1] https://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve_(U...

[2] https://www.spr.doe.gov/dir/dir.html

Re: US oil prices turn negative as demand dries up

#124

Post by lubos »

godzillabrennus wrote: post #6
pcurve wrote: post #3

anybody know how many barrels were actually sold at that price? $0 is one thing, but I'm shocked at the minus $38. It could not have been large.

No demand, surplus inventory already out there, so taking possession in May requires storing them indefinitely. Investors decided to factor that cost in when buying these.

You can close your position by buying the month after futures. This will require you to store crude oil for just one month. I think the issue is that storage facilities are almost booked out and the remaining capacity is just so expensive.

Re: US oil prices turn negative as demand dries up

#125

Post by irrational »

blhack wrote: post #32
irrational wrote: post #18

Earlier quoted context omitted.

How long until we run out of tankers?

How out of date do you think this list is? https://horizonship.com/ship-category/tankers-for-sale/crude...

So, almost 200 for sale. That is interesting.

Re: US oil prices turn negative as demand dries up

#126

Post by NamTaf »

csense wrote: post #83

If you owned an oil ship, what stops you from getting paid $25 a barrel to fill your ship up with oil, sailing to international waters, dumping it all in the sea, then go right back to port and do it again and again getting paid $25 a barrel each time?

Probably various international treaties signed by the nation under which you're flagged.

Re: US oil prices turn negative as demand dries up

#127

Post by mensetmanusman »

fiblye wrote: post #59
mensetmanusman wrote: post #57

It’s getting more likely that the fallout from the response will be worse than the virus would have been. For perspective, 800 000 people die every year in the world from suicide alone. Depression/anxiety/hopelessness has real consequences.

On the other hand, there’s some potential good that could come of it. Some people who’ve felt trapped in dead end jobs are getting new opportunities. Who knows if the good changes that result will outweigh the bad, though.

True, it was cool to see how much solar production has spiked in Germany because of smog reduction.

Re: US oil prices turn negative as demand dries up

#128

Post by koheripbal »

joecool1029 wrote: post #90
burfog wrote: post #70

Earlier quoted context omitted.

Pelosi blocked that. The workaround is to cheaply rent out the reserve as storage space, with the hope that someday a better congress will allow purchasing the oil.

>Pelosi blocked that. Why should the American people pay to fill it when they can now be paid instead to store the oil? The market's decided that the toxic asset needs to go somewhere and the speculators that bought it (not the producers) will pay. >The workaround is to cheaply rent out the reserve as storage space Cheaply? They took a risk in speculating and it didn't work out. The solution is to give them a choice:…

Bailout?

It's not a bailout. Prices were negative! We'd literally be _getting paid_ to take oil and put it into our reserve. It's literally the easiest financial decision on the planet.

The fact that Pelosi blocked it demonstrates a fundamental lack of understanding of basic finance.

Re: US oil prices turn negative as demand dries up

#129

Post by koheripbal »

state_less wrote: post #72
firebird84 wrote: post #52

Earlier quoted context omitted.

Why don't we just take delivery of futures contracts directly? Isn't this a great time to fill the reserve?

The USG can top off the reserve at any time and it'd be chump change. They're spending trillions of dollars these days. They're not concerned with a few billion dollars worth of oil here and there.

With negative prices, it's literally the dumbest financial decision not to take the oil - whatever the quantity we're talking about.

Re: US oil prices turn negative as demand dries up

#130

Post by koheripbal »

vkou wrote: post #79
firebird84 wrote: post #52

Earlier quoted context omitted.

Why don't we just take delivery of futures contracts directly? Isn't this a great time to fill the reserve?

The reserve is already 90% full.

10% of the capacity at what was NEGATIVE $30 per barrel is still a lot of extra money for doing literally nothing.

Anyone not filling any available storage is a huge idiot.

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