Live data from Hacker News

I tried to buy an actual barrel of crude oil (2015)

bloomberg.com

141–150 of 165 posts

Re: I tried to buy an actual barrel of crude oil (2015)

#141

Earlier quoted context omitted.

I'm not sure there's much of anything that will get the NIMBYs riled up more than a million barrels of crude.

Add blue collar people to the mix and it acts like a NIMBY rage multiplier. I'm picturing the movie plot now: A bunch of gulf coast fisherman, effectively unemployed by Corona hatch a plan to make a buck by taking advantage of the negative price of oil futures. They pool their resources and somehow get their hands on a derelict Venezuelan tanker, cheap because of favorable exchange rates, in order to take delivery of…

A repurposed cruise ship.

Re: I tried to buy an actual barrel of crude oil (2015)

#142
post #33

Well, this aged well: "The story of how I came to own physical oil begins in late 2008, when fallout from the financial crisis spurred the crude market into severe contango—meaning the price of oil for future delivery was higher than the expected price of immediate “spot” delivery. While contango is the usual and persistent state of the oil futures curve, this particular "super" version helped create the perfect cond…

More or less, though it should be pointed out that the negative prices yesterday were for futures contracts that trade in 1000 barrel increments (roughly a railroad tank car) and not some tiny amount (like a blue barrel).

Re: I tried to buy an actual barrel of crude oil (2015)

#143
post #61

Earlier quoted context omitted.

If the oil tanker can hold 2,000,000 barrels at -$35/ barrel you are being paid $70 million to store the oil for a few months... Of course, the next question is who pays for transport to/from the tanker, labor, dock fees, employees in ship (unless you can simply "park" it for a fee)

Yeah, I was wondering. I think if someone had the experience needed to put this together quickly it would likely be profitable. It looks like most tankers are ~200,000 metric tons which at ~8 barrels per metric ton is roughly 1.6 million barrels. You also really only need to store it for a month, I think June futures are around $20 still, and so it's a diff of ~$60/barrel.

Better yet you can play hedging games with your oil. Sell a june delivery contract to lock in your profit now. If June prices collapse buy a contract to take delivery in June and sell one to deliver in July. You never have to get to Port until prices are high enough to be worth actually making a delivery, and you make money every month.

Details of the above are important to get just right. It works out if you get all the details right.

Re: I tried to buy an actual barrel of crude oil (2015)

#144
post #69

Earlier quoted context omitted.

Did you read the part where I wrote, "there's no place to put the stuff?" I also specifically said "front month contract". June oil is barely over $20 today and will probably drop under that mark by week's end.

The point of futures is that I could sell my oil _today_ to be delivered in June for $20. Any change in June oil prices from that point onwards doesn’t matter once I’ve sold the contract.

If the price collapses for June you buy a june pick up contract, trade it for your June delivery contract, and sell a July delivery contract. So long as you have the oil and can deliver you can make money on it until prices return to where it doesn't work out at which time you deliver your oil.

Re: I tried to buy an actual barrel of crude oil (2015)

#145
post #24

Earlier quoted context omitted.

Nobody's going to spend money to build new storage facilities for an oil glut that will go away in, at most, a month or two.

If you're sure about that, I hope you're investing accordingly...

Not exactly. If you are not sure the glut will last for a while and then disappear you don't invest. There is a ton of money to make but only if you get the details right, if any is wrong there is a ton of money to lose.

Re: I tried to buy an actual barrel of crude oil (2015)

#146
post #42
post #10

Considering that the front-month oil contracts went negative today (paid to buy a barrel of oil), I think more (well funded and adept) players will try to hastily arrange more storage facilities. There's just no place to put the stuff right now. It's quite difficult to turn-off an active well. Deep-water wells are all but impossible to stop.

When the price went negative, it made me wonder if I could legally take delivery of barrels of oil in my back yard. I'd like to assume there are some EPA rules that preclude one from storing barrels of oil just anywhere, but at the same time, the EPA is currently not enforcing any regulations. I also wondered about delivery on these contracts. Does that include delivery to any address I specify? Can I get paid $3000…

Even if the oil came in physical barrels, the contract is for 1000 barrels of oil, so you would need quite a lot of space in your back yard. That quantity is more like a railroad car full of oil. You might be able to arrange for the oil to be put in a tank car and delivered to a train track somewhere if you wanted to try this, though I suspect you would not make nearly as much money in the process as you think.

Re: I tried to buy an actual barrel of crude oil (2015)

#148
post #14
post #12

Earlier quoted context omitted.

>Deep-water wells are all but impossible to stop. While I realize you're referring to a functioning deep-water well, working as designed, I can't help but remember the complete mess from Deepwater Horizon. If it's difficult to stop a correctly functioning deep-water well, I have even more respect for that mess of a situation (and a bit more disdain for the practice in general): https://en.m.wikipedia.org/wiki/Deepwat…

That was ten years ago today, actually. I just watched this wonderful 11 minute video on the failure: https://www.youtube.com/watch?v=FCVCOWejlag

I ended up watching a bunch of those videos, they are really well made, thank you for the link

Re: I tried to buy an actual barrel of crude oil (2015)

#149
post #135
post #13

Earlier quoted context omitted.

Actually, deep water wells are usually quite easy to shut in by design. They frequently need to be shut in due to hurricanes or infrastructure maintenance. You don't drill a $100 million deepwater well without all the bells and whistles. Very cheap wells with low production (onshore, say ~10 barrel per day) are the ones that tend to be difficult to shut in, as they're not designed for easy temporary shut-ins. That ha…

ALL wells, including the "very cheap wells" are easy to shut in, by design. It is an essential safety feature, mandated by all relevant codes, rules and regulations. SOME wells can be a little difficult to restart after a shut-in . This includes, for example, offshore wells which extract waxy crude - the crude can simply solidify in the pipe if allowed to cool down to ambient temperature. See link below. This is usua…

Yes, any well must be able to be shut in. I phrased that poorly. What I meant was that not all wells respond to a shut in in the same way. It's not uncommon for things to take months to recover to the same production levels after a shut in. (At least for conventional wells -- unconventionals are significantly different.)

(Major caveat here: I'm an exploration geologist who later went into remote sensing, so my knowledge of actual operations is pretty spotty. Feel free to ignore me on this, but I'm going to keep rambling anyway.)

I was referring to a lot of onshore wells in declining or very small conventional fields. In many cases, a shut in that lasts for more than a few weeks basically leads to a P&A, as production won't recover without a workover, and a workover isn't worth it. That's what I meant by "not designed for it" -- production is expected to be sub-par after a shut in and a workover was never in the plans. A shut in means a death sentence for some wells, so operators prefer to keep them trickling along when possible, as it leads to a higher EUR. (Also most of these are hooked up to stock tanks, not production gathering pipelines, so it's a bit of a different world.)

However, I'm extrapolating from the very little experience I've had with that. Literally one tiny onshore field in TN (yes, Tennessee) that I worked in/with 15 years ago a summer after undergrad (I was actually mostly collecting seismic with a tiny source and a short string of geophones from the back of a pickup truck, so not terribly closely related). I may very well be way off base.

Re: I tried to buy an actual barrel of crude oil (2015)

#150
post #42

Earlier quoted context omitted.

When the price went negative, it made me wonder if I could legally take delivery of barrels of oil in my back yard. I'd like to assume there are some EPA rules that preclude one from storing barrels of oil just anywhere, but at the same time, the EPA is currently not enforcing any regulations. I also wondered about delivery on these contracts. Does that include delivery to any address I specify? Can I get paid $3000…

> When the price went negative, it made me wonder if I could legally take delivery of barrels of oil in my back yard. Typically, the exchange contract is quite specific about where and how delivery can be made, and “in barrels shipped to your backyard” isn't an option. See, e.g., the delivery procedures here: https://www.cmegroup.com/trading/energy/crude-oil/light-swee... Also, “barrels” are just a (traditional for t…

https://thedailywtf.com/articles/Special-Delivery accidental coal delivery, but still.
Post reply on HN