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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

#531

Post by patall »

marcosdumay wrote: post #520
patall wrote: post #458

Earlier quoted context omitted.

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)

Hum... We can know this today with the power of Math! But seriously, changing to -$10 to -$20 is a +100% change. It's multiplication, this is how it works. From -$10 to $10 would be a -200% change. Obviously, only the mainstream news reports finance numbers as a percentage of change. Anybody else is only concerned about ROI.

Well, NYSE stops at certain drop intervals, so percentage does also occur professionally:

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

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

#532

Post by dragonwriter »

JBSay wrote: post #526
dragonwriter wrote: post #432

Earlier quoted context omitted.

> That still doesn't answer: why wasn't it anticipated and reflected in earlier pricing Because despite the people that like saying all future events are reflected in current prices, the fact is humans, both individually and aggregated into markets, are imperfectly prescient, thus future events are basically never perfectly priced in to to current market prices.

Nobody says that. All KNOWN future events are priced in. We are not doing divination here.

> Nobody says that.

People say things to the effect of “if it is going to happen, it is already priced in” all the time, on HN even.

> All KNOWN future events are priced in.

There are no such thing as known future events. Market participants estimation of the likelihood of future events, weighted by inclination and capacity to invest, are priced in.

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

#533

Post by evandijk70 »

colinmhayes wrote: post #402
bmelton wrote: post #357

Earlier quoted context omitted.

I honestly don't even know if I can fathom how you could get permitted to build such a tank in a couple of weeks, but the answer to why that isn't happening _right now_ is probably because nobody wants to lay out a bunch of capital for a business that might do well contemporaneously but that has no future. Either things settle back down to normal at some point, in which case you've made some revenue, but probably not…

7 million barrels * $30 a barrel = 210 million just to take the oil. Plus $20 a barrel when you sell it brings you to $350,000,000 in revenue on a 7 million barrel tank. What am I missing, other than not being able to build the tank fast enough?

You are probably right. And given that June futures went down since yesterday, and the May futures went up, someone is probably doing that right now.

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

#534

Post by pas »

lonelappde wrote: post #218
bluGill wrote: post #160

Earlier quoted context omitted.

Worse it isn't 1000 bushes at your home it is at some transfer point several states away. If you are lucky it is an elevator that sends you a bill for storage and can unload them. If you are unlucky you need to get a truck (with a driver) there on short notice to get it out of there.

What if you just don't? You probably just get a larger bill.

Sure, but that can become a very big bill fast. Basically they can charge you (almost) whatever they want.

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

#535

Post by pas »

mlrtime wrote: post #418
pas wrote: post #284

Earlier quoted context omitted.

Are there market makers for those contracts? (So can they sell them at all?)

Of course there are market makers, but they aren't going to buy contracts if they can't deliver.

Okay, but isn't the point of designated market makers to always provide liquidity?

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

#536

Post by neop1x »

adelHBN wrote: post #525

Isn't each contract 1,000 barrels? If so, that's about $40k per contract. There something wrong here. I can see $0, or -$1-2. But almost -$40 is illogical. Something's wrong with the system.

Price is per barel. Although o e contract consists of 1000 barells. So the price is $1 for the future but you would have to pay $1000 to buy one contract. It is similar with options, alyhogh 100 pcs is standard there.

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

#537

Post by cwhiz »

alkonaut wrote: post #365
cwhiz wrote: post #351

Earlier quoted context omitted.

The May contract was still selling at $22 as of last Tuesday. I don't know much about oil markets but my base assumption would be that we would do this whole thing over again in 30 days unless something significant happens in consumption or production? When do the output cuts begin?

And can I somehow short these contracts a week before the next deadline?

I wouldn't touch this market with a 10 foot pole. It is absolutely ripe for government intervention and abuse. And if the fed does get involved they aren't going to be in there to bail out the short sellers.

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

#538

Post by beervirus »

altcognito wrote: post #522
beervirus wrote: post #465

Earlier quoted context omitted.

Except it hasn't happened yet. https://en.wikipedia.org/wiki/File:Global_liquids_and_US_tig...

Perhaps I was not clear. This graph you are sharing is shale oil, not the pure stuff found in oil shales. Regular oil production reached peak in 1970. We invented new sources that were considered untappable because of the expense of extracting it at one point. I'm not saying this is bad, I'm just saying that peak oil, as it was originally defined, is very much a real thing. On the plus side for oil enthusiasts, we wi…

Did the original definition specifically refer to non-shale oil? That doesn't seem too likely. It was just about total production.

https://www.youtube.com/watch?v=ImV1voi41YY

The fact that we've made new sources viable means we haven't hit the peak yet.

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

#540

Post by throwaway_USD »

greenshackle2 wrote: post #377
throwaway_USD wrote: post #352

Earlier quoted context omitted.

>Usually by the time you see commodities activity hitting the front page of HN the bets are in... My bet was already in...however, I do think once we start seeing the news like this proliferate we will see an odd swing by Wednesday or Friday. Still my question was sincere, if we see a swing, I don't know what the markets rationale would be...that said where can it go from negative but up

Well, I don't want to presume what your bet is, if it was literally buying this contract and hoping to re-sell it than sorry for your loss I guess. But yeah it seems like a short-term storage problem and it should bounce back, if your bet was something else it may yet pay off.

I had some puts on UCO. Last night there was a 25:1 reverse split...I just sold for >500% return (very small position).
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