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Oil plunges below zero for first time with May contract ending
- DevX101 7y agoSomeone's going to find a creative way to store large amounts of oil and make a lot of money in a few years.
- ethbro 7y agoPhysics would argue otherwise.
- recursive 7y agoAnd what would that argument be?
- turbinerneiter 7y agoI think gas goes bad after some months, not sure if crude degrades as well.
- tantalor 7y agoIt's been buried for 100 million years, I don't think a few months is going to do anything.
- bb611 7y agoGasoline and other petroleum derivatives are not a stable as their underlying source. However consumer gas will last a few years with proper care and storage, the real issue will be when appropriate storage runs out.
- NikolaeVarius 7y agoParent specifically noted crude
- onlyrealcuzzo 7y agoSo what happens if you have gas in your car and don't drive it for 4 months???
- bradstewart 7y agoThere's a decent chance your car won't start. The gasoline in the tank is probably fine, but the gasoline in the fuel lines and so forth has likely turned in useless gunk.
- FartyMcFarter 7y agoProbably buried in a very different environment?
- nogabebop23 7y agoThe knock-on price is to refined gas, but when we talk price/storage of oil that's not ready to put in your car gasoline.
- deleted 7y ago[deleted]
- discordance 7y agoOil tankers are being used for storage: https://amp.theguardian.com/business/2020/apr/19/supertankers-drafted-in-to-store-glut-of-crude-oil-coronavirus https://amp.theguardian.com/business/2020/apr/19/supertanker...
- exothermic 7y agoFloating storage levels for crude are already double what they were a week ago [0] [0] https://uk.reuters.com/article/us-global-oil-tankers-storage/crude-oil-held-in-sea-storage-hits-new-record-at-160-million-bbls-sources-idUKKBN21Z2A2 https://uk.reuters.com/article/us-global-oil-tankers-storage...
- ccozan 7y agoand the prices of storage as well.[1] ( Article quite old, but argument stays ) [1] https://www.reuters.com/article/us-global-oil-shipping/oil-tanker-rates-double-as-demand-for-storage-and-transport-resurfaces-idUSKBN21H15Q https://www.reuters.com/article/us-global-oil-shipping/oil-t...
- tartoran 7y agoSure but those are limited as well, and their capacity would probably run out. Those tankers would have to basically be docked and not be able to transport anymore. And then?
- dredmorbius 7y agoThe point is that so long as there's weak demand, the oil's going nowhere, and the ships would be sitting regardless. Though otherwise agreed: capacity is rapidly being saturated, and this isn't much of a win for shipping companies either.
- dredmorbius 7y agoAnd the existing fleet is rapidly being saturated. Building new tankers to serve as floating storage is economically unfeasable (negative ROI), though repurposing idle fleet capacity is rational as a means to recover some variable costs. The activity doesn't make profit, rather, it slows losses.
- sz4kerto 7y agoNature has figured it out. (I.e.: the simplest way of storing oil is to not extract it.)
- nradov 7y agoOnce an oil well is producing the operators can't necessarily just turn it off. If they do cap it that can impair future production.
- coldpie 7y ago> If they do cap it that can impair future production. Great! Let's get started.
- Maximus9000 7y agoFor some producers that's easier said than done. You can't just shut the operation down and then start it up again.
- nogabebop23 7y agoAnd there lies the rub - oil in-place is often in remote, hard-to-get areas; the margin will be made in having it ready to go when price warrants, not ready to extract
- orev 7y agoMaybe we can store it in large underground caverns (or maybe porous basins) and then pump it up to the surface only when we need it. We would probably want to coordinate with other people also doing pumping in their region, as not to end up with too much on the surface that we can’t use and then have nowhere to put it.
- asah 7y agoI assume you're making a sarcastic reference to the Strategic Petroleum Reserve. https://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve_(United_States) https://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve_(U...
- sambroner 7y agoI believe (s)he's making a sarcastic reference to oil in the ground.
- dkn 7y agoIs this the same thing as... not pumping it?
- kube-system 7y agoThe other people pumping are coordinating... against you, not with you.
- deleted 7y ago[deleted]
- TenJack 7y agoYou can create underground caverns in salt using water drilling. That's how the US stores its oil reserves.
- deleted 7y ago[deleted]
- pjc50 7y agoThe world produces approximately thirteen billion liters of oil (83m "barrels") a day. A billion liters is a cube a hundred meters on a side. Given that it needs to be stored in a tank and not just pooled in a huge lake, that's a bit of a problem. https://en.wikipedia.org/wiki/TI-class_supertanker https://en.wikipedia.org/wiki/TI-class_supertanker store about three million barrels.
- lazyjones 7y agoOr, we could just burn it, heat up the planet and not need to heat during the coming winter.
- sixQuarks 7y agoEmpty Oil tankers. They are charging over $300,000 per day for storage now. Some think this is the greatest trading opportunity in over a decade. https://adventuresincapitalism.com/2020/03/19/crude-contango/ https://adventuresincapitalism.com/2020/03/19/crude-contango...
- carlsborg 7y agoCrude spot at $10.80 right now. 40 percent crash in an day.
- coldcode 7y agoThats WTI, Brent is still much higher.
- Mikeb85 7y agoWTI is what matters most to North American producers.
- chrisfinazzo 7y agoIs that correlated to the price of gas - if it ever was? I realize the above question is naive, but it's clear that the Russians and the Saudis having a pissing match over supply just as demand dries up (because COVID) has caused prices to collapse. In some places, gas is under $1/gallon.[1] [1]: https://www.cnet.com/roadshow/news/gas-prices-average-drop-kentucky-station-us/ https://www.cnet.com/roadshow/news/gas-prices-average-drop-k...
- Mikeb85 7y agoYeah gas prices mostly correlate to oil prices but also to demand for gasoline (hence the price always going up in the summer).
- chrisfinazzo 7y agoI meant this more in the sense of do they look at a specific benchmark to derive how prices are set. E.g, If gas is based on WTI, then Brent can be up or down without affecting it much - Prepared to be wrong. While they aren't in lockstep, it looks like they play off each other most of the time. As you say, seasonality has a role and demand for heating oil v gas depends on the time of the year.
- bob33212 7y agoWhat happens when Saudi Arabia collapses? Does the royalty get the fuck out of town on their private jets with as many gold bars as they can carry?
- harikb 7y agoDictators/Kings can survive on a very tight budget btw. It takes a long long time for those structures to crack. The only reason they would leave town would be something related to the virus (like other western rich folks are doing now)
- DuskStar 7y agoIIRC Saudi Arabia is a massive welfare state with significantly subsidized food, power, water and more - all paid for by oil. People might be more willing to revolt because of that going away than they would have had it never been a thing in the first place.
- ptero 7y agoSurvive in a small enclave in a third country with a small group of servants, sure. Survive as dictators, I am not so sure -- it requires keeping troops and those in key positions happy, which is expensive. My 2c
- henrikschroder 7y agoRules for Rulers by CGP Grey is a fantastic lesson in how this works: https://www.youtube.com/watch?v=rStL7niR7gs https://www.youtube.com/watch?v=rStL7niR7gs
- yur3i__ 7y agoUAE and Saudi Arabia imo will be ok. They are trying to build themselves into big entertainment and tourism hubs with their ventures into sports and investment in tourism etc I think though they will definitely suffer they may be able to weather the storm. Kuwait and Qatar on the other hand I'm not so sure about
- philjohn 7y agoDoes this not make the case for investing in renewables over shale extraction and fracking that has a price floor below which it's not economical?
- scottLobster 7y agoNo more than the great recession made investing in the stock market a bad idea. This is a temporary and largely self-inflicted shock, demand will return and prices will go back up. As much as I like renewables, with the latest oil prices I've snapped up oil/natural gas producer stock at a hell of a discount for the last few weeks. For the record, I've also invested in renewable energy companies. Both ought to do well over the next 10 years IMO.
- hirundo 7y agoGenerally an increase in oil prices is considered an argument for more renewable investment. You're saying that a decrease in price is too. Is there any oil price movement that doesn't argue for more renewables to you? How about no change, is that a case for more renewable investment?
- dd36 7y agoRenewables aren’t subject to huge price swings.
- thebean11 7y agoIs that actually true? You'd think solar would swing dramatically between day and night..
- deleted 7y ago[deleted]
- manquer 7y agoRenewalable prices I am sure is what he meant . Sun is always shining somewhere , solar is very predictable and cyclical. Volatility is not caused by change but lack of predictability of changes . Oil production is controlled by few dictators with no transparency into their decision making . Most other markets including solar are far more distributed and rational
- frankchn 7y agoNote that this is for the May contract, which closes tomorrow, and anyone left with a contract then will have to actually take delivery of the physical product. Since we are in supercontango (oil storage is full, causing spot prices to be significantly lower than forward prices), I am guessing that traders who are still holding on to contracts and don’t have available storage have to unload contracts pretty quickly. The June contract, where most of the trading is happening, is at around $22, and the July contract is $28.
- lonelappde 7y agoWould they take delivery or would they pay the producers to dump it in the dirt or ocean? Oops into the ocean is cheap storage of useless oil.
- dsfyu404ed 7y agoThe producers aren't gonna dump it (at least not in the US) because that is a surefire way to not only have the EPA bend them over but to have the EPA bend them over with the blessing of public opinion. Nobody wants to have their company be associated with pictures of oil soaked wildlife.
- dd36 7y agoEPA isn’t enforcing right now.
- kcolford 7y agoDoesn't matter when they enforce, no one's taking the risk of a change in administration.
- koheripbal 7y agoThis is obviously wrong. You cannot dump oil, and anyone found to be dumping will be prosecuted. READ THE EPA STATEMENT.. https://www.epa.gov/sites/production/files/2020-03/documents/oecamemooncovid19implications.pdf https://www.epa.gov/sites/production/files/2020-03/documents... > The enforcement discretion described in this temporary policy do not apply to any criminal violations or conditions of probation in criminal sentences. ... > This policy does not apply to imports. They are relaxing REPORTING requirements - not giving a free pass to anyone dumping whatever they want. Obviously.
- lonelappde 7y agoI understand that it's hard to stop oil production, leading to pileups. But even after 2 months it's still unstoppable?
- somebodythere 7y agoNobody wants to cut production, unless everyone else does so too. Otherwise they're just giving up a chunk of their revenue stream for a negligible rise in prices. It's a classic prisoner's dilemma game. Anyway, OPEC+ did cut production, a little bit. The market is saying it's not enough, at least in the near term.
- lonelappde 7y agoSurely when storage is full you do start to want to stop production?
- kube-system 7y agoThat's what producers would do in a competitive and rational market, but oil is not that. Oil is notoriously anti-competitive and political. https://en.wikipedia.org/wiki/2020_Russia%E2%80%93Saudi_Arabia_oil_price_war https://en.wikipedia.org/wiki/2020_Russia%E2%80%93Saudi_Arab...
- thinkcontext 7y agoFor many oil companies when the price of oil goes down they have to produce more in order to pay their heavy debt loads. With many companies producing as much as they can to stay afloat this forces the price down even further.
- syncsynchalt 7y agoSome wells can't be turned off without permanent loss of production.
- giarc 7y agoI talked with a friend the other day that works for a big Canadian producer. SAGD (which is popular in Alberta) can't just be turned off since the heating of steam takes months to ramp up.
- throwaway_USD 7y agoUsually by the time you see commodities activity hitting the front page of HN the bets are in and the market is about to take a wild swing in the other direction. It is very easy to side with the news on oil right now that there is a historical over supply (so much so we have no place to store it any longer, and even considering paying producers to leave it in the ground) and we have a historical drop in demand...so any guesses on what the "news" will be to push oil prices wildly upwards?
- somebodythere 7y agoIn the near term, Fed buying oil for future delivery and instructing drillers to keep it in the ground. In the longer term, the bankruptcies and capex cuts going on every day in the space--a lagging supply constrictor. Should be fuel to propel WTI to 80s when people start flying and driving again.
- DarthGhandi 7y agoI've seen many talking about getting into oil producers and ETFs well above this price. Guess it depends where you dwell online.
- greenshackle2 7y agoWTI was at -36.25$ just now. I hope you didn't put your money where your mouth is.
- throwaway_USD 7y ago>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
- greenshackle2 7y agoWell, 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.
- MrGilbert 7y agoI'm a software developer, which translates to being somehow smart, but I'm not that into economics: Will this have a rubber band effect? E.g., the price will skyrocket in the next 2 - 5 years, because of this?
- protomyth 7y agoI have my doubts. TX and ND can reopen wells pretty quickly, so there is a max limit on the price going up. Plus, fracking efficiency is going to go up with better techniques.
- Analemma_ 7y agoThey can, but there is a question of whether they will. Even before coronavirus Wall Street was getting annoyed at how US fracking seemed to be a money pit with no ROI; these producers may not find it easy to get the capital they need to restart production.
- pixl97 7y agoEh, not really. I live in Texas and had worked for a company that developed a software product for management of things like oil leases. The big issue is not the inability to re-open oil wells, it's not that hard. It's the people. When you shut in production you lay people off. Eventually they go elsewhere. This is a big problem in oil boom/bust cycles. Getting trained operators that don't mess up the equipment or cause environmental disasters is one of the bigger problems. Also, once shut in, the operators that survive the downturn will want to open later, than earlier. They can profit more by waiting.
- protomyth 7y agoTalking to friends in the west, they are keeping a lot of operators on pay still. I guess it is a how long thing. I'm hoping all the folks with one of the tribes that made a lot of cash on oil put some away for a rainy day.
- 7y ago
- symplee 7y agoAnyone still talking about peak oil? :) https://en.wikipedia.org/wiki/Predicting_the_timing_of_peak_oil https://en.wikipedia.org/wiki/Predicting_the_timing_of_peak_...
- altcognito 7y agoI have to imagine you are being facetious. "good oil" peaked a long time ago, and while it is still being produced, the only reason we have oil at all is because of all the dirty fracking, shale and sand oil out there.
- symplee 7y agoThe comment was to lightheartedly point out the incorrect doom and gloom predictions over the last 100 years, where people have been predicting that we're going to run out of oil "soon." Now we have so much we can't get rid of it. For example: https://paleofuture.gizmodo.com/weve-been-incorrectly-predicting-peak-oil-for-over-a-ce-1668986354 https://paleofuture.gizmodo.com/weve-been-incorrectly-predic...
- symplee 7y agoReally 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-%20electronic https://www.marketwatch.com/investing/future/crude%20oil%20-... Can someone explain the down-votes?
- altcognito 7y ago"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.
- csours 7y agoAs "nice" as this is, it's realllllly gonna suck on the other side when the price snaps back up and keeps going up because some oil producers have gone out of business.
- jes5199 7y agoseems like a good time to invest in electric cars
- rechristened 7y agoTesla Semi isn't even a thing yet. EVs won't be looking so hot when they can't get parts delivered to their factories.
- jes5199 7y agoBuy low, sell high.
- joosters 7y agoWestern Canadian oil was -$0.15 today, i.e. you can be paid to take oil from the producers! https://twitter.com/zeroshorts/status/1252108066843054097 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...
- symplee 7y agoNow 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-%20electronic https://www.marketwatch.com/investing/future/crude%20oil%20-...
- typon 7y agoI wonder if that negative int broke a bunch of code in software around the world
- keanebean86 7y agoWhy is oil trading for $4 billi.. oh no
- grezql 7y agoSon I sure hope thats not an Int. Its double, float or something else
- nopinsight 7y agoIf the pandemic lasts longer than 6 months, which is quite likely, many high-cost oil producers might not survive. Some would argue this could lead to shortage and a much higher price later on, but long-term oil demand could also be affected. There might be some semi-permanent change in people's behaviors if the epidemic continues for many months. Many people will form a habit of doing more things at home/online: more takeouts, more online shopping, live/recorded video classes, virtual meetings, telehealth, etc. Better online services will also spring up to support the habits/practices. Since online activities often save time, the new habits could become a new equilibrium: people/companies who adopt them will often have an economic advantage, influencing others to do the same. Thus, oil demand could be significantly diminished long-term as well.
- yingw787 7y agoIf this comes to pass, I'm all for it. If we could take the demand we saw for oil, and put it into demand for high-speed Internet, we could see completely new, blue ocean markets. Imagine a surgeon being able to control a robotic surgery tool from the comforts of his/her home, where you have to have extremely low-latency or guaranteed low-latency networks. Or imagine mecheng offices running simulation jobs in the cloud or an on-premises instead of each having a workstation, and being able to cluster that compute together. All these have been possible to some degree with existing technology, but now we have a paradigm shift and market acceptance that unlocks new business possibilities.
- bluGill 7y agoNice to imagine, but the speed of light is too slow for a lot of low latency applications. After you allow the infrastructure some latency. A dedicated line might work, but without the network that is expensive.
- yingw787 7y agoIf last-mile network is too much, you could have a colocated office park / operations center next to a hospital with a dedicated high-speed network. Then each surgeon can schedule / manage a patient without having to walk to a different OR, change scrubs, or be exposed to contagious viruses. Mecheng tasks could be async / queue-based and latency wouldn't matter too much. Regardless, I think it's really important to keep your bias for action high during this period of time.
- kumarski 7y agohttps://news.ycombinator.com/item?id=22719949 https://news.ycombinator.com/item?id=22719949 This is a big deal. I think EURN might hit 40% divyield which would be nuts. I'm a gambling lunatic, this is not investment advice. Floating storage thesis.
- mrnobody_67 7y agoYeah, this is a good speculation. If Tankers are $150K+ vs. usual $20-40K for any prolonged period of time...
- 1-6 7y agoTime to make more tar and repave the roads.
- eric_khun 7y agosomeone can explain me why they just don't stop pumping?
- Rury 7y agoI'm also just an outsider, but I'd imagine there's risks and costs also involved in stopping/starting production that have to be considered. Shutting off oil fields probably isn't as simple as turning a tap. It's likely a complicated process that could potentially harm a site's future production. There might be problems or it might take months to get things operating again...
- bityard 7y agoIt's a bit like asking why a train can't simply stop when there's a car parked on the tracks.
- alach11 7y agoIt's a great time to own a supertanker. You can get a 300% return on investment by buying a May contract and selling a contract for August.
- Faaak 7y agoYou'd be a bad speculator. What if contracts in august are worse near the end ?
- timerol 7y agoThat doesn't matter. If you sell a contract for August now, the buyer of the contract is the person who has to worry about the price of the contract going down. As the seller, you just have to deliver the goods as specified by the contract. You've already been paid. The relevant missing fact here is that the 300% ROI ignores the cost to operate a supertanker.
- Faaak 7y agoIndeed. Thanks
- deleted 7y ago[deleted]
- caleb1666 7y agoDo we know what percentage of futures participants are speculators just at the casino? It seems like the percent of players actually making/taking physical delivery is like 0.0000001%
- tempsy 7y agoAlmost all of them. No one is trading May anymore.
- dmurray 7y agoOil producers and distributors, airlines, power companies etc are major players in the oil futures markets. Much more so than, say, the gold markets where almost everyone's purpose is speculation, but less than agricultural futures like wheat and corn. It's still probably <10% by volume, but maybe your .0000001% was hyperbole.
- gezh 7y agoCurrently, speculators make up roughly 2/3rds of the outstanding WTI contracts [1]. In most commodities contracts taking/making physical delivery by physical players is rare. The physical delivery option is there to make sure that the underlying commodity market and the futures market converge; and you don't need someone to actually deliver to make that happen. The threat of delivery/taking delivery is usually enough. [1]You can get that info from the CFTC here: https://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm https://www.cftc.gov/MarketReports/CommitmentsofTraders/inde..., namely in this report: https://www.cftc.gov/dea/options/deanymelof.htm https://www.cftc.gov/dea/options/deanymelof.htm . Look for "CRUDE OIL, LIGHT SWEET".
- paxys 7y agoArticle title changed to "below $10". Edit: now "below $5".
- deleted 7y ago[deleted]
- lgleason 7y ago[edited for typos/grammar] The US was going to top up the strategic reserves, but that was stopped in congress. Seems like an ideal time to make that happen with such low prices. Irregardless of environmental concerns, nobody is at a point where they are not dependent on oil and a supply disruption that this is designed to address currently would have dire consequences without it. IE: food shortages etc..
- TMWNN 7y agoThere is no reason for the US government to pay to take oil out of the ground to put it into the ground elsewhere. Fracking has made the US an oil exporter. As others mentioned, fracking has made the US the world's lowest cost producer.
- rechristened 7y agoThe breakeven point for US shale producers is around $40-50. For the Saudis it is at around $10. In what way is the US the lowest cost producer?
- marvin 7y agoIf top US leadership was less demented, they could secretly "buy" up all of these $-35 May contracts and get paid 35 dollars a barrel to put it in the strategic reserve. But if such an agreement had been made in Congress and the US was obligated to buy at a certain (positive) price, you can bet the price wouldn't be $-35 right now.
- dsalzman 7y ago“ The upcoming May contract’s expiry means traders are shifting their positions to June as they try to avoid taking deliveries of cargoes because of the lack of space to store them. That has opened up an unprecedented discount of more than $10 between the two nearest contracts. This situation—in which the price of the June contract is far above that of the May one—apparently delights in the name “super contango.” People put a price on oil—they think it has value and want to own it at that value—but they also put a price on not having it now, and the latter price is quite high relative to the former. Conceivably, in theory, the latter price (what you’d pay to not have oil now) could exceed the former (what you’d pay to have oil eventually), leading to negative spot prices. We’re getting there: There are signs of weakness everywhere. Buyers in Texas are offering as little as $2 a barrel for some oil streams, raising the possibility that producers may soon have to pay to have crude taken off their hands. In ordinary economics, things do not have negative prices: If nobody wants a thing, if you’d have to pay them to take the thing, you just don’t make it. Oil is a little weird—it is hard to shut in and then restart an oil well, and there are all sorts of weird cartels and game theory involved in oil pricing and production—but the other thing going on here is that a global pandemic is pretty weird for commodity prices. The price of oil is not approaching zero because nobody needs oil; you can look into the future—or at futures prices—and see that, in fact, there is demand for oil. But right now, with the world economy closed, people need much less oil than they’ve got. If you have a thing that lots of people want, but that no one wants right now, it is hard to put a normal price on it.” today’s money stuff newsletter by Matt Levine https://www.bloomberg.com/amp/opinion/articles/2020-04-20/there-s-nowhere-to-put-the-oil https://www.bloomberg.com/amp/opinion/articles/2020-04-20/th...?
- tomp 7y ago> In ordinary economics, things do not have negative prices: If nobody wants a thing, if you’d have to pay them to take the thing, you just don’t make it. Oil is a little weird—it is hard to shut in and then restart an oil well Same as negative electricity spot prices, really. Hard to stop and restart a nuclear power plant.
- jefftk 7y ago> In ordinary economics, things do not have negative prices: If nobody wants a thing, if you’d have to pay them to take the thing, you just don’t make it. I think it's more that when something consistently has a negative price we reframe it as a positive one. Garbage has a "negative price", but we normally call it a landfill fee. Some kinds of grad school have "negative tuition" but we call it a stipend. It's things switching signs that breaks this way of talking.
- williesleg 7y agoNO MORE GLOBAL WARMING! PROBLEM SOLVED! NOBODY DRIVING! THEY CAN'T GIVE THIS STUFF AWAY!
- fortran77 7y agoI 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?
- beervirus 7y agoIt'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.
- neonate 7y agohttps://archive.md/zzq4m https://archive.md/zzq4m https://archive.md/YoedN https://archive.md/YoedN
- henryw 7y agoIt's at $0.28 right now https://finance.yahoo.com/quote/CLK20.NYM?p=CLK20.NYM https://finance.yahoo.com/quote/CLK20.NYM?p=CLK20.NYM Update: -$35.53 now
- qaq 7y agoit hit 0 for a bit
- whatok 7y agoTrading at negative $1.43. Incredible stuff.
- whatok 7y ago-$37 now
- deleted 7y ago[deleted]
- giarc 7y agoAnyone with insight what we will see tomorrow when the May contract issue isn't in play?
- hcs 7y agoHere's June: https://finance.yahoo.com/quote/CLM20.NYM?p=CLM20.NYM https://finance.yahoo.com/quote/CLM20.NYM?p=CLM20.NYM
- giarc 7y agoSo 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.
- beervirus 7y agoWell, it's the price for a different contract. The June contracts already exist, and their price is more or less continuous.
- kccqzy 7y agoYou can choose the see the price of the front month, or a specified month. The former: https://finance.yahoo.com/quote/CL=F?p=CL=F https://finance.yahoo.com/quote/CL=F?p=CL=F That indeed wouldn't really be continuous because the object being priced is different. Also I may be wrong but tomorrow on the day of expiration these contracts can still be traded.
- billfruit 7y agoWhy wasn't the oils producers reducing their production fast enough to prevent the price from crashing. This to me looks like a lag and inelasticity in how the oil producers are responding to demand.
- MattGaiser 7y agoHow do you choose who reduces? A lot of the lower-cost producers are happy with this as long term their competitors will fail.
- altcognito 7y agoIt's a good question, but a number of producers are trying to put others out of business. I don't know that this was necessary considering the drop off in consumption, but perhaps the point is to generate a supply shock in order to make a bigger point.
- snarf21 7y agoI was listening to some a podcast when oil first dropped and they were saying the issue is that a lot of the small producers are on leases and then may have to pump at a loss just to keep it and try to make it up later. Or burn everything they already spent. A lot went all in and levered up and are now stuck. Additionally, if SA stops pumping, then Russia gets all their revenue (even if it is lower per barrel). It is a great big game of chicken.
- aazaa 7y agoWhich groups are most likely to lose from this crazy development. A few weeks ago there was a story about plunging oil prices exposing Capital One to scrutiny for its surprising exposure to futures. What others are out there?
- ardy42 7y agoIs the Strategic Petroleum Reserve full yet? If it isn't the Federal Government should buy up these negative contracts and take delivery.
- Fiveplus 7y agoAll I'm interested in knowing about the near future and long term implications. Any articles/blogs/podcasts to quench my inquisitive mind?
- kyleblarson 7y agoAlso the per day price of a supertanker (~2mm barrels capacity) has been skyrocketing to well above 100k$ so speculatively buying and storing is getting riskier. My favorite quote about the storage play comes from the WSJ: 'One of the great trades in modern history involved steep contango and a lot of oil tankers. In 1990, Phibro, the oil-trading arm of Salomon Brothers, loaded tankers with cheap crude just before Iraq invaded neighboring Kuwait and crude prices surged. The trade’s architect, Andy Hall, became known for a $100 million payday and bought a century-old castle in Germany.'
- macawfish 7y agoPeople talk about this going away in June, but I don't understand why that would possibly happen unless producers decide to slow down. Otherwise, the supply is just going to continue to accumulate.
- Animats 7y agoGreat time to fill up the US strategic oil reserve. Congress didn't fund Trump's plan to have the Government buy up excess oil to prop up the price. But with prices negative, the Department of Energy can go ahead and fill up the underground storage anyway. Might need it someday.
- xur17 7y agoCompletely naive question, but I'm curious: all of the negatively priced oil is coming from Saudi Arabia and Russia. What keeps the US from applying large tariffs to oil imports from those countries (or on all imports)? If it's in our best interest to keep US oil companies alive (I understand that it is), wouldn't this be an effective way to accomplish this goal, with the side benefit of receiving additional tax revenue?
- tdhoot 7y agoOil 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.
- 0xffff2 7y agoIf the tariffs are only applied to keep oil at some nominal level, don't both parties benefit somewhat? You can still have very cheap oil while keeping the price high enough to keep US oil companies alive (if only barely).
- xur17 7y agoAren'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.
- tdhoot 7y agoI 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.
- 7y ago
- PanMan 7y agoBasically, people pay to prevent this from happening: http://thedailywtf.com/articles/Special-Delivery http://thedailywtf.com/articles/Special-Delivery
- tamaharbor 7y agoSpot price = $18.10 (close)
- vadym909 7y agoWould this slow down the move to electric cars? If gas is so cheap, it takes away one of the major advantages.
- adelHBN 7y agoIsn'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.
- neop1x 7y agoPrice 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.
- neycoda 7y agoPaywall