4 ms·

You have different markets essentially - there is a market for delivery, and a futures market. The market for delivery briefly went price negative. This is dom

by csours 4y ago

You have different markets essentially - there is a market for delivery, and a futures market. The market for delivery briefly went price negative. This is dominated by what is in the pipeline right now and what volume of gas is being pulled from the pipeline right now. The futures market is still positive. This market is served by LNG and gas that is still in the ground. The price here is dominated by risks. --- The above model is oversimplified and wrong. If you want to know how things work, it may take some dedicated study beyond internet comments.

cj 4y ago
> The above model is oversimplified and wrong. Can you share anything that would help us commoners reading internet comments understand why the analysis is wrong?
- csours 4y ago
  There are more than 2 markets. The dominating factors change based on market conditions.
  - Twisell 4y ago
    However it would be equally false to believe that the only useful data point come from future market. Every market that enable trade gambling is bound to be volatile and sometimes disconnected from reality. Gamblers that manage to to accurately estimate this delta are the winning one. PS: Actually that's how you end up with negative price, a gambler acquired a huge quantity of gaz in the future market hoping to sell it even higher on the daily market. Nice weather daily market drop. He end up selling negative because he's just a gambler living in NYC and he don't have any usage for the gaz he own in a ship ready to deliver in the European northern sea. So he is ready to pay to get away of this deal and soon enough he is ready for his next sad gamble...
deleted 4y ago
[deleted]
chinchilla2020 4y ago
I try to explain this to people all the time with respect to gasoline prices in the US. People thing it has to do with the 'oil companies', but crude producers are hedged into next decade for the most part. Even on the refinery side they are locked in long term contracts with distributors for their products, of which gasoline is a very small piece of the pie.
- boilerupnc 4y ago
  I listened to a Planet Money podcast [0] last month that was really interesting and helpful (for me at least) to understand the aggregate price breakdown and the different aspects which contribute to the sum (e.g. transport, refinement, drilling, taxes, etc ...) price for a unit of gasoline. In particular, one portion talks about how tankers aren't beholden to the original manifest when they leave port A to go to port B. Mid voyage, they can suddenly pivot to port C if the spot buying price there is better than port B. And so on and so forth. So, until the tanker reaches a particular port - the market is what dictates which ports the tankers end up gravitating towards dynamically (and probably factoring in current and future weather, spot buying price fluctuations, current proximity, piracy, etc.) Really fascinating stuff and was eye opening for me to realize how truly small the transport cost portion is for the cost of a unit of gasoline. "Planet Money investigates how exactly gas stations determine how much a gallon is going to cost us, and why those numbers are so volatile." [0] https://www.npr.org/2022/09/15/1123108797/planet-money-breaks-down-the-price-of-a-gallon-of-gasoline https://www.npr.org/2022/09/15/1123108797/planet-money-break...

by csours 4y ago

cj 4y ago

> The above model is oversimplified and wrong. Can you share anything that would help us commoners reading internet comments understand why the analysis is wrong?

csours 4y ago
There are more than 2 markets. The dominating factors change based on market conditions.
- Twisell 4y ago
  However it would be equally false to believe that the only useful data point come from future market. Every market that enable trade gambling is bound to be volatile and sometimes disconnected from reality. Gamblers that manage to to accurately estimate this delta are the winning one. PS: Actually that's how you end up with negative price, a gambler acquired a huge quantity of gaz in the future market hoping to sell it even higher on the daily market. Nice weather daily market drop. He end up selling negative because he's just a gambler living in NYC and he don't have any usage for the gaz he own in a ship ready to deliver in the European northern sea. So he is ready to pay to get away of this deal and soon enough he is ready for his next sad gamble...

deleted 4y ago

[deleted]

chinchilla2020 4y ago

I try to explain this to people all the time with respect to gasoline prices in the US. People thing it has to do with the 'oil companies', but crude producers are hedged into next decade for the most part. Even on the refinery side they are locked in long term contracts with distributors for their products, of which gasoline is a very small piece of the pie.

boilerupnc 4y ago
I listened to a Planet Money podcast [0] last month that was really interesting and helpful (for me at least) to understand the aggregate price breakdown and the different aspects which contribute to the sum (e.g. transport, refinement, drilling, taxes, etc ...) price for a unit of gasoline. In particular, one portion talks about how tankers aren't beholden to the original manifest when they leave port A to go to port B. Mid voyage, they can suddenly pivot to port C if the spot buying price there is better than port B. And so on and so forth. So, until the tanker reaches a particular port - the market is what dictates which ports the tankers end up gravitating towards dynamically (and probably factoring in current and future weather, spot buying price fluctuations, current proximity, piracy, etc.) Really fascinating stuff and was eye opening for me to realize how truly small the transport cost portion is for the cost of a unit of gasoline. "Planet Money investigates how exactly gas stations determine how much a gallon is going to cost us, and why those numbers are so volatile." [0] https://www.npr.org/2022/09/15/1123108797/planet-money-breaks-down-the-price-of-a-gallon-of-gasoline https://www.npr.org/2022/09/15/1123108797/planet-money-break...