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I tried to buy an actual barrel of crude oil (2015)
- niklasbuschmann 1y agohttps://archive.is/SKAKk https://archive.is/SKAKk
- ahazred8ta 1y agoThis is right up there with the futures trader who accidentally ordered a barge full of coal delivered to his manhattan office.
- speedylight 1y agoI would love a link to that article lol
- beaviskhan 1y agoThis is where I read it: https://thedailywtf.com/articles/Special-Delivery https://thedailywtf.com/articles/Special-Delivery
- emchammer 1y agoThat writeup seems exaggerated. When I read the story, it was a newbie at a Bloomberg Terminal who pressed the wrong button.
- rkagerer 1y agoHave you got a link to a different account? This one describes it as an XML parsing error (expecting true/false instead of 0/1) combined with some hubris on the part of the the trading exec ("what part of ‘execute my f*ing trade’ don’t you understand!")
- rkagerer 1y agoPs. I agree it feels fake/eggagerated, I just wondered if it stemmed from a divergent, true incident of some sort.
- Animats 1y agoRight. That one is probably fake. It's not at all uncommon to trade a tanker load of oil, and this may result in the tanker being re-directed mid-trip, or being anchored somewhere for a while. Those are normal shipping events. (Yes, there are parking spaces for oil tankers. Here are the ones in the San Francisco Bay.[1]) I have read of an oil trader who bought a trainload of railroad tank cars of oil as a similar deal. That was a bigger hassle, because finding and paying for a storage track to park the tank cars became his problem. There is a market in railroad siding for storage, but there are not that many available spaces. Most of them are in Outer Nowhere, someplace where there used to be something that needed track but no longer does.[2] Managing this tied up a lot of high-priced broker time. Supposedly worked out OK, but nobody wanted to do it again. [1] https://www.sfmx.org/wp-content/uploads/2017/01/Anchorage-9-Berth-Layout-Information-Sheet.pdf https://www.sfmx.org/wp-content/uploads/2017/01/Anchorage-9-... [2] https://sidings.ca/collections/sidings https://sidings.ca/collections/sidings
- sgarland 1y agoThis is like a friendlier version of r/wsb’s stories.
- colechristensen 1y agoYes many futures are not "cash settled" but settled in the actual commodity. This is why in rare occasions the price of a thing goes negative because trading in that thing you are contractually obligated to take delivery and people trying to unload that obligation sometimes can't find buyers until they are paid to take delivery. It happens when nobody really wants to buy a thing and there is no capacity left to store or ship. When you buy a futures contract and you don't want delivery you have to sell it to close your position, and rarely you have to give people large sums of money so you can close.
- tialaramex 1y agoIn 2020 some Oil futures were negative at close, which has one obvious effect (if you're stuck holding the bag you're paying to store all this oil despite it being, at least temporarily, worthless) but also messes up the ETFs. Suppose my actual oil futures go from $800k to $900k, the ideal ETF is trying to ensure that $800k also turns into $900k just as if its investors were in actual oil futures. But these aren't futures and don't result in delivery - so critically when real oil futures blow up and that $900k turns into -$1M because the global economy had a heart attack the ETF cannot be worth -$1M as it's just paper and I don't have to pay you one cent. For the ETFs this means a negative exposure for the operator - they're eating unlimited downside but can't pass that on to their customers, and for a blip like 2020 that's survivable (if you're well capitalised) but longer term it would be fatal.
- chii 1y agoi figured these ETF providers have to have sufficient capital in reserve to allow for it perhaps? I mean, how does it work if they defaulted on those options by not being able to take delivery? Who pays?
- tialaramex 1y agoSome ETFs can't go negative because they're moving say, stock in oil refiners, oil research, etc. and they've got a model to try to follow the motion of oil futures based on investments in those stocks. So for them this sort of chaos is not good of course, but they don't have scary red numbers everywhere and people who might jump out of a window. In some cases there is basically a bucket shop (hopefully not literally, those are illegal) and so you're betting against somebody with lots of capital, but in that scenario it can definitely go very bad and it's important to read your fine print. I believe in 2020 some funds pointed out that in their fine print it said they get to choose not to follow a month's oil delivery if they need to, so, you expected $15M for the June oil because it went negative as you'd hoped, but too bad we've decided to roll that over to July oil, and that's going to lose you money as you have to wait a month longer and get worse results. That sort of thing is obviously infuriating for an investor, but as with gambling firms who won't pay (and this happens a lot if you win serious money gambling, e.g. Oops, when you gave us $100 we forgot to ask for valid ID, but now that we owe you $150 000 because you got lucky we've remembered - without ID actually the bet was illegal, so here's the $100 back and no hard feelings) they get a reputation for not paying and that does eventually hurt them.
- alfiedotwtf 1y agoAs soon as I read this headline, I was hoping someone in the comments was going to link to “Special Delivery”! That one and “Complicator’s Gloves” are probably the most memorable!
- kchoudhu 1y agoAs good as the DailyWTF story is, it's not real. Coal is unfortunately cash settled. Even oil, which is physically delivered settles physically in discrete locations. It would be pretty funny if someone delivered tankers full of oil to your office though lol.
- gadders 1y agoGood job it wasn't a power future.
- timoth3y 1y agoPlanet Money had a wonderful series of episodes where they did exactly this a few years ago. https://www.npr.org/sections/money/2016/08/26/491342091/planet-money-buys-oil https://www.npr.org/sections/money/2016/08/26/491342091/plan... They traced the path of their barrel from purchase, to production, to refining, to the sale of the various hydrocarbon products. It's a great listen.
- sgt 1y agoDid they pay extra for the barrel itself? Surely that steel doesn't come for free.
- engineer_22 1y agoBarrel is a unit of measure, like gallon.
- sgt 1y agoI know that. But if you show up to an oil field and buy a barrel of oil, they're not going to give it to you in plastic bags.
- bubblethink 1y agoThe Gang Solves the Gas Crisis.
- austinallegro 1y agoI want to buy pork bellies and frozen concentrated orange juice.
- mihaic 1y agoRandolph, I will wager you one dollar that an LLM, if put in a fine suit, could do just a good a job as any of our traders.
- austinallegro 1y ago"Mr Duke your brother is unwell!" "F*K HIM!!!!"
- ghaff 1y agoThat was such a good movie. All the leads and even not so leads were at the top of their form.
- timewizard 1y agoFutures contracts are actually somewhat interesting in how fully they are specified. If you want to see how Light Sweet Crude Oil Futures are delivered, that's covered in the NYMEX Rulebook, Chapter 200: https://www.cmegroup.com/rulebook/NYMEX/2/200.pdf https://www.cmegroup.com/rulebook/NYMEX/2/200.pdf
- kqr 1y agoThis level of standardisation is indeed what makes them so liquid and useful!
- mr_toad 1y agoOil is usually considered fungible. Fungible is a word that sounds weird and I don’t get to say often enough.
- kqr 1y agoIf you are looking for more opportunities, recall that the difference between entities and value objects in domain-driven design is that value objects are fungible.
- ghaff 1y agoLike commodity I suppose it also gets used to describe things that may not be 100% fungible but may be pretty close depending on the details and the circumstances.
- praptak 1y agoTo the first approximation, yes. But there are different standards for oil and they trade at different prices (e.g. Brent is more expensive than Urals).
- ipdashc 1y agoI never really understood the "with delivery in Cushing, Oklahoma" thing, and the Delivery section on page 3 doesn't make it too much clearer. Surely there are people trading in these contracts that... don't want their oil delivered to Cushing? The Delivery section makes it sound like maybe it can be delivered somewhere else if the buyer and seller agree, maybe? And Wikipedia does make it sound like Cushing really can be a bottleneck: https://en.wikipedia.org/wiki/Oil_industry_in_Cushing,_Oklahoma#Transhipment_point_for_West_Texas_Intermediate_(WTI)_oil https://en.wikipedia.org/wiki/Oil_industry_in_Cushing,_Oklah... But... how? It seems like such a bizarre setup to literally require all the oil to come to this one specific town, I assume I'm missing something obvious?
- steveBK123 1y agoShe’s an entertaining writer & co anchors a podcast called Odd Lots, for those unaware. Entertaining and informative on various niches of money & markets.
- john-tells-all 1y agohttps://www.bloomberg.com/oddlots https://www.bloomberg.com/oddlots
- keepamovin 1y agoQuirky and laugh out loud funny. Thank you for the post.
- terminalgravity 1y agoI agree that was a fun read
- helsinkiandrew 1y agoI remember this from 2015! (187 comments): https://news.ycombinator.com/item?id=10499297 https://news.ycombinator.com/item?id=10499297 Came up again in 2020 (157 comments): https://news.ycombinator.com/item?id=22924929 https://news.ycombinator.com/item?id=22924929
- nickdothutton 1y agoOriginally I had planned to pursue geology as a career, and studied it at college. In those days there was still a significant element of the course which concerned hand specimens. Mostly rocks and minerals, but also an impressive display of different crude oils from around the world. High or low sulphur, viscosity, density. Uncapping the small tubes would stink up the whole room pretty quickly.
- ubermonkey 1y agoI remember this, and it was hilarious. Somewhat related is the tale of the commodities trade from DailyWTF that was unfortunately executed literally. https://thedailywtf.com/articles/Special-Delivery https://thedailywtf.com/articles/Special-Delivery
- throw0101d 1y agoSomewhat related, from 2020, "The day oil was worth less than $0 — and nobody wanted it": * https://www.cbc.ca/news/business/oil-negative-price-1.5538996 https://www.cbc.ca/news/business/oil-negative-price-1.553899...
- RaoulP 1y agoI vaguely remember som enterprising guys decided to buy some sort of storage tanks and then “buying” the oil while they still could, for a quick buck.
- throw0101d 1y agoBloomberg story on it: > Over the span of a few hours one day in April 2020, a guy called Cuddles and eight of his pals from the freewheeling world of London’s commodities markets rode oil’s crash to a $660 million profit. Now regulators are scrutinizing their once-in-a-lifetime trade. * https://www.youtube.com/watch?v=F7_WXUMFM_w https://www.youtube.com/watch?v=F7_WXUMFM_w (14m) * http://archive.is/https://www.bloomberg.com/news/features/2020-12-10/stock-market-when-oil-when-negative-these-essex-traders-pounced http://archive.is/https://www.bloomberg.com/news/features/20...
- ForOldHack 1y agoDo you have an idea what one bbl of crude oil weights? Like bowling balls, it depends on the quality of the crude. 55gal @ 8.5lbs/gal to 11.4lbs/gal? 450lbs to 625lbs. Forklifts only.
- Symbiote 1y agoA standard (now) actual chemical drum holds 200L, which would be 200kg plus the weight of the barrel if filled with water. Oil is less dense. Estimations are much easier with metric units. There are special hand-powered machines for moving chemical drums: https://www.salesbridges.eu/en/products/drums-lifter/ https://www.salesbridges.eu/en/products/drums-lifter/
- maCDzP 1y agoI can recommend the NPR planet money episode ”The onion king” if you are into commodities trading.
- thenthenthen 1y agoThe Toaster Project[1], where Thomas Thwaites tries to build a toaster from scratch also touches upon this subject. Fascinating read. [0] https://www.thomasthwaites.com/the-toaster-project/ https://www.thomasthwaites.com/the-toaster-project/
- metalman 1y agoPure lack of initiative and stuck in a retail mentality. There are 10's of thousands of privatly owned wells, and countless trucks and shipping hubs. It is EXACTLY the same situation with, oh, lets pick, wheat, and a "bushel" whatever the fuck that is, I wanted one, and got one, and corn by the ton, and fuel oil, and coal by the ton, loaded onto my 1 ton truck, drive up to the fucking place and get some.......they dont realy want to sell small quantities....but they will.....mainly they are worried about civilians getting hurt in what are purely industrial environments, but standing y ground and bieng patient and respectfull has gotten me through many gates, loaded, and gone.......often it's the secretary/receptionist who decides, and pulls out a cash slip, then.the rest just happens, sometimes it's the plant manager, who does a hand wave and points after determining that it will be ok, but all in all, it's the same for everything, just find the person who can say yes and ask.
- hodder 1y agoI buy ~200,000 physical barrels of oil for 2 refineries every single day. The quantity is mind blowing and Im not even a particularly large oil trader in the grand scheme of things. The world drinks ~104 million barrels per day or around 1200 barrels a second. An olympic swimming pool holds ~15000 barrels of volume. In Canada, we trade in "cubes" which are M3. Each M3 is ~6.29287 barrels of oil. I do my monthly planning in km3. I'm happy to answer any industry questions in case anyone has any. It is a fascinating job.
- cj 1y agoDo refineries employ people like you directly? Or do you work for a downstream supplier of some kind? Curious what the supply chain looks like.
- hodder 1y agoYeah I work for a large oil company. Companies like BP, Shell, Marathon, Valero etc all have oil traders/marketers doing refinery supply. There are also intermediaries like traders at midstream companies, producers (selling the oil), or trading shops like Trafigura, Glencore, Mercuria who are slowly accruing more physical assets. Some hedge funds operate in the phys space as well.
- treyd 1y agoHow do you take delivery of such huge volumes? Rail?
- cman1444 1y agoSurely by pipeline or ship I think. When he says "physical barrels of oil" I believe he means he's actually buying the oil itself (as opposed to buying a contract or derivative of some sort). I don't think he means that the crude oil is actually arriving in individual barrels. But I could be wrong.
- hodder 1y agoCorrect.
- ANarrativeApe 1y agoI wonder what the bitcoin is worth now...