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Started By
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re: May WTI Crude just fell to -$35.20
Posted on 4/20/20 at 5:09 pm to Icansee4miles
Posted on 4/20/20 at 5:09 pm to Icansee4miles
I doubt any major oil company has one of these contracts.
1
Posted on 4/20/20 at 5:14 pm to C
Correct, as a general rule a producer making product 24/7 cannot keep a large nearby long position without investing in massive storage
Posted on 4/20/20 at 5:14 pm to Icansee4miles
quote:These contracts are not with the oil companies.
it’s better than paying someone to store it
Posted on 4/20/20 at 5:19 pm to NC_Tigah
quote:
Commodities, Equities, anything.
My point is that storage/transportation can't be decoupled from the cause of this crash. That attribute distinguishes commodities from equities, and explains the the disparity between May and June contract prices. More specifically, the inability to take delivery of the asset caused prices of the May contracts to trade negative.
I think we are mostly saying the same thing just differently.
quote:
Either we suddenly found a boatload (pun intended)
I have to give credit where credit is due here.
Posted on 4/20/20 at 5:25 pm to southdowns84
quote:
My point is that storage/transportation can't be decoupled from the cause of this crash.
quote:
The U.S. Oil ETF, USO, Is The Culprit Behind Oil’s Massive Plunge
According to Bloomberg, USO owned 25% of the outstanding volume of May WTI oil futures contracts as of last week. With that contract set to expire Tuesday, the buyers of that “paper oil” have to sell or take physical delivery at the end of May. ETFs like USO are not created to take physical delivery of the oil contracts they hold, so in a long squeeze, the fund’s managers . . . . have to dump oil.
Posted on 4/20/20 at 5:28 pm to southdowns84
Yep, no one predicted trading $-35 oil today, but this has been a slow moving trainwreck for well over a month, from storage tightening up at first and now logistical issues. Also saw a lot of spec buying of May oil caks when the OPEC deal was announced to try to skim a few bucks, then found out pretty quickly that deal was not going to change anything fundamentally and the market was one way street down
This post was edited on 4/20/20 at 5:31 pm
Posted on 4/20/20 at 5:33 pm to ClampClampington
I appreciate your well-informed posts.
The funny thing about this is, speculators who had no intention of taking delivery of a drop of oil not only drove prices into negative territory today, but drove prices up to $150 bbl in 2008 when everything else collapsed.
All the while, the compliant and misinformed media played along. In 2008, they were screaming that we were running out of oil, and today they’re attributing it solely to lower, actual demand.
The funny thing about this is, speculators who had no intention of taking delivery of a drop of oil not only drove prices into negative territory today, but drove prices up to $150 bbl in 2008 when everything else collapsed.
All the while, the compliant and misinformed media played along. In 2008, they were screaming that we were running out of oil, and today they’re attributing it solely to lower, actual demand.
Posted on 4/20/20 at 5:46 pm to ClampClampington
Imagine the pressure those speculators who held those contracts were feeling today when the price went negative and they are fixing to have to take delivery on those contract when they come due tomorrow.
Posted on 4/20/20 at 5:49 pm to NC_Tigah
quote:
“paper oil” have to sell or take physical delivery at the end of May. ETFs like USO are not created to take physical delivery of the oil contracts they hold, so in a long squeeze, the fund’s managers . . . . have to dump oil.
You’ve made my point and contradicted yourself at the same time. According to your own link, the sell off was caused by the inability of USO’s to accept delivery (and not the result of some nerd panicking).
Let me try this differently. What do you think caused the disparity between May and June contracts today? What caused people to panic?
This post was edited on 4/20/20 at 5:52 pm
Posted on 4/20/20 at 5:50 pm to NC_Tigah
This is exactly why commodities are not the same as equities.
Posted on 4/20/20 at 5:54 pm to ClampClampington
quote:To be clear - operators selling product from the wellhead today were not selling at negative prices.
Yep, no one predicted trading $-35 oil today, but this has been a slow moving trainwreck for well over a month, from storage tightening up at first and now logistical issues. Also saw a lot of spec buying of May oil caks when the OPEC deal was announced to try to skim a few bucks, then found out pretty quickly that deal was not going to change anything fundamentally and the market was one way street down
Posted on 4/20/20 at 5:58 pm to texashorn
quote:
The funny thing about this is, speculators who had no intention of taking delivery of a drop of oil not only drove prices into negative territory today, but drove prices up to $150 bbl in 2008 when everything else collapsed.
I turned 16 the summer of '08 and spent the majority of my first job wages filling up my shitty Corolla
I do trade a some paper at work, but prefer physical because when I have no idea what is going on I can back to back purchases and sales and work to cheapen freight to make a few bucks and buy myself another couple weeks of work. Specs do play a role in market transparency, they talk to dozens of producers daily.
But yeah, why the media was freaking out today over oil was strange. Its noteworthy because it's never happened, but it's small volume on an expiring contract when Jun was trading 7x as many contracts.
Posted on 4/20/20 at 5:59 pm to highcotton2
They said frick it at 1 pm and crawled under their desk after liquidating
Posted on 4/20/20 at 6:03 pm to Big Scrub TX
Ok...WTI futures are at -5.00 now.
To borrow some reddit language (sorry, I cringed at that), can someone ELI5 (Explain Like I'm 5) why this happened?
EDIT: I got the price wrong, I'm dumb. Carry on!
To borrow some reddit language (sorry, I cringed at that), can someone ELI5 (Explain Like I'm 5) why this happened?
EDIT: I got the price wrong, I'm dumb. Carry on!
This post was edited on 4/20/20 at 6:58 pm
Posted on 4/20/20 at 6:06 pm to Big Scrub TX
I won't say none, but no not many. Producers rely on margins, and I can't imagine who the hell has a risk department that would be okay with holding contracts to expiration. If they do they should all be fired tomorrow
Posted on 4/20/20 at 6:07 pm to NC_Tigah
Be a great opportunity to stock up the Strategic Petroleum Reserve.
Posted on 4/20/20 at 6:08 pm to NC_Tigah
Hit a low of -$40.32 at one point. 
Posted on 4/20/20 at 6:09 pm to Big Scrub TX
@Big Scrub TX
What prices were operators selling at? Truly curious, I'm just trying to get a better sense of how this all works.
What prices were operators selling at? Truly curious, I'm just trying to get a better sense of how this all works.
Posted on 4/20/20 at 6:12 pm to ClampClampington
But there were some. Probably praying roll to June would become a little more favorable. Then when it went that far deep, it broke em. I agree, doubtful huge volume of longs, but there’s always some out there, not just oil. I see it often in grains.
Posted on 4/20/20 at 6:13 pm to dreigh
$-35 is the price of a May contract, it expires tomorrow. Not a great sign of future price, but kinda irrelevant at this point. Basically had a bunch of buyers holding onto expiring contracts that could not get any bids(people to buy) their contracts and it was a race to the bottom.
Now we are trading off June which closed at $22. So know the question is, does May rise to June or does June fall down towards May? Answer of course is probably somewhere in the middle
Now we are trading off June which closed at $22. So know the question is, does May rise to June or does June fall down towards May? Answer of course is probably somewhere in the middle
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