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Oil is now at $13.32 (NOW $4.00) [Not anymore, now it's $1] {We're in Negative Land now}

Kyougar

Kyougar

Cute Animal Whisperer
Member
Nov 3, 2017
9,359
maabus1999 said:
If people are going to be stuck with contracts they can't execute since it is closing on expiration, it is very possible for this to go negative. Literally paying people to take the contract. Way too much oil for this month.

Also to the comment about the barrel costing $50, they really don't store oil in barrels anymore in mass....but funny!
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also, the barrel doesn't get consumed when it is emptied.
 
elLOaSTy

elLOaSTy

Member
Oct 27, 2017
3,846
Stinkles said:
This will probably knock gas in Seattle down to like, $3.75 a gallon!

I wish I were kidding...

I think Cali and Hawaii have it worse tho.

I remember seeing 99 cent gas once in New Jersey when I visited my GF at the time, when it was > $2.50 in cali. Seeing less than a dollar felt CRAZY.

I guess Shell and Chevron will just have to stay afloat by <checks notes> rolling around in vast govt subsidies, having obscene cash reserves, making fewer glossy climate concern ads and tripling the sales of Gas Station Boner Pills.
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I bought gas for 2.97 in LA yesterday. It's usually more expensive by me as well in this city.
 

Deleted member 41520

Banned
Mar 29, 2018
7,078
pong123 said:
guys thats for May contract, they expire tomorrow thats why everyone just selling at whatever price. Look price for June/July contracts for better sense.
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There are other factors at work here which will have implications far beyond June and July. For example oil storage companies having no more capacity to carry oil as their warehouses are literally wall-to-wall oil containers, none being shipped out, and capacity at max.
 
Shodan14

Shodan14

Banned
Oct 30, 2017
9,410
Aadiboy said:
If a barrel is less than $2, then why is gas still $2.50 a gallon?
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It costs money to process into gasoline, transport to the gas station, keep the gas station running and pay taxes on it. (+ make a profit)

Basically even if crude oil was free, it's just a component in gas price at the pump and the price would bottom out at much higher than $0.
 
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Dreams-Visions

Dreams-Visions

Banned
Oct 25, 2017
41,368
Miami, FL


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janusff

janusff

The Fallen
Oct 25, 2017
18,133
Austin, TX
Stinkles said:
This will probably knock gas in Seattle down to like, $3.75 a gallon!

I wish I were kidding...

I think Cali and Hawaii have it worse tho.

I remember seeing 99 cent gas once in New Jersey when I visited my GF at the time, when it was > $2.50 in cali. Seeing less than a dollar felt CRAZY.

I guess Shell and Chevron will just have to stay afloat by <checks notes> rolling around in vast govt subsidies, having obscene cash reserves, making fewer glossy climate concern ads and tripling the sales of Gas Station Boner Pills.
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i put some gas in the tank yesterday at $1.30 a gallon. wonder what it will be when i pump some gas next. (Texas)
 
maabus1999

maabus1999

Member
Oct 26, 2017
8,944
sonder said:
Taken from: https://seekingalpha.com/article/4338551-why-wti-crude-is-crashing-much-today

The Simple Explanation
First, we need to consider what's actually being traded here. On one side, the crashing contract is traded on NYMEX under the ticker CL. Now consider the following regarding this contract:
  • This contract stops trading on the 21st of April (tomorrow).
  • This contract is settled physically.
This second item is critical. It means whoever is long the contract when it stops trading will have to take delivery of physical crude. This excludes any speculators not having somehow contracted for storage for this incoming crude. In practice, this excludes all people not professionally trading this thing at the same time as they contract physical infrastructure, including the very large ETFs which now dominate this market.

Now consider what the Brent contract traded on ICE actually represents:
  • The front-month is the June contract. It stops trading on April 30, so very comparable to the WTIC May 2020 contract.
  • This contract is settled in cash.
What that second item means is that any speculator can take this contract through the end of trading and subsequent expiration. Nobody is going to find barrels of oil with nowhere to store, if he does that.

Hence, for the WTIC front-month contract, you have extreme forced selling pressure from all the traders holding the contract which can't possibly go beyond tomorrow holding it. For the Brent contract, you have no such pressure. You also don't have such a thing for the June WTIC contract yet, simply because it doesn't stop trading for another month.

The end result is what you see.

On the buying side of the WTIC May contract, and except for those who were short the contract and can't possibly deliver crude either, you have only those who can take oil into storage. That's actually a potentially very profitable trade – to just buy this discounted oil, store it for one month, and then deliver it to the June CL buyers. However, there is a very limited public who can take advantage of this.

Conclusion
The extreme selling you're seeing in the front-month crude contract today, which will make the news everywhere today, is driven by this simple mechanism. There is extreme forced selling in this front-month contract because any speculators that can't take physical delivery have to sell these contracts today, no matter what.

This isn't happening in Brent simply because Brent crude contracts settle in cash. Thus, any speculator can take them to their expiry without being forced to sell at any price, a "luxury" not available in WTIC crude futures.
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Funny I remember in my Futures class talking about a young banker who once didn't understand the settlement of contracts at expiration. Lets say he had to fly to Chicago to a train yard to figure out how to take delivery of hundreds of tons of lumber once...

Anyways, story is for the layman...stay away from Futures trading.
 
maabus1999

maabus1999

Member
Oct 26, 2017
8,944
Like I said, it may not settle there, but you will see trades with NEGATIVE contracts here momentarily.
 
Shoe

Shoe

One Winged Slayer
Member
Oct 25, 2017
4,184
NakedSnek said:
So what does this mean? Is the US currency tied in oil or are US assets tied in oil?
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No, but it is an enormous sector in the US economy. See link: roughly 8% of GDP.

Oil & Natural Gas Contribution to U.S. Economy Fact Sheet

America’s oil and natural gas industry supports 10.3 million jobs in the United States and nearly 8 percent of our nation’s Gross Domestic Product. We spur economic growth through hundreds of billions of dollars investing right here at home every year. We create jobs across a wide range of other...
www.api.org www.api.org
NakedSnek said:
This is probably a big world wide implication right?
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Yuuuup
 
Xando

Xando

Member
Oct 28, 2017
27,314
If you bought a barrel at $18 last night (which is a pretty good price) you now lost 98% of your investment
 
maabus1999

maabus1999

Member
Oct 26, 2017
8,944
Xando said:
If you bought a barrel at $18 last night (which is a pretty good price) you now lost 98% of your investment
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Oh they are loosing way more than that as you only but a portion down for a Futures contract (we are talking losses that greatly exceed 100%). The margin calls must be ridiculous right now for anyone not part of a large bank.
 
Kyougar

Kyougar

Cute Animal Whisperer
Member
Nov 3, 2017
9,359
Xando said:
If you bought a barrel at $18 last night (which is a pretty good price) you now lost 98% of your investment
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Only if you have to get rid of the contract, though. if you can store it, you can just sell it tomorrow in the june futures for ~20$ (until it also tanks)
 
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