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What the Oil Markets Think
GrundleStiltzkin
Member Posts: 61,496 
in Tug Tavern
Why Oil Is $11 a Barrel Now but Three Times That in Autumn
The price for a barrel of West Texas Intermediate crude to be delivered next month fell 40% to $11 in Monday’s trading, the lowest price in two decades. If that barrel were to be delivered to a buyer in November, it would be worth nearly three times as much.
The unusually large difference in price between oil now and then has traders filling up tankers and setting them adrift. The bet is that the coronavirus pandemic runs its course and later this year demand for oil—and thus its price—will jump.
Some may have little else to do with their oil other than put it on a boat, given the historic collapse in transportation fuel demand that has accompanied shelter-in-place orders around the world aimed at slowing the spread of the deadly virus. Producers have been running out of places to send crude as refineries choke back their output to match the meager demand for gasoline or jet fuel.
The price gap widened Monday with expiration of the May futures contract set for Tuesday. The price of oil futures converge with the price of actual barrels of oil as the delivery date of the contracts approach.
“If you can find storage, you can make good money,” said Reid I’Anson, economist for market-data firm Kpler Inc.
Increasingly, traders are looking offshore. Lease rates have soared for very large crude carriers, the 2-million-barrel high-seas behemoths known as VLCCs.
The unusually large difference in price between oil now and then has traders filling up tankers and setting them adrift. The bet is that the coronavirus pandemic runs its course and later this year demand for oil—and thus its price—will jump.
Some may have little else to do with their oil other than put it on a boat, given the historic collapse in transportation fuel demand that has accompanied shelter-in-place orders around the world aimed at slowing the spread of the deadly virus. Producers have been running out of places to send crude as refineries choke back their output to match the meager demand for gasoline or jet fuel.
The price gap widened Monday with expiration of the May futures contract set for Tuesday. The price of oil futures converge with the price of actual barrels of oil as the delivery date of the contracts approach.
“If you can find storage, you can make good money,” said Reid I’Anson, economist for market-data firm Kpler Inc.
Increasingly, traders are looking offshore. Lease rates have soared for very large crude carriers, the 2-million-barrel high-seas behemoths known as VLCCs.
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Comments
They are wildly optimistic on the return of oil demand though (IMHO...)...the consultants have been behind the curve for a while. GS made news when they went out on a limb and expected demand to get destroyed by 20MM BBL/day when everyone else said 8-9MM BBLs/day...it looks like its going to be just under 40MM BBL/day. They have some crazy idea that demand is going to rebound dramatically in the next 2 months...I think they are nuts.
All we needed was a worldwide economic collapse and a billion dead or so
Strong resistance expected at $0...