What the Oil Markets Think


Why Oil Is $11 a Barrel Now but Three Times That in Autumn

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.
Comments
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So we get peak oil in the fall?
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Putting tons of storage back into service in a hurry right now in California after spending my whole career eliminating it.
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Oil markets are nuts right now...they are pricing in folks to temporarily turn off wells because they are running out of storage. That's why you see the discrepancy between May and June/July pricing.
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.
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And it $8 and change now and still falling...
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All we needed was a worldwide economic collapse and a billion dead or so
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And now its $7 and change and still falling...
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Somewhere @azduck is jerkin it like it owes him money.HoustonHusky said:And now its $7 and change and still falling...
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Agree, forecasters are assuming the price rebounds with demand but there's going to be a ton of inventory to work through if nothing else.HoustonHusky said:Oil markets are nuts right now...they are pricing in folks to temporarily turn off wells because they are running out of storage. That's why you see the discrepancy between May and June/July pricing.
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. -
And now $5.5 and still falling... June contracts are still $22.30/BBL
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Clean energy ETFs are the future. Ask me for my top 5 picks! Number 3 will shock you.
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So... cheap boat gas this summer?
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And now its $3/BBL.
Strong resistance expected at $0...
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Jesus, expect regime changes in half the middle east, Russia, and Norway.HoustonHusky said:And now its $3/BBL.
Strong resistance expected at $0... -
Its only WTI and only the current month...Brent Crude current month is $26/BBL. Its a running out of storage in middle America issue.UW_Doog_Bot said:
Jesus, expect regime changes in half the middle east, Russia, and Norway.HoustonHusky said:And now its $3/BBL.
Strong resistance expected at $0...
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Those salt caverns or wherever it is they put Strat Reserve all full?HoustonHusky said:
Its only WTI and only the current month...Brent Crude current month is $26/BBL. Its a running out of storage in middle America issue.UW_Doog_Bot said:
Jesus, expect regime changes in half the middle east, Russia, and Norway.HoustonHusky said:And now its $3/BBL.
Strong resistance expected at $0... -
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No, but there is not much room (and Congress has to authorize the $$$ which they won't under Pelosi...). Its now negative $7/BBL...don't think it needs authorization anymore?GrundleStiltzkin said:
Those salt caverns or wherever it is they put Strat Reserve all full?HoustonHusky said:
Its only WTI and only the current month...Brent Crude current month is $26/BBL. Its a running out of storage in middle America issue.UW_Doog_Bot said:
Jesus, expect regime changes in half the middle east, Russia, and Norway.HoustonHusky said:And now its $3/BBL.
Strong resistance expected at $0...
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How does it go negative??? It's now -$11.00.HoustonHusky said:
No, but there is not much room (and Congress has to authorize the $$$ which they won't under Pelosi...). Its now negative $7/BBL...don't think it needs authorization anymore?GrundleStiltzkin said:
Those salt caverns or wherever it is they put Strat Reserve all full?HoustonHusky said:
Its only WTI and only the current month...Brent Crude current month is $26/BBL. Its a running out of storage in middle America issue.UW_Doog_Bot said:
Jesus, expect regime changes in half the middle east, Russia, and Norway.HoustonHusky said:And now its $3/BBL.
Strong resistance expected at $0... -
lol this didn't age well...HoustonHusky said:And now its $3/BBL.
Strong resistance expected at $0...
hey kids - no swimming for a while. Time to drain the pool and fill it with oil! -
-$37/BBL now. Most of the SPR is sour oil...only 25MM BBLs of sweet oil storage there.
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I've been joking for a while they ought to take the empty cruise ships and fill them with oil...GDS said:
lol this didn't age well...HoustonHusky said:And now its $3/BBL.
Strong resistance expected at $0...
hey kids - no swimming for a while. Time to drain the pool and fill it with oil!
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So, smart people, how do these negative prices work? Contract holder doesn't want pay storage costs, or simply can't, so they figure it's better to pay someone else to take the contract?
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Not a smart person, but my understanding is that this is the last day to sell or buy for May futures and it has to all be gone by X date..GrundleStiltzkin said:So, smart people, how do these negative prices work? Contract holder doesn't want pay storage costs, or simply can't, so they figure it's better to pay someone else to take the contract?
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Here is a good discuss on it.
https://www.zerohedge.com/energy/heres-next-problem-where-do-100-million-oil-barrels-get-delivered
I'm going to laugh if a bunch of the open contracts are the oil companies that own the oil and are getting paid not to deliver it... -
Oil prices plunged Monday as storage space ran low for the glut of crude no longer needed by economies hard hit by the coronavirus pandemic.
The June contract for West Texas Intermediate futures, considered the benchmark for U.S. crude prices, dropped 18% to $20.43 a barrel. Brent crude oil, the global benchmark, fell 8.9% to $25.57 a barrel.
The fall was more severe for the front-month May contract, which made history by plunging into negative territory in the afternoon, a first in oil-futures market data going back to 1983. It ended the day at $-37.63 a barrel, underscoring the glut threatening the energy sector. Producers in some parts of the world will have to pay buyers to take oil away or store it.
Still, with the May contract expiring Tuesday and no longer the most actively traded, oil watchers don’t consider it the most accurate reflection of price action.
When futures contracts come close to expiration, their price typically converges with the underlying price of physical barrels of oil. Otherwise traders could profit from the difference between oil futures and oil barrels.
https://www.wsj.com/articles/oil-prices-slump-as-crude-storage-shortage-intensifies-11587382034 -
Also curious how the Saudi/Russia price war affected these expiring contracts. Heard the Saudi's were sending 9 VLCCs to the Gulf compared to 1 or 2 a month before the price war.salemcoog said:
Not a smart person, but my understanding is that this is the last day to sell or buy for May futures and it has to all be gone by X date..GrundleStiltzkin said:So, smart people, how do these negative prices work? Contract holder doesn't want pay storage costs, or simply can't, so they figure it's better to pay someone else to take the contract?
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This is a short-term storage issue...different grades than the Saudi material. There is a long-term oil price reckoning still coming...