US oil prices plunge to $11 per barrel, lowest in two decades, in pandemic-fueled free fall

[mystery-ak]

US oil prices plunge to $11 per barrel, lowest in two decades, in pandemic-fueled free fall
by Josh Siegel
 | April 20, 2020 10:18 AM



U.S. oil prices fell to $11 per barrel Monday, a level not seen in at least 20 years.

The low price of West Texas Intermediate crude, the U.S. benchmark, comes amid collapsing demand from the coronavirus pandemic, which has shut down world economies and prevented people from traveling.

About 60% of the world’s oil normally is used to make transportation fuel.

The further drop in price Monday also reflected concern that the logistics of the oil industry — ships, pipelines, and storage tanks — will be overwhelmed soon from an oil supply glut with demand so low.

more
https://www.washingtonexaminer.com/policy/energy/us-oil-prices-plunge-to-11-per-barrel-lowest-in-two-decades-in-pandemic-fueled-free-fall

[Free Vulcan]

Right now front month futures are bouncing off $10.

[catfish1957]

Right now front month futures are bouncing off $10.

As I said on another thread, there are some people making a speculative killing as we speak.  As production slows, that $10/bbl oil will bring huge returns.

[Free Vulcan]

Just crashed again to sub/$8. I'm thinking early 80's since it's been that low.

[Free Vulcan]

Scratch that, oil just bounced off $4.

That's early 70's prices, pre-embargo, non-adjusted for inflation.

Damn.

[libertybele]

Scratch that, oil just bounced off $4.

That's early 70's prices, non-adjusted for inflation.

I saw that ... unbelievable!   Well, Amazon, UPS, FedEx ... should be doing very well. 

[Free Vulcan]

I saw that ... unbelievable!   Well, Amazon, UPS, FedEx ... should be doing very well.

I went back and looked at 100 year charts. Adjusted for inflation, I'm not sure oil has ever been this cheap since it first since it came to market.

[Cyber Liberty]

I went back and looked at 100 year charts. Adjusted for inflation, I'm not sure oil has ever been this cheap since it came to market.

It just briefly flashed <$4.  A 75% drop in today's session!

[Fishrrman]

Hmmm.... finally, for the first time since 1973 (and the first arab oil embargo) we are seeing the concept of true "supply and demand" restored to the petroleum market.

From 1973 until now (an exception was a very brief period in 2008), "the market" has been distorted on the supply side, by a collaboration of suppliers fixing prices through production and therefore constricting that market.

Supply and demand cannot work under Adam Smith's rules when supplies are monopolized and manipulated by one side that controls all the strings.

But... today... for at least the immediate future... that is no more.
We are seeing "the price" of oil where it REALLY belongs -- determined by "the market".
Hallelujah !!!

[Free Vulcan]

It just briefly flashed <$4.  A 75% drop in today's session!

I'm guessing this is some expiry squeeze. Back month crude and RBOB futures aren't following.

I didn't realize that RBOB actually hit .50c/gal at the beginning of the month.

Gas prices here in Iowa now under a buck.

[Hoodat]

Hasn't been this low since Reagan put an end to price controls.

[Cyber Liberty]

I'm guessing this is some expiry squeeze. Back month crude and RBOB futures aren't following.

I didn't realize that RBOB actually hit .50c/gal at the beginning of the month.

Gas prices here in Iowa now under a buck.

Crude just fell to under two bucks, and is flirting with one buck.

[Free Vulcan]

Crude just fell to under two bucks, and is flirting with one buck.

Wow. I have 10 minute delay on oil futures so watching with a lag.

Someone wants/needs to deliver alot of crude really, really badly and right now.

Sell Mortimer, sell!

[Fishrrman]

1.45pm:


A barrel of oil for less than the price of a gallon of gas?
Who woulda thunk it...?

Addendum:
Could it go to "below zero"...??
That is, "we'll pay YOU to take it off our hands..." ??

[Cyber Liberty]

1.45pm:


A barrel of oil for less than the price of a gallon of gas?
Who woulda thunk it...?

Addendum:
Could it go to "below zero"...??
That is, "we'll pay YOU to take it off our hands..." ??

It's 67 cents, so your question is a good one.

ETA: I just saw a flash of 20 cents!

[jpsb]

I saw that ... unbelievable!   Well, Amazon, UPS, FedEx ... should be doing very well.

I wonder what Russia thinks of it good friend China now.

[Cyber Liberty]

I wonder what Russia thinks of it good friend China now.

Truer words have never been spoken!

[Hoodat]

Occidental must be kicking themselves now over Anadarko.  Some Oxy execs should be jumping out of top floor windows by now, while Chevron execs emit sighs of relief.

[Free Vulcan]

Just briefly hit $.01c/bbl, probably because it can't go lower.

I'm not sure there has ever been a exchange traded commodity contract that went to zero in anyone's lifetime.

No words. Sometimes when history is made, all you can do is stand silent and gape.

[Cyber Liberty]

Just briefly hit $.01c/bbl, probably because it can't go lower.

I'm not sure there has ever been a exchange traded commodity contract that went to zero in anyone's lifetime.

No words. Sometimes when history is made, all you can do is stand silent and gape.

Oh, yes it can go lower!  Current price is negative $8.

[Free Vulcan]

Well put a 2X4 up my butt and call me a corn dog - oil just went negative.

Didn't know that was possible.

[jpsb]

Oh, yes it can go lower!  Current price is negative $8.

Does that include shipping?

[Fishrrman]

Cyber wrote:
"Oh, yes it can go lower!  Current price is negative $8."

What I want to know is...
... how does this work at the local gas pump...?    ;)

[Cyber Liberty]

Well put a 2X4 up my butt and call me a corn dog - oil just went negative.

Didn't know that was possible.

Does that include shipping?

Cyber wrote:
"Oh, yes it can go lower!  Current price is negative $8."

What I want to know is...
... how does this work at the local gas pump...?    ;)

[Hoodat]

What I want to know is...
... how does this work at the local gas pump...?    ;)

Closest refinery is in New Mexico.  Does not good if you can't get the oil to a refinery (which is why the prices is so low).

Meridian is working on building a refinery in Winkler County.  But that is far off.

[Hoodat]

$-35

[Free Vulcan]

Cyber wrote:
"Oh, yes it can go lower!  Current price is negative $8."

What I want to know is...
... how does this work at the local gas pump...?    ;)

Probably not alot unless the next month futures follow.

This is an expiry squeeze. Usually it's to the upside when there's no physical commodity to deliver. Often happens with agricultural products in a heavy drought or flood year.

I've never seen it to the downside. Not like this. Basically the physical buyers are saying you have to pay them to take it, to hedge for storage, transportation, interest, and other costs/risks, while the speculative guys who are long are trying to get out and/or roll over to the June contract.

There's no storage left. No one really wants to take delivery, and the traders are trying to get out of their long positions.

Pretty crazy history being made today.

[Cyber Liberty]

Closest refinery is in New Mexico.  Does not good if you can't get the oil to a refinery (which is why the prices is so low).

Meridian is working on building a refinery in Winkler County.  But that is far off.

Something really screwy has happened, and it will be THE topic of discussion on the business channels after the market closes today.

[Hoodat]

Something really screwy has happened, and it will be THE topic of discussion on the business channels after the market closes today.

For less than it offered for Anadarko, Chevron can now buy Oxy and Anadarko.

[Fishrrman]

What's going on?

My "oil prices" widget (Dashboard on the Mac OS) shows:
34.88  (perhaps it can't show "negatives")

But if I search for "commodities prices" on the web, it shows:
-35.70  (that's a "minus" sign out front)

Are prices really down to -35 or so right now?

How can this even work...?

Maybe it's time to suspend trading for a while...

[IsailedawayfromFR]

Occidental must be kicking themselves now over Anadarko.  Some Oxy execs should be jumping out of top floor windows by now, while Chevron execs emit sighs of relief.

Well, the Oxy Executive who put in this hedge won't be jumping.

He'll likely have a good line of work at another company.

[Cyber Liberty]

What's going on?

My "oil prices" widget (Dashboard on the Mac OS) shows:
34.88  (perhaps it can't show "negatives")

But if I search for "commodities prices" on the web, it shows:
-35.70  (that's a "minus" sign out front)

Are prices really down to -35 or so right now?

How can this even work...?

Maybe it's time to suspend trading for a while...

Yes, it's really negative 38 bucks, for a loss of >300%.

[Hoodat]

What's going on?

My "oil prices" widget (Dashboard on the Mac OS) shows:
34.88  (perhaps it can't show "negatives")

But if I search for "commodities prices" on the web, it shows:
-35.70  (that's a "minus" sign out front)

Are prices really down to -35 or so right now?

How can this even work...?

Maybe it's time to suspend trading for a while...

This is a local anomaly.  A producer has put forth the investment to create a setup where a continuous stream of oil comes out of the ground and is handed over to buyers in a competitive market.  When buyer demand increases, the price goes up.  When demand falls, the price goes down.  The producers anticipated that demand would remain near a certain level, and that they could engage in a continuous operation to transfer their oil to buyers.

But now local buyer demand has fallen.  There are no local buyers wanting their oil.  Sure, there are buyers in Deer Park, Port Arthur, Pascagoula, etc. that would love to be paid to take this oil off their hands.  But they are already pushing the limit with contract purchases and have no ability to gather Permian oil at the local level.

So you have these producers with oil continuing to come out of the ground afraid to suspend operations (and the high cost that goes along with that) and who are hoping this is just a temporary glitch.  So instead of simply dumping oil out on the ground (which they used to do over a century ago), they pay people to save them the cost of an environmental catastrophe.

It all comes down to supply and demand, and the ease with which one can enter/leave the market.

[catfish1957]

Cyber wrote:
"Oh, yes it can go lower!  Current price is negative $8."

What I want to know is...
... how does this work at the local gas pump...?    ;)

Now if you can find a pump that will pay you one fill up, I've got.........

[catfish1957]

This is a local anomaly.  A producer has put forth the investment to create a setup where a continuous stream of oil comes out of the ground and is handed over to buyers in a competitive market.  When buyer demand increases, the price goes up.  When demand falls, the price goes down.  The producers anticipated that demand would remain near a certain level, and that they could engage in a continuous operation to transfer their oil to buyers.

But now local buyer demand has fallen.  There are no local buyers wanting their oil.  Sure, there are buyers in Deer Park, Port Arthur, Pascagoula, etc. that would love to be paid to take this oil off their hands.  But they are already pushing the limit with contract purchases and have no ability to gather Permian oil at the local level.

So you have these producers with oil continuing to come out of the ground afraid to suspend operations (and the high cost that goes along with that) and who are hoping this is just a temporary glitch.  So instead of simply dumping oil out on the ground (which they used to do over a century ago), they pay people to save them the cost of an environmental catastrophe.

It all comes down to supply and demand, and the ease with which one can enter/leave the market.

Exactly..... a commodity glitch.  And a real lucrative one to those who stock up, and have the capacity to store.  Some refiners are going to see astronomical margins.

[libertybele]

In a historic plunge, the U.S. oil May benchmark fell 300% to a negative $37.63 a barrel

https://www.marketwatch.com/story/us-oils-may-contract-skids-about-20-at-nadir-as-crudes-woes-continue-2020-04-19?mod=home-page

[Cyber Liberty]

Exactly..... a commodity glitch.  And a real lucrative one to those who stock up, and have the capacity to store.  Some refiners are going to see astronomical margins.

Who has inventory storage capacity in the Just In Time supply chain corporate world of today?

[Free Vulcan]

Who has inventory storage capacity in the Just In Time supply chain corporate world of today?

From what I can read almost no one, or at least aren't admitting to it.

[catfish1957]

Who has inventory storage capacity in the Just In Time supply chain corporate world of today?

There are still plenty of monthballed tank farms here in Texas ,that could be brought up to standard pretty easily.  As far as supply chain.....   In most of these locations, all you need is a barge, a pump, and a tank.  Then sit on the black gold until prices adjust.  Wow, the potential margins make my mouth water.

[Free Vulcan]

There are still plenty of monthballed tank farms here in Texas ,that could be brought up to standard pretty easily.  As far as supply chain.....   In most of these locations, all you need is a barge, a pump, and a tank.  Then sit on the black gold until prices adjust.  Wow, the potential margins make my mouth water.

Crude looks like one of those contracts that trades to expiry (which is tommorow), so I wonder if there will suddenly be storage capacity that appears and buyers that say 'Oh yes sir, I will let you pay me to take it!'

[Cyber Liberty]

From what I can read almost no one, or at least aren't admitting to it.

Warehouses add less than zero value to a widget.  They are liabilities the green-eyeshade guys are paid to minimize.

[Free Vulcan]

Warehouses add less than zero value to a widget.  They are liabilities the green-eyeshade guys are paid to minimize.

Futures contracts are graduated to compensate for carry or storage cost/risk to ease that problem and basically grease the market.

For those guys who have the means and capacity, contract expirations such as this can be a windfall for simply being able to hold it a month or two and selling it at a much better price, spot or hedged.

[catfish1957]

Crude looks like one of those contracts that trades to expiry (which is tommorow), so I wonder if there will suddenly be storage capacity that appears and buyers that say 'oh yes sir, I will let you pay me to take it!'

Again these are futures prices, which tend to get tempered over period time to arrive at their spot price.  I am not an oil commodities expert, but I can gurantee no one is going to be paid to take oil off a producer.  They would stop production before that.

With that said, with today's unpredecented collapse of prices, I wouldn't doubt seeing much of the world's capacity of oil production, idled, or throttled back to minimum rates  until demand gets closer to production supply.

[libertybele]

Again these are futures prices, which tend to get tempered over period time to arrive at their spot price.  I am not an oil commodities expert, but I can gurantee no one is going to be paid to take oil off a producer.  They would stop production before that.

With that said, with today's unpredecented collapse of prices, I wouldn't doubt seeing much of the world's capacity of oil production, idled, or throttled back to minimum rates  until demand gets closer to production supply.

It's going to be a long while till demand gets closer to supply. I cannot find any accurate stats as to how many people are out of work globally.  IF our economy doesn't make a recovery soon, we will enter into a depression and the rest of the world will follow.

With continuing to print $$ I believe the collapse of the U.S. economy is imminent. 

There is a book that was printed in 2015 that I purchased entitled " Porter Stansberry America 2020" forwarded by Dr. Ron Paul -- I've started reading it again -- lots of things happening that were predicted and lots of good information.

[Cyber Liberty]

Again these are futures prices, which tend to get tempered over period time to arrive at their spot price.  I am not an oil commodities expert, but I can gurantee no one is going to be paid to take oil off a producer.  They would stop production before that.

They will refuse to produce if the non-zero cost of delivery goes below a point, in addition to a negative price.

With that said, with today's unpredecented collapse of prices, I wouldn't doubt seeing much of the world's capacity of oil production, idled, or throttled back to minimum rates  until demand gets closer to production supply.

That is guaranteed.  It sucks to be in the oilpatch business this day.  Everybody from roustabouts to tanker drivers to Geologists will suffer.  There are several of our fellow BRiefers in that category.

[Free Vulcan]

Again these are futures prices, which tend to get tempered over period time to arrive at their spot price.  I am not an oil commodities expert, but I can gurantee no one is going to be paid to take oil off a producer.  They would stop production before that.

With that said, with today's unpredecented collapse of prices, I wouldn't doubt seeing much of the world's capacity of oil production, idled, or throttled back to minimum rates  until demand gets closer to production supply.

You would think, though I haven't been paying attention to that market for years, so it's hard to say. The physical delivery/storage aspect of the futures game is quirky, twisty, and has lots of angles. I would assume no producer would be sitting on oil they couldn't store or at least stop from producing. I could see some getting burned on fulfillment agreements or quotas if they didn't hedge.

Part of the plunge was speculative traders that were trying to get out to avoid taking delivery according to the business sites, which I don't doubt. Although what dumbass would take that kind of a risk is beyond me, but I also imagine there were hedges and other derivative plays that were unwound as part of today's action.

[Free Vulcan]

The other thing is that for every buyer of a contract, there is a seller, so someone will get left holding the bag at contract expiry.

[Cyber Liberty]

The other thing is that for every buyer of a contract, there is a seller, so someone will get left holding the bag at contract expiry.

Yes, that is the one guarantee.  The seller is not guaranteed a profit, nor is the speculator, nor the reseller of the goods.  IOW, there may be a winner, but for sure there will be losers.

[Smokin Joe]

Cyber wrote:
"Oh, yes it can go lower!  Current price is negative $8."

What I want to know is...
... how does this work at the local gas pump...?    ;)

You put the nozzle in and it sucks the tank dry...??

[IsailedawayfromFR]

There are still plenty of monthballed tank farms here in Texas ,that could be brought up to standard pretty easily.  As far as supply chain.....   In most of these locations, all you need is a barge, a pump, and a tank.  Then sit on the black gold until prices adjust.  Wow, the potential margins make my mouth water.

The US Strategic Petroleum Reserve currently has 77 million barrels of capacity until it is full because Pelosi will not let the US purchase crude now that it is cheap to fill it up.

The easiest place to store crude is there, so all Trump has to do is to rent out part of this ready-to-go storage to whoever wishes to use it.