Topic: Can someone explain the negative price of oil to me
Anonymous A started this discussion 6 years ago #98,915
Please and thank you
Anonymous B joined in and replied with this 6 years ago, 39 minutes later[^] [v] #1,116,317
I think it means we should be expecting checks from the oil companies.
Fake anon !ZkUt8arUCU joined in and replied with this 6 years ago, 9 minutes later, 49 minutes after the original post[^] [v] #1,116,327
Something about lockdowns meaning demand is cratering, Saudis and Russians fighting about oil production levels, and oil storage costs or something idk.
(Edited 24 seconds later.)
Anonymous D joined in and replied with this 6 years ago, 1 minute later, 51 minutes after the original post[^] [v] #1,116,329
So here is the deal... a futures contract is simply a contract to buy something in the future... like next month or next year.
Some futures contracts "settle to cash" which means we determine the price when I bought the contract and the actual real world price on the day of expiration, then one of us pays the other person on the contract the cash difference. Easy.
But oil and most commodity contracts actually settle for the actual product. If you don't close out your soybean contract, you get a call from the exchange telling you that your soybeans are waiting for you in Kansas City and what would you like to do with them?!
Same with oil. Tankers are showing up in houston with millions of gallons of oil and somebody needs to take delivery. Nobody can because all the storage facilities are already full. So people are literally paying you over $30 a barrel for you to take possession of oil. Crazy times.
EDIT: Thmnak for the gold kind stranger!
Some futures contracts "settle to cash" which means we determine the price when I bought the contract and the actual real world price on the day of expiration, then one of us pays the other person on the contract the cash difference. Easy.
But oil and most commodity contracts actually settle for the actual product. If you don't close out your soybean contract, you get a call from the exchange telling you that your soybeans are waiting for you in Kansas City and what would you like to do with them?!
Same with oil. Tankers are showing up in houston with millions of gallons of oil and somebody needs to take delivery. Nobody can because all the storage facilities are already full. So people are literally paying you over $30 a barrel for you to take possession of oil. Crazy times.
EDIT: Thmnak for the gold kind stranger!
Sheila LaBoof joined in and replied with this 6 years ago, 2 hours later, 3 hours after the original post[^] [v] #1,116,394
Anonymous F joined in and replied with this 6 years ago, 9 minutes later, 3 hours after the original post[^] [v] #1,116,396
I'm hoping oil pricing will get even more creative and start using imaginary numbers. If the square root of negative oil pricing ever needs to be paid, then let me know. I'm willing to pay any imaginary number of dollars.
Anonymous G joined in and replied with this 6 years ago, 1 hour later, 5 hours after the original post[^] [v] #1,116,400
The future is electronic self-driving automobiles with a manual car ban punishable by thirty years in a state penitentiary.
Anonymous H joined in and replied with this 6 years ago, 35 minutes later, 5 hours after the original post[^] [v] #1,116,404
Erik !jzYkdX7lIw joined in and replied with this 6 years ago, 14 minutes later, 6 hours after the original post[^] [v] #1,116,405
Anonymous J joined in and replied with this 6 years ago, 44 minutes later, 6 hours after the original post[^] [v] #1,116,410
Blom joined in and replied with this 6 years ago, 6 minutes later, 6 hours after the original post[^] [v] #1,116,411
The severe drop on Monday was driven in part by a technicality of the global oil market. Oil is traded on its future price and May futures contracts are due to expire on Tuesday. Traders were keen to offload those holdings to avoid having to take delivery of the oil and incur storage costs.
The leading exporters - Opec and allies such as Russia - have already agreed to cut production by a record amount.
In the United States and elsewhere, oil-producing businesses have made commercial decisions to cut output. But still the world has more crude oil than it can use.
And it's not just about whether we can use it. It's also about whether we can store it until the lockdowns are eased enough to generate some additional demand for oil products.
Capacity is filling fast on land and at sea. As that process continues it's likely to bear down further on prices.
It will take a recovery in demand to really turn the market round and that will depend on how the health crisis unfolds.
There will be further supply cuts as private sector producers respond to the low prices, but it's hard to see that being on a sufficient scale to have a fundamental impact on the market.
For US drivers, the decline in oil prices - which have fallen by about two-thirds since the start of the year - has had an impact at the pumps, albeit not as dramatic as Monday's decline might suggest.
"The silver lining is, if you for various reason actually need to be on the roads, you're filling up for far less than you would have been even four months ago," Mr Glickman said. "The problem for most of us is even if you could fill up, where are you going to go?"
US President Donald Trump has said the government will buy oil for the country's national reserve. But concern continues to mount that storage facilities in the US will run out of capacity, with stockpiles at Cushing, the main delivery point in the US for oil, rising almost 50% since the start of March, according to ANZ Bank.
Mr Innes said: "It's a dump at all cost as no one, and I mean no one, wants delivery of oil with Cushing storage facilities filling by the minute."
The leading exporters - Opec and allies such as Russia - have already agreed to cut production by a record amount.
In the United States and elsewhere, oil-producing businesses have made commercial decisions to cut output. But still the world has more crude oil than it can use.
And it's not just about whether we can use it. It's also about whether we can store it until the lockdowns are eased enough to generate some additional demand for oil products.
Capacity is filling fast on land and at sea. As that process continues it's likely to bear down further on prices.
It will take a recovery in demand to really turn the market round and that will depend on how the health crisis unfolds.
There will be further supply cuts as private sector producers respond to the low prices, but it's hard to see that being on a sufficient scale to have a fundamental impact on the market.
For US drivers, the decline in oil prices - which have fallen by about two-thirds since the start of the year - has had an impact at the pumps, albeit not as dramatic as Monday's decline might suggest.
"The silver lining is, if you for various reason actually need to be on the roads, you're filling up for far less than you would have been even four months ago," Mr Glickman said. "The problem for most of us is even if you could fill up, where are you going to go?"
US President Donald Trump has said the government will buy oil for the country's national reserve. But concern continues to mount that storage facilities in the US will run out of capacity, with stockpiles at Cushing, the main delivery point in the US for oil, rising almost 50% since the start of March, according to ANZ Bank.
Mr Innes said: "It's a dump at all cost as no one, and I mean no one, wants delivery of oil with Cushing storage facilities filling by the minute."