Crude Oil Collapses Epically

Currently $0.12 a barrel

business.financialpost.com...

NEW YORK — U.S. crude futures plunged more than 85 per cent on Monday to the lowest price on record as storage space for U.S. crude was filling up, discouraging buyers even as weak economic data from Germany and Japan cast doubt on when fuel consumption will recover.

Physical demand for crude has dried up, creating a global supply glut as billions of people stay home to slow the spread of the novel coronavirus.

This is usually the time of year when crude spikes considerably... this is a very ill omen. I'd say this indicates the economy will be on ice for at least the next 60 days. Oil is seen as a leading indicator, not to mention how much of the overall economy is pegged to the price of oil. Dark times are ahead.

a reply to: burdman30ott6

Use smaller words please.

I know this is bad, but how and why?

Now MINUS a buck-ninety!?!? I didn't even know it was possible for a stock to go negative yield. My God.

a reply to: burdman30ott6

Its not all bad news. Its time we looked and addressed oil need in our economy. Its certainly good for global warming


Probably not so good for the petrodollar but that dinosaur is on its way out.
If this stuff goes negative equity though it is going to cost a lot of money you cannot simply turn off the rigs. Its enough to bankrupt nations.

a reply to: burdman30ott6

This will devastate Russia and Iran... their entire economies are tied directly to oil. As for the US, it will be a boon as our manufacturing relies greatly on transportation. China as well needs oil for their energy needs and this will assist them. Looks like it's still coming down to a trade war between us and China.

Not sure how this will affect Europe. Maybe some of our European members can shed some light on that situation.

On the other hand, this could squash any call for that silly "Green New Deal." Who needs it when power is cheap and plentiful?

TheRedneck

MINUS SEVEN DOLLARS!!!???!!!

Madre de Dios.

a reply to: purplemer

Well that's reassuring for someone like me who realizes Global Warming is a made up pile of crap and lives in a state where 90% of the economy is oil, isn't it?

originally posted by: purplemer
Probably not so good for the petrodollar but that dinosaur is on its way out.

The petrodollar is not a thing so there is no where for it to go, it's purely a reference to money made on the sale of oil when it's paid in dollars.

a reply to: burdman30ott6

but if the prices that usually are increased due to Oil price are actually lowered on the new cost for Oil, the normal reaction is for people to spend.

So will this reflect everywhere farmers storing oil and lowering food shops lowering cost. well the preppers buy and store more fuel for next winter?

There does have to be a global reset of prices now the Russians and Arabs have crushed the oil supply, the chinese have brought the worlds biggest companies for pennies on the dollars.

Time to lift the Pandemic, recall all Aid and troops from overseas start re-building infrastructure and manufacturing.

originally posted by: burdman30ott6
MINUS SEVEN DOLLARS!!!???!!!

Madre de Dios.

This is insane but not a shock. More insane but we saw it coming shocks on the way. Holy crap.

Why didn't anyone see this happening?

Is this an attack on the US?

originally posted by: puzzled2
...the chinese have brought the worlds biggest companies for pennies on the dollars.

They have? Which ones? Considering many of the largest oil companies are state owned I think you are mistaken.

originally posted by: DBCowboy
a reply to: burdman30ott6

Use smaller words please.

I know this is bad, but how and why?

Oil is the backbone of the US dollar as the global reserve currency. Oil is traded internationally in US dollars. Similarly, a lot of retirement funds and corporate investment funds are tied into oil because, historically, it's always had a floor that was higher than the floors of pretty much every other industry. It's the king commodity and when commodities collapse, it generally means investors are anticipating some serious crap on the near horizon and are dumping off their sheltered commodity stocks.

Oil is now at Minus $9.

a reply to: burdman30ott6

Thank you.

Oh crap.

It's trading at -$11.42 now.

I never thought I'd see it trade in the negative, it's pretty damn historical, seeing as how it's never traded in the negative before o.O

a reply to: burdman30ott6

Unfreakingreal! I'm so glad my dad got out of that business in 2015, after 40 years, and I got out in 2008. This is crazy. It's down 135% now, and dropping.

A negative price means that BP or Amaco or whoever needs to pay someone to take their barrel of oil off, right?

...minus $23 a barrel.

TIL this can actually happen.

originally posted by: AndyFromMichigan
A negative price means that BP or Amaco or whoever needs to pay someone to take their barrel of oil off, right?

Yeah, it means whoever holds the barrel(s) being sold has to pay someone to take it off their hands now.

originally posted by: AndyFromMichigan
A negative price means that BP or Amaco or whoever needs to pay someone to take their barrel of oil off, right?

There are two different scenarios:

Contago: (Positive bias)

A scenario where the spot prices are higher than the future prices. In such a scenario as the expiry approaches, the two prices are expected to converge. The trading arbitrage opportunities end up pushing the price together.

Arbitrage during Contango: If the spot prices are higher, then the traders will buy futures at the lower price and take deliveries, and then sell it off at the higher market spot price. This will lead to an increase in demand of futures contracts and an increase in supply of spots. Thus, prices converge.

Backwardation: (Negative bias)

This is the reverse scenario, this is when the spot prices are lower than the futures contracts. As the expiry approaches, as before both prices are expected to converge.

Arbitrage during Backwardation: The traders first short the futures contract, then buy the spot from the market, and sell it off at the higher price as dictated by the futures contract. This leads to an increase in supply for the futures contract and an increase in demand for the underlying. This leads to convergence of prices.