Crude Oil Collapses Epically

a reply to: Lumenari

Whoever may be left anyway.

Using my tiny mind and simple math here,

We just spent 75 percent of our GDP.
Already spend 30 some percent on outstanding debt.
Now simply lost 6 in one day.

Thats only only on the macro.

a reply to: AugustusMasonicus

Because it benefits us to have the dollar as the world's reserve currency. Do you really need that simple fact explained to you or are you being pedantic?

It gives the currency value. So maybe it is plausable that the ceasation of trade in oil will have a negative effect on the value of the dollar.

Learn some:

Since the most sought-after commodity in the world—oil—is priced in U.S. dollars, the petrodollar helped elevated the greenback as the world's dominant currency. With its high status, the U.S. dollar enjoys what some have asserted to be the privilege of perpetually financing its current account deficit by issuing dollar-denominated assets at very low rates of interest as well as becoming a global economic hegemony.

www.investopedia.com...

learn some more!

Essentially, Paul is saying that understanding the petrodollar system and the forces affecting it is the best way to predict when the U.S. dollar will collapse.

www.equities.com...

a reply to: burdman30ott6

Could there be some sort of push to back the dollar, or any other fiat for that matter, to something, anything?

You have to look at the whole market not just may's contracts. And WTI oil doesn't concern Russia (not that much) ... The oil still trades above 20$ per barrel, but contracts with delivery in May expire in the next hours and nobody wants to buy it as demand dropped and inventories are already full. Energy index (S&P) fell around 4%.

For long term investors this situation is a great chance to invest. The world will get back on it's feet and prices will soar again

originally posted by: LSU2018
a reply to: purplemer

Yeah there are plenty of alternatives to Chinese plastic. Eggshells for example. They seem to be more sturdy than China plastic. What's the alternative to rubber? Makeup?

How about lawnmowers? Are we going to use riding mowers that plug into our electric outlets or do we get to pay $15,000 for an electric riding mower? The possibilities are endless, unlike our pockets.

At the rate this is going your lawn may be the least of your worries.

Edit to add; grass lawns are another thing that is really not sustainable in the long run. Water is the current gold. Lava rock yards will make a comeback as new laws are passed restricting water usage.

originally posted by: DBCowboy
a reply to: Lumenari

I don't mean to get all "conspiracy" on anyone, but I'm willing to wager that some in the government will now look to "nationalize" oil production.

That was my first thought.

a reply to: burdman30ott6

could the price fall be due to over production of oil during a time where most of the world is sitting at home?

it could just mean the world needs to get back to consuming fuel again.

though i believe CriticalStinker has the right idea that some company is possibly set for a bail out.

originally posted by: JinMI
a reply to: burdman30ott6

Could there be some sort of push to back the dollar, or any other fiat for that matter, to something, anything?

This is likely how we end up with a global currency, which is scary if you're an American but probably a lot less scary if you're not.

originally posted by: LSU2018
a reply to: purplemer

Sure, until you realize all the things that are made from oil and all the things you'll lose. Then you'll realize how inexplicably ridiculous it sounded to suggest that a collapsed oil industry is a good thing.

The people in this thread that are cheering for no electricity for major cities this fall need to maybe think things through.

/facepalm

a reply to: burdman30ott6

Oil is the backbone of the US dollar as the global reserve currency. Oil is traded internationally in US dollars.

A minor correction:

Oil was the backbone of the US dollar as the global reserve currency. Oil was traded internationally in US dollars.

The petrodollar has been slip-sliding away for some time now. It started the exodus when the first Arab Spring happened. Now the dollar as IRC is based solely on faith in the US government.

Uh... you'll excuse me for a moment. I think I threw up in my mouth a little saying that.

TheRedneck

a reply to: LSU2018

I predict goats will be in high demand.

originally posted by: DBCowboy
Why didn't anyone see this happening?

Is this an attack on the US?

A lot saw this coming actually. And they made some nice money on their puts. Like really nice money.

It's just an expiry of an instrument. A bit dramatic though. But to talk about an attack on the US is wrong.

In Dumbass terms (I skip a lot of details and explain it a bit wrong but I do so for understanding of the trading mechanism you saw today. So real future traders don't blame a Dumbass for trying to explaing ok?): The particular future you saw today is physically delivered. Simply said as you would receive the oil. The sellers most likely didn't have that as stock either. They made an buyorder to be delivered now and paid a price for that in the passed in expectation to get a higher return for that now. The seller (or borrower) of that stock did this to make sure they have control over the amount they have in store in the future and a steady and expected return on that.

As everyone's warehouse was already now full it would cost them to store the additional oil as they need to rent more spaces. So they say no thank you. I don't need cheap oil right now and do not buy.

So the seller thinks f*ck I need to get rid of what will be delivered as I can't keep it here either. So the seller proposes to pay for stocking fees and the seller pays the buyer for that. As paying someone that can get a better deal on stocking space (and has the know-how how to do it properly) than you might be cheaper than arranging that yourself. Hence you have a negative price.


Trading is quite an interesting topic with a lot of different aspects in it. It is not as simple as buy and sell.

a reply to: baburak

I just read the same thing on a couple of sites.

This is for short term contracted deliveries??

originally posted by: purplemer
So maybe it is plausable that the ceasation of trade in oil will have a negative effect on the value of the dollar.

Yeah, and water is wet. Like I said, pedantic.

originally posted by: slapjacks
It's scary because we have never been here before, ever... what could the fall out from this be?

Major economic depression of a "never seen before" proportion !!👿

a reply to: purplemer

Its not something you have realised it is something you have imagined. If you actually did understand the mechanisms behind it and could flasify the theory then you would be capable of creating peer reviewed paper.

Ummm.. excuse me?

I DO understand the physical mechanisms behind the theories of Global Warming, and I AM capable of writing papers for scientific journals. And I'm telling you the whole thing is a fantasy born of pure imagination supported only by the public misconceptions of how physics actually works.

Any questions?

TheRedneck

a reply to: purplemer

But the topic of the OP was about the expiry of a physically delivered instrument. Not about the collapse of an industry.