GRG55: Oil Crashing

[shiny!]

Oil just crashed 44% in one day, currently down to $8.73.

Among other questions (like, WTF???) will the mid-level pipeline industry survive?

[jpatter666]

Re: GRG55: Oil Crashing

Oil just crashed 44% in one day, currently down to $8.73.

Among other questions (like, WTF???) will the mid-level pipeline industry survive?

The industry? Yes. The current investors, shareholders and bondholders? That's an entirely different question.

[GRG55]

Re: GRG55: Oil Crashing

Oil just crashed 44% in one day, currently down to $8.73.

Among other questions (like, WTF???) will the mid-level pipeline industry survive?

Relax shiny! The pipeline business will still be there as long as people actually need to use oil products (and natural gas). And despite Mega's insistence that jellybean EVs are the wave of the future, I suspect it will take a while in the aftermath of this economic shutdown. People are more likely to be able to afford a tankful of gasoline for their existing ICE car than shelling out for an eco-statement EV.

This morning is yet again witness to the usual completely idiotic, uninformed mainstream media over-dramatization.

The front month futures contract (May 2020) expires tomorrow. That means holders of that contract (which are mainly financial traders/speculators and the oil ETFs) either have to sell the contract before expiry, or risk having to take physical delivery in a market that has little demand (due to the COVID-19 economic shut down) and increasingly scarce remaining storage (at Cushing, OK or elsewhere). The ETFs, that never ever take physical delivery, have to roll the contract into the next month by selling May, before it expires, and buying June.

The market does NOT see this oversupply glut lasting very long. The "soon-to-be-extinct" West Texas Intermediate (WTI) May 2020 contract, currently at $7.84 per barrel, is getting breathless air play this morning from the airheads on Bubblevision.

But as I type this the June 2020 contract is trading at $22.72, a contango of $14.88 per barrel. The December 2020 contract is trading at $33.43. And oil one year out, June 2021, is currently being sold for $35.79 per barrel.

Finally, we all thank you for being mercifully restrained and not including "!!!!!!!!!!!!!!!!" in the thread title.

[shiny!]

Re: GRG55: Oil Crashing

Relax shiny! The pipeline business will still be there as long as people actually need to use oil products (and natural gas). And despite Mega's insistence that jellybean EVs are the wave of the future, I suspect it will take a while in the aftermath of this economic shutdown. People are more likely to be able to afford a tankful of gasoline for their existing ICE car than shelling out for an eco-statement EV.

This morning is yet again witness to the usual completely idiotic, uninformed mainstream media over-dramatization.

The front month futures contract (May 2020) expires tomorrow. That means holders of that contract (which are mainly financial traders/speculators and the oil ETFs) either have to sell the contract before expiry, or risk having to take physical delivery in a market that has little demand (due to the COVID-19 economic shut down) and increasingly scarce remaining storage (at Cushing, OK or elsewhere). The ETFs, that never ever take physical delivery, have to roll the contract into the next month by selling May, before it expires, and buying June.

The market does NOT see this oversupply glut lasting very long. The "soon-to-be-extinct" West Texas Intermediate (WTI) May 2020 contract, currently at $7.84 per barrel, is getting breathless air play this morning from the airheads on Bubblevision.

But as I type this the June 2020 contract is trading at $22.72, a contango of $14.88 per barrel. The December 2020 contract is trading at $33.43. And oil one year out, June 2021, is currently being sold for $35.79 per barrel.

Finally, we all thank you for being mercifully restrained and not including "!!!!!!!!!!!!!!!!" in the thread title.

Thank you so very much for explaining that so very well. You deserve pie.

[GRG55]

Re: GRG55: Oil Crashing

The industry? Yes. The current investors, shareholders and bondholders? That's an entirely different question.

I wouldn't be too concerned about the equity or debt in the pipeline companies. Let's remember they operate on a tariff to provide transport logistics service and do not take custody of the product they transport, and therefore do not have exposure to the commodity price risk.

I am not suggesting a badly managed pipeline company can't go bankrupt, like any other badly managed business. But there's a reason Buffett and Berkshire like the pipeline business.

[GRG55]

Re: GRG55: Oil Crashing

Thank you so very much for explaining that so very well. You deserve pie.

Some day, when this is all over, I'll find some excuse to visit Hades/Arizona and you and I can share some with coffee! Without the masks.

[jpatter666]

Re: GRG55: Oil Crashing

I wouldn't be too concerned about the equity or debt in the pipeline companies. Let's remember they operate on a tariff to provide transport logistics service and do not take custody of the product they transport, and therefore do not have exposure to the commodity price risk.

I am not suggesting a badly managed pipeline company can't go bankrupt, like any other badly managed business. But there's a reason Buffett and Berkshire like the pipeline business.

Fair point, I was mulling the old saw that markets can stay irrational longer than you can stay solvent.

[Mega]

Re: GRG55: Oil Crashing

The "Getting Killed" thing ...............she gets it from Me.
Mike

[GRG55]

Re: GRG55: Oil Crashing

Fair point, I was mulling the old saw that markets can stay irrational longer than you can stay solvent.

Some markets these days are just a complete train wreck.

But then what do we expect with the Fed bailing out every irresponsible large corporate executive suite out there?

[globaleconomicollaps]

Re: GRG55: Oil Crashing

Can I just put in a single exclamation point. Oil is now $0.01/barrel !!!

OK that's three.

[globaleconomicollaps]

Re: GRG55: Oil Crashing

Can we organize a large tank or a swimming pool? Guys? What do you say?

[jk]

Re: GRG55: Oil Crashing

spot at 0.05, june at 21.79. cushing is full and there are 7 big saudi tankers on the way to the gulf coast. mission: smash the shale business.

[globaleconomicollaps]

Re: GRG55: Oil Crashing

Can I just put in a single exclamation point. Oil is now $0.01/barrel !!!

OK that's three.

negative $3.7 now

[jpatter666]

Re: GRG55: Oil Crashing

negative $3.7 now

Negative 35. 35 DOLLARS. Am I reading this right?

[globaleconomicollaps]

Re: GRG55: Oil Crashing

negative $3.7 now

Art Berman was on macrovoices on 5 April. He said:

https://www.macrovoices.com/guest-co...chartbook/file

Fears about filling oil storage are exaggerated. U.S. crude oil storage would not reach capacity unitl November assuming a constant, never seen fill rate of 1.5mmb/day ( 10.5mmb/week)