Negative Oil Prices

[vooke]

• Tweet

Yes, I understand it’s speculators betting burned but these are interesting times

This is the near-month May futures contract, which expires tomorrow. It should normally trade close to the spot market price, but has now divorced from it. It has continued to collapse in a breath-taking pace to $8 a barrel, then $4, then $2, then $0, then below zero, then at -$10 and then… and now settled at negative -$37.63 a barrel:

This is obviously completely nuts. Futures contracts that expire the next day should be close to the spot market cash price.

But the WTI spot cash price “only” collapsed by 35% today to $11.70 at the moment. And in terms of prices further out, the June futures contract has plunged by 17% to $20.75. So this is a WTI massacre all around, but those prices are still well into positive territory.

So the disconnect between the May contract (-$37.63), and the cash spot price ($11.80), and the June contract ($21.77) point at some serious forced selling and a complete blowup in the May contracts.

It seems some oil trading firms and hedge funds were caught on the wrong side of heavily leveraged bets, and couldn’t roll over their contracts due to a liquidity crunch and horrible market conditions in that space. But if they can’t sell the contracts by tomorrow, they’ll have to take delivery of the physical oil at the delivery point for NYMEX futures, namely in Cushing, Oklahoma.

The delivery time is in May. But storage in Cushing for May seems to have been spoken for, and now these traders see that they have no place to go with this oil that they might have to take delivery of in May.

But the market for the May contract today essentially collapsed, as potential buyers faced the same problem. And so in their desperate efforts to get rid of the contracts so they wouldn’t end up with the oil that they couldn’t physically handle, these speculators paid a heavy price.

Over the next couple of days, we’ll probably learn who some of those exploded-imploded players might have been. Meanwhile this is a moment for historic reflection and head-shaking.

https://wolfstreet.com/2020/04/20/holy-wtf-moly-wti-crude-oil-may-contracts-collapse-to-negative-35/

[Georgesoros]

Am still paying $2/gal. I guess I’ll never see the benefit

[gout]

Nyeudhi slaves in Gulf countries are in a very vulnerable position. Africans economic escape routes will be wiped out by this virus. Good thing an economic storm can help clean up our politics now that it is clear that political scum is not dying of the virus.

[RV Pundit]

Why can't we just build strategic storage tanks and buy as much as we would need for 3-5yrs.

[Njuri Ncheke]

Why can't we just build strategic storage tanks and buy as much as we would need for 3-5yrs.

You would expect that but the drunkard possibly has other motives right now petrol should be retailing at no more than 50/L but because he has to please his wife baba and stock up for 2022 dont expect anything positive from the

[vooke]

Why can't we just build strategic storage tanks and buy as much as we would need for 3-5yrs.

You could but what if the prices dropped further?

And from whence would you get $$ to buy all that? That's why you have futures

[RV Pundit]

But surely we need strategic oil reserves like US. We have for maize. The idea should be ensuring our oil prices never go beyond say 50bob - and cause multiplier effect. We should start somewhere. Fund Kenya Pipeline to build storage tanks. Have Strategic Oil reserves Authority. Their job would be to smoothen the prices of oil.

I don't think it's rocket science to build oil storage tanks. Juakali can fabricate thoses.

You could but what if the prices dropped further?

And from whence would you get $$ to buy all that? That's why you have futures

[RV Pundit]

We consumed about 6-7B litres of oil annually

SOuth Africa has one.

TZ were thinking of having one.

Uganda also does not have a functional strategic oil reserve.

Rwanda’s target is to have at least 80,000 cubic metres (120 million litres) to last for four years, a feat that will be achieved by revamping current reserves and investing in others countrywide. The current facilities can store at most 10 million litres.

https://af.reuters.com/article/idAFJOE74J0F220110520 - Kenya was thinking of doing 1B litre - but nothing has been done.

[Kadudu]

Now Raila is to blame for all of Uhuru's misgivings. Why not blame the idiots who supported him and his running mate in 2013 and 2017?

You would expect that but the drunkard possibly has other motives right now petrol should be retailing at no more than 50/L but because he has to please his wife baba and stock up for 2022 dont expect anything positive from the

[Kadudu]

Pundit, what is happening to your grey matter between the ears of late? Seems to be deminishing. Oil is not water. Oil storage is not nuclear science but leaving it for jua kali fundis would be a sad joke.

But surely we need strategic oil reserves like US. We have for maize. The idea should be ensuring our oil prices never go beyond say 50bob - and cause multiplier effect. We should start somewhere. Fund Kenya Pipeline to build storage tanks. Have Strategic Oil reserves Authority. Their job would be to smoothen the prices of oil.

I don't think it's rocket science to build oil storage tanks. Juakali can fabricate thoses.

[RV Pundit]

My sister as a petrol station and her storage tanks were constructed by Juakali. All we need is to get Juakali to construct 1B litres capacity and bury it underground.

Pundit, what is happening to your grey matter between the ears of late? Seems to be deminishing. Oil is not water. Oil storage is not nuclear science but leaving it for jua kali fundis would be a sad joke.

[Georgesoros]

So where do I buy the oil barrel @ $0????
Where is Robina when you need her.
I hear even electricity is going the same way.

[KenyanPlato]

Why can't we just build strategic storage tanks and buy as much as we would need for 3-5yrs.

These are contracts. Gambling positions that had to be cashed in. I think storing oil is not that easy plus you have to get a marketer that is willing to shell out this cost upfront not knowing if they can recover it. We are going to be crying in the toilet for years. The world is not prepared for the economic and human devastation this virus will cause

[vooke]

We consumed about 6-7B litres of oil annually

SOuth Africa has one.

TZ were thinking of having one.

Uganda also does not have a functional strategic oil reserve.

Rwanda’s target is to have at least 80,000 cubic metres (120 million litres) to last for four years, a feat that will be achieved by revamping current reserves and investing in others countrywide. The current facilities can store at most 10 million litres.

https://af.reuters.com/article/idAFJOE74J0F220110520 - Kenya was thinking of doing 1B litre - but nothing has been done.

Building tanks/reserves is not rocket science. We have them so all we need is adding some more.

What I’m saying is, supposing you bought a billion liters at $30. If the price rises above $30 you are safebut if it drops below $30 you’re better off buying cheaper from the market rather than your own reserves. Since we don’t produce any oil, the reserves would have to be imported and paid for in $$. They are essentially tied up $$.

I don’t think having reserves is really a priority, it only helps when there is absolute or significant global disruption in supply, a very remote event. I’d equate the reserves to nuclear bunkers. We need those to survive nuclear war but what are the chances we will ever be attacked by nuclear bombs? Next to nil.

[Kadudu]

She is lucky that Kenya is a banana republic. The safety precautions for storage of petrol are surely written somewhere but nobody adheres to them. When talking of storing of millions of litres of petrol is not a joke as you want to make it look. What would happen if there is a leak in the underground tank?

My sister as a petrol station and her storage tanks were constructed by Juakali. All we need is to get Juakali to construct 1B litres capacity and bury it underground.

[KenyanPlato]

She is lucky that Kenya is a banana republic. The safety precautions for storage of petrol are surely written somewhere but nobody adheres to them. When talking of storing of millions of litres of petrol is not a joke as you want to make it look. What would happen if there is a leak in the underground tank?

My sister as a petrol station and her storage tanks were constructed by Juakali. All we need is to get Juakali to construct 1B litres capacity and bury it underground.

I rode a Matatu from I think Muthaiga to Town. It was in year 2005. My buddy has just relocated to Kenya and we decided to go to brakenhurst with his bro. After that we decided to to go to town and drink. So both of us took a Mathree. It stopped in those Old parklands shops. Inside the duka was a Petro tank and the pipe to fuel the mathree was inside. the mathree took 300 of petrol. Next building was an X-ray place. I just wondered how did the people in that block live with the fumes of unleaded fuel. Kenyan liberalization of economy left a lot of crazy stuff

I just learnt one my childhood friends owns about 5 tankers. He sold three to campaign for Kinuthia Mbugua. he got a CEC of trade and did a lot of shit to his business oppents that he was later hounded out of office due to fake academic credentials

We used to call my boy King of Kwasa kwasa. When we got circumcised, my neighbor took 120 shs and brewed 40 litres of beer. We got a 4 liters of the beer and went to my friend's house where we drunk the stuff and after that we were drunk like shit. We then went to his grandfathers homestead few kms from his house and took a few girls out to go and poink them in the tea bushes. on our way there this guy kept saying he is king of Kwasa kwassa and throwing some good Kanda bongman dances...

anyway Kenya is the place to be if you want to experience Free market and Black market forces at work

I am relocating to Kenya in September. I have about $200,000 to waste let us  see how this will go. My run in US has come to and end

[gout]

We have Kenya Petroleum Refineries storage last times it was in the news it was about Tullow oil export shady scam.

Noah Wekesa been in the news singing of empty Strategic?? Maize Reserves.

Corona not about to transform Jubilee scams into gold but expose them for shitstorm they are.

[vooke]

Post mortem of the negative futures price

https://www.eia.gov/petroleum/weekly/archive/2020/200422/includes/analysis_print.php