How did you end up with negative oil prices today?
>This happens when a physical futures contract find no buyers close to or at expiry.
Let me explain what that means:
>A physical contract such as the NYMEX WTI has a delivery point at Cushing, Oklahoma (a shithole in the middle of an empty shithole, but a cheap shithole nevertheless) & date, in this occurrence May.
>So people who hold the contract at the end of the trading window have to take physical delivery of the oil they bought on the futures market.
>This is very rare!!!!!!!
It means that in the last few days of the futures trading cycle, (which is tomorrow for this one) speculative or paper futures positions start rolling over to the next contract.
>This is normally a pretty undramatic affair.
What is happening today
>Trades or speculators who had bought the contract are finding themselves unable to resell it, and have no storage booked to get delivered the crude in Cushing, OK, where the delivery is specified in the contract.
>BUT BUT BUT all the storage in Cushing is booked, and there is no price they can pay to store it, or they are totally inexperienced in this game and are caught holding a contract they did not understand the full physical aspect of as the time clock expires.
That's not how this works. Expect to see oil dumped just like how milk was earlier this month.
James Hall
Where do you put the oil? Dump it on the ground and pay millions for environmental damages?
Owen Anderson
It sits wherever it currently is, with the entity holding the inventory losing their shit because it's very costly to store. Leading to lower prices, layoffs, and eventually full bankruptcy. Unless demand spikes of course (lol)
There were 108,000 contracts in open interest for CLK20 as of Thursday- according to zerohedge, 60,000 would be a more normal number. In the drop from $10/bbl to $-40/bbl today around 25,000 contracts traded. I wonder how many traders were looking to just roll over their long positions and would up getting wiped out.
what good is a petro dollar when nobody wants petrol?
Isaac James
BUY EVERY DIP
Henry James
Yas Forumslet here. Still don't quite get what's happening but it sounds like futures are promises to buy a specific amount of x by y-date that get traded around because it's a safe way to invest since someone will always buy it off of you..... until y-date shows up and you actually have to buy and store the oil because you have no one to sell it to.
Am i right?
Lucas Foster
op if i have 5-10k can i buy hundreds of barrels of oil and have it delivered to new england?
Christopher Lopez
I get the cherry but the whole ice cream is yours.
Jace Lopez
its a nothingburger
Cameron King
how does this affect the likelihood that an event causes the U.S. treasury to issue bonds in exchange for federal reserve notes to bail out the ultra rich will happen?
Aiden Gonzalez
Yes. There were no storage options, most traders sell their futures contracts prior to expiry, but there were no buyers due to lack of demand and storage, so futures traders had to sell for terrible prices to avoid the potential of even more terrible prices at contract expiry, or their brokers closed their contracts for them to avoid the same situation.
Owen Scott
That would be something separate, the issue here is underconsumption.
Eli Diaz
Reminder that even the prices are low, peak oil has been rich and we entered yet another oil crisis. Thank god for the covid.
Andrew Gonzalez
No... it's just a precious me- combustible liquid.
Is there any way to make bank out of this? I'm a brainlet with no idea whatsoever of how any of this works
Aiden Hernandez
oh ok. I don't know what futures are so I just assume that someone living off of dividends of a future would have enough lobbying power to get a congressional puppet to "bail them out." You can call me an idiot, idc. But I know what it means for the average guy when shit hits the fan.
ok so can this theoretically happen in reverse with precious metals >"ok i want my gold contract delivered" >"uhh sir we actually don't have any gold/silver to deliver" >??? does the price spike up?
Jace Howard
Unless you can get a eighteen wheeler to take the oil in Cushing Oklahoma now, no.
Nathan Reyes
tldr speculative oil futures traders are about to get rekt in a big way
Aaron Barnes
is it in barrels or does it need a tank"?
Jackson Ross
No problem. I believe this is purely on the commodity side of things; it would be easier to get rid of the oil to cause a spike in demand. Right now demand is so low that it's dropped to a negative. It's something called Underconsumption; key in Keynesian, Marxist, and even Ricardian economic analysis.
If the markets do take a plunge, I would expect some federal intervention though. Although that would have further ramifications (especially as we're on the precipice of another recession).
