quote:

Originally posted by radioman:
So much for the "Peak Oil" predictions of 25 years ago.

Ha ha, yep. Weren't we supposed to be out of oil by now?

It's a rolling system just like climate change we are always 10 or 20 years from running out of oil or the planet being uninhabitable.

While I appreciate the concern of the President about the depressed state of the oil industry, I don’t like the idea of a federal bailout. As long as the supply of oil so greatly exceeds the crushed demand of today, the industry will continue to suffer. Plainly and simply put, oil supplies need to be cut drastically and the sooner the better.

Before the Arab Oil Embargo of 1973, the Texas Railroad Commission regulated the supply of oil there by means of proration. Other oil producing states had, IIRC, similar regulations. Proration grew out of the Depression era oil oversupply from the East Texas Oilfield. It worked quite well and stabilized oil prices until the early 1970s. The current group of Commissioners has been asleep at the switch on this issue. They would rather cater to the wishes of certain supermajor oil companies to continue producing as usual. Driving down oil prices allows the oil giants to buy up oil reserves on the cheap as smaller industry players go bankrupt.

and I still pay 2.49 a gallon.

The laws of supply and demand should rule. We don't need government manipulating the market.

Oil Prices Turned Positive Again. Don’t Call It a Comeback.
By Avi Salzman
April 21, 2020 12:30 pm ET

The historic collapse of the oil market extended to a second day as West Texas oil for May delivery started the morning with a loss before rising to $2.81 per barrel, the cost of less than two gallons of gasoline. The far more heavily traded June contract fell 28% to $14.61.

Underscoring how strange things have gotten, the fact that May oil is in the single digits—a level it had never hit in nearly 40 years of trading—marks a recovery in the price. On Monday it hit negative $40 a barrel, meaning traders were willing to pay buyers tens of thousands of dollars per contract to take the oil off their hands. (Each contract represents 1,000 barrels of oil.)

The ripple effects were enormous. Trading in the most popular exchange-traded fund to trade oil—the United States Oil Fund (ticker: USO)—was halted as the fund’s sponsor, United States Commodity Funds (USCF)—stopped creating new shares. USO holds at least a quarter of the June futures contract.

President Donald Trump said Tuesday morning that he has directed the energy and Treasury secretaries to create a bailout plan for the U.S. oil and gas industries, while Saudi Arabia said it was closely monitoring the oil market and was ready to work with other oil producers to stabilize the market.

The broader stock market was falling, with the S&P 500 down 2.5% in morning trading. Oil stocks fell hard on Monday, but were mixed on Tuesday morning. Exxon Mobil (XOM) was up 1.7%, while Chevron (CVX) was down 1%.

On the one hand, the turmoil in oil looks like a technical issue. The May contract expires on Tuesday and traders are now more focused on the June contract, which is trading at low levels but certainly not negative. That said, the turning of the month won’t change the basic dynamic at play. There is way too much oil being produced and nowhere to put it. That means there is serious pain ahead for oil producers.


“I don’t think that anyone should underestimate the fact that what happened with WTI yesterday is completely game-changing,” said Dave Ernsberger, global head of pricing and market insight at S&P Global Platts, in an interview with Barron’s. “Going into the expiry yesterday no one thought prices could go negative, let alone minus $30.”

The reason oil went negative is that no one wants to buy it. Most Americans are staying at home to stop the spread of the coronavirus. Refiners don’t want to buy oil that they can’t profitably turn into gasoline because no one is driving. Storage tanks have been filling up with oil that is going unused. There is no reason to think this dynamic will change in the near future.

People who own May futures at the end of the day Tuesday are expected to take physical delivery of 1,000 barrels of oil per contract. In nominal terms, there is still storage space available in Cushing, Okla., to accept that oil. But in reality, that storage space is spoken for.


“If you look at the data technically Cushing is only 70% full,” he said. “But if you don’t already have a lease to get storage you’re never going to get it. The other 30% already got booked by somebody and they’re just waiting to move in.”

This is not a one-day phenomenon. In fact, Ernsberger expects a similar dynamic to happen with the June contract as it gets closer to expiration. While 97% of oil-futures trading is just dots on a screen—people betting on the direction of the price—the remaining 3% is by people who intend to actually take possession of the oil. And that 3% is crucial right now, because we are hitting the physical limits of oil production and storage capacity.

“The same thing is going to happen in other markets for the next eight weeks for sure,” he said.


What happens next? Production will have to halt in a very short period. Oil has to go somewhere, or it has to stay in the ground. U.S. producers are the most likely candidates to stop production, because shale wells cost more to operate and can be turned off more quickly than offshore projects.

“This is a problem that’s going to re-emerge month after month until one of two things happen,” said CFRA analyst Stewart Glickman. “Demand picks up because economies come off the mat, or producers start shutting off their wells. If you can’t find above ground storage you leave it below ground.”

https://www.barrons.com/articl...486514?mod=hp_LEAD_1

2:41 p.m. ET: May WTI crude oil futures settle at $10.01 per barrel, June futures slide

May West Texas intermediate crude oil futures, which expired today, settled at $10.01 per barrel. The contract recovered some losses after diving into negative territory on Monday for the first time on record.

June futures, however, extended declines, sliding more than 40% as of Tuesday afternoon. The more actively traded contract briefly dipped below $10 per barrel before recovering.

https://finance.yahoo.com/news...-2020-221534957.html

Well, our little spat with Iran seems to have helped WTI prices recover a bit.

I posted this more than 3 weeks ago in the gas prices thread, and got no response whatsoever. I’m glad a least a couple of forum members are thinking similarly.

quote:

originally posted by TMats:

From the heart.

Living in western Colorado, and now SE Wyoming, we’ve met many people who worked in oil and gas. My wife, in fact, worked for Schlumberger for a few years and still keeps in touch with several people she worked with at “Slumber J.” Crude oil prices have cratered, they’ve been down at $20/barrel for a few days now. Just as this Virus was taking hold, the Sauds started a gas war with the Russians. That started the decline, then the Coronavirus began to accelerate causing airlines and cruise ships to park planes and ships and most Americans are sheltered at home. There’s a glut of oil now. The price is WAY too low to sell, so it’s being stored. Assuming at some point in the next few months things begin to return to something approaching normalcy, it won’t return for domestic O&G for a long time because of the glut of oil being stored now.

The independence we’ve enjoyed from OPEC because of domestic oil production is something some of you may be too young appreciate. Do a search for “70s gas crisis” and see what life is like when the Middle East (or Russia) has the country by the short hairs. This independence does not come about because of Exxon-Mobil, or Phillips Petroleum, or Chevron-Mobil. It’s achieved because of the many independents out there exploring, drilling, and employing thousands of fellow Americans. It will be devastating to American energy independence and our economy if those independents can’t survive.

There may not be a group of people harder hit during this crisis than those in O&G. Say a prayer for them as you put $1.49/gal gas into your SUV.

Thanks for your post, Alan

quote:

Originally posted by Balzé Halzé:

quote:

Originally posted by radioman:

quote:

Originally posted by Dakor:
Negative 28 dollars a barrel spot price.

Would you have a link for this so I can follow real time?

https://markets.ft.com/data/commodities

Looking at the chart, it's gone up a huge amount since this post was made when things were negative.

Question: Was anyone here able to profit off the upswing, and if so, how did you do it? What did you buy / sell?

It seemed obvious that $$ could be made on the upswing, but short of driving to Oklahoma with a large fuel container, I couldn't figure out how to profit from it.

“Up a huge amount?” Crude really needs to be up around $40/bbl to make a decent profit.

I bought a few thousand of both Halliburton and Schlumberger on the day oil crashed and I made out well.