The Price of a Barrel of Crude Oil

[Rustic23]

From what I have seen the negative price of oil was in the futures market, and I think for delivery tomorrow or very soon. So it went negative. That makes sense. If you take the oil you have to have a place to store it, and that does not exist.

Caveat: I don't put any of the above out as truth! Just what I read.

 

[street]

As much as I would this to backfire on Saudi Arabia and Russia, I fear they will have achieved some of their goals - that is to drive some of the shale operators out of business. The oil majors will then step in and buy these assets at fire sale prices and then cap the wells so as they do not undercut them in the future

I am not (or ever was) in the oil business so this is speculation on my part - anybody with more knowledge care to lend some insight into how this is going to play out for the US shale ?

I might agree with some of your quotes and theory.

The one thing that is questionable is in most state oil consumer laws if that oil well isn't producing in every quarter they have to reclaim that oil site and remove all equipment etc.. This law almost all states that I have worked in have this law to protect the mineral owner and land owner and the state from big oil screwing them over which they try to do as often as they can.

 

[NYEXPAT]

Would be very careful with Banks over the next few days!

A oil analyst I follow who correctly called the May contract going negative weeks ago, made a fortune and is donating the money to friends in the industry as this made him physically sick today just recently warned:

Margin Call Warning:

The overnight session on Crude and products will cause some massive margin calls in the next 3 days. Everyone looks at flat price, but look at the June/July spread overnight... It's off $0.80. That is a devastating move for energy funds that profess to carry a "BALANCED BOOK" (ie, not long and not short). I know we say every chart on its own, but this is one instance where I will warn you from experience, this will have a knock-on effect on many other things as large funds will be forced to liquidate portions of portfolios in the next 2-3 days. The banks providing the credit lines to these funds are SCRAMBLING right now!

 

[Chuckanut]

Finally, they appreciate us drive-off customers.

 

[Chuckanut]

Looked at the commodity prices this morning and was shocked to see crude oil was at $10.50 a barrel.



Just took a look now, barely an hour later and the price of a barrel of oil is at $5.04!



I think the last time oil was this cheap was in the 1970's.

$0.229. The cheapest I ever paid for gas. Early 70’s.

 

[Beststash]

I view this news (the price of oil collapsing)as good news. With the weakened demand caused by the virus it just shows that eventually with the move to electric vehicles then a large portion of the fossil fuel industry with just go away. I know that will be some time coming but the prediction of the declining need for oil is not only possible but hopefully reality. Time to move on to a 21st century means of energy production. Oil is so 19th century.

 

[Markola]

I view this news (the price of oil collapsing)as good news. With the weakened demand caused by the virus it just shows that eventually with the move to electric vehicles then a large portion of the fossil fuel industry with just go away. I know that will be some time coming but the prediction of the declining need for oil is not only possible but hopefully reality. Time to move on to a 21st century means of energy production. Oil is so 19th century.

I genuinely hope so but cheap gas also tends to produce unnecessary things like Hummers.

 

[Freedom56]

There were news reports today that oil ETF USO was responsible for the plunge. Money flooded into this ETF today by investors who thought they were buying oil at $1 or less through this ETF. But USO unwound the May contract two weeks ago and holds June/July contracts. However starting May 5th, USO which currently owns 25% of the June futures contract will have start rolling over to the the July/August contracts since ETFs cannot take physical delivery. Rumors of a major oil/gas trading firm has taken sizeable losses and is desperately looking for funding. Also rumored is Capital One financial has major oil swap exposure due to the plunging price of oil.

 

[Perryinva]

If oil stays this low for extended periods, ie: gas at under $1/gal for years, Electric vehicle sales will drop to near zero. I wonder what percentage of oil production airlines consumed?

I do recall my mother always getting “$2 worth please” back around 1965-70, (I’d be 7-12) when all stations were full service, and they checked your oil and cleaned the windshield while it filled. And then gave you Green Stamps. “Fillerup!” was like $4-5. That would be crazy to see again.

 

[skipro33]

Question about oil storage;
I thought it was possible to just pump crude right back down the well. Buying oil cheap overseas and storing it domestically in US wells. Is that not true?

 

[atmsmshr]

End of Oil? Not

Incredible - oil futures opened today less than 0.

IMHO - Oil price collapse will be followed by a slow recovery with world economies. Big cruise ships and airline usage will be depressed for years. Transportation will recover faster - but not the unicorn V-shaped recovery.

Terrible impact on the USA and Canadian independents and their suppliers (equipment and steel); traumatic impact on the workers (unemployment and mortgage defaults).

How bad will it get for the leaders of regimes that depend on the hard currency of oil to support their dictatorships? Russia, Iran, Saudi Arabia, Kuwait, UAE. What will these countries do when reserves run out? Russia and Iran may have least reserves to ride out the price depression.

What will those despots do to divert popular unrest attention elsewhere?

 

[Markola]

How bad will it get for the leaders of regimes that depend on the hard currency of oil to support their dictatorships? Russia, Iran, Saudi Arabia, Kuwait, UAE. What will these countries do when reserves run out? Russia and Iran may have least reserves to ride out the price depression.

What will those despots do to divert popular unrest attention elsewhere?

Good questions. These regimes seem to be at peak mischief when oil prices are high, building up armaments and manipulating other countries while gorging on corruption at home. Peak oil price periods also make their currencies very expensive, making them extremely import-oriented with little domestic production except for oil. It could be a good thing for the world ultimately if our good friends in Russia and Saudi Arabia have their arms and legs tied behind their backs for a while and maybe it will be enough for Venezuelans to kick their wrecked hulk of a government over the cliff.

 

[Car-Guy]

I view this news (the price of oil collapsing)as good news. With the weakened demand caused by the virus it just shows that eventually with the move to electric vehicles then a large portion of the fossil fuel industry with just go away. I know that will be some time coming but the prediction of the declining need for oil is not only possible but hopefully reality. Time to move on to a 21st century means of energy production. Oil is so 19th century.

^^^^^^
I'm not sure I have ever disagreed with a post more than this one above. Although I've disagreed with a good number of posts over the years. This is not good news and the negative ramifications are likely to be far reaching and are unpredictable at this time, especially if these negative prices drag on for any length of time. (Oil prices in the teens are bad enough) However, I would agree that eventually we will run out of fossil fuels and be forced to alternate sources but that's a long time away. Well beyond my lifetime anyway.

If oil stays this low for extended periods, ie: gas at under $1/gal for years, Electric vehicle sales will drop to near zero. I wonder what percentage of oil production airlines consumed?

I do recall my mother always getting “$2 worth please” back around 1965-70, (I’d be 7-12) when all stations were full service, and they checked your oil and cleaned the windshield while it filled. And then gave you Green Stamps. “Fillerup!” was like $4-5. That would be crazy to see again.

^^^^^^^^

Fully agree with this post. From my POV, with the price of gas going much lower than it is today, why would anyone want to buy an EV. Except maybe the environmental purist. (That's as politically correct as I can say it)

Also, you must have grown up rich. I can remember my mom pulling into the gas station and asking for a dollars worth. Of course that was in the very early 60's... And I do remember getting Green Stamps too.

I can remember seeing gas for 19.9 at one time. (Late 50's or early 60's)

 

[Koolau]

Sounds like a good time to fill the strategic petroleum reserve - maybe even expand it (however that would be done.)

I can't help much. Both my 15 gallon tanks were filled a month ago and I haven't driven more than 30 miles total since then. YMMV

 

[Car-Guy]

Sounds like a good time to fill the strategic petroleum reserve - maybe even expand it (however that would be done.)

I can't help much. Both my 15 gallon tanks were filled a month ago and I haven't driven more than 30 miles total since then. YMMV

I drive thru Houston all the time (not by choice) and I've seen the number of tank storage farms increase by many multiples in the past 10 years. The SE part of the greater Houston area is full of them. I "assume" they are all full by now. Must be a incredible amount in storage now as compared to 10 years ago. Not to mention the strategic reserve held in salt domes.

Now I'm smiling everytime I tank up my 700+ hp gas guzzling Jeep... Too bad there's no where to go.

 

[Sunset]

Question about oil storage;
I thought it was possible to just pump crude right back down the well. Buying oil cheap overseas and storing it domestically in US wells. Is that not true?

I don't think so, usually it comes out under it's own pressure.
Underground storage is done by filling old salt domes with oil, that is our strategic reserve method.
Of course all the available salt domes are already probably in use as they afford a huge cheap safe way to store oil.

 

[Fermion]

If oil stays this low for extended periods, ie: gas at under $1/gal for years, Electric vehicle sales will drop to near zero. I wonder what percentage of oil production airlines consumed?

I do recall my mother always getting “$2 worth please” back around 1965-70, (I’d be 7-12) when all stations were full service, and they checked your oil and cleaned the windshield while it filled. And then gave you Green Stamps. “Fillerup!” was like $4-5. That would be crazy to see again.

But weren't the hourly wages back then something like $3 an hour? I would hate to work at a gas station for that little.

 

[USGrant1962]

Sounds like a good time to fill the strategic petroleum reserve - maybe even expand it (however that would be done.)

I can't help much. Both my 15 gallon tanks were filled a month ago and I haven't driven more than 30 miles total since then. YMMV

That is the plan. The Administration is looking at adding 75 million barrels or charging for storage.

 

[38Chevy454]

That is the plan. The Administration is looking at adding 75 million barrels or charging for storage.

Maybe the gov't can get paid to take the oil, then paid to store the oil, and use that to help offset all the increased spending due to covid19


Circular logic if there ever was

 

[Beststash]

^^^^^^
I'm not sure I have ever disagreed with a post more than this one above. Although I've disagreed with a good number of posts over the years. This is not good news and the negative ramifications are likely to be far reaching and are unpredictable at this time, especially if these negative prices drag on for any length of time. (Oil prices in the teens are bad enough) However, I would agree that eventually we will run out of fossil fuels and be forced to alternate sources but that's a long time away. Well beyond my lifetime anyway.

If you disagreed with my earlier post then you'll probably love this one.

The oil business has been a declining industry for over a decade. It has been supported by subsides and geopolitical turmoil for a long time. There will be calls to support the sector with bailouts but that would clearly be a political decision ignoring the economics. In an effort to be "energy independent" we have seen Wallstreet give the shale industry tons of cash which loaded the companies up with a lot of debt. The expected profits never materialized. Lot of bankruptcies in the last few years. There is no business case that can be made for fracking. “If you had a child with a lemonade stand that every day spent more money on lemons and sugar than they got selling lemonade, eventually you would say there’s no business case for that lemonade stand.”

Nationalization of the sector might be the best way out. As was recently described in an article by Democracy Collaborative’s Carla Skandier, "If the government takes a majority stake in privately owned fossil fuel firms, winding down production along a science-based timeline and giving workers a dignified off-ramp into other well-paid work, all the while muting the industry’s enormous influence over our political system. “Only democratic government can ensure the planned wind-down of fossil fuel production in accordance with climate safety goals,” she writes. “With room for private profit cut out of fossil fuel extraction and production, the powerful entrenched opposition of the energy sector would crumble.”
By taking fossil fuel companies under public ownership while they’re cheap to buy, the U.S. could ensure the country’s energy demands are met responsibly as it transitions to a net-zero-emissions economy.

I am tired of the environmental hazard created by this industry even as we have the know how and technology for a better solution. Not to mention the subsidies of >25B worth of state and federal subsidies each year. Move that money to green technology and have a phased transition to a cleaner and sustainable energy future. It is inevitable so why wait for the next crisis to deal with something we know is necessary.

 

[firemediceric]

On sale...

 

[youbet]

Why are the energy ETF's not down more?

Because investors think that the future earnings potential of the companies owned by the ETF justifies the current price, despite the current crude oil price as reflected in the May futures.

 

[atmsmshr]

On sale...

Perfect!

 

[atmsmshr]

Good questions. These regimes seem to be at peak mischief when oil prices are high, building up armaments and manipulating other countries while gorging on corruption at home. Peak oil price periods also make their currencies very expensive, making them extremely import-oriented with little domestic production except for oil. It could be a good thing for the world ultimately if our good friends in Russia and Saudi Arabia have their arms and legs tied behind their backs for a while and maybe it will be enough for Venezuelans to kick their wrecked hulk of a government over the cliff.

A good parallel (but not oil related) is North Korea firing off 'test' missiles lately like the fourth of July. Evidentially Kim Jon fatso has been "recovering from heart surgery."

 

[COcheesehead]

But weren't the hourly wages back then something like $3 an hour? I would hate to work at a gas station for that little.

When I pumped gas in high school, gas was $1/gallon and I was paid $2.10 hour. Those days may be here again.