AuthorTopic: Oil Price Crash: Who Cooda Node?  (Read 166424 times)

Offline Surly1

  • Administrator
  • Master Chef
  • *****
  • Posts: 18498
    • View Profile
    • Doomstead Diner
Re: 🛢️ WTI crude prices collapse as trading drops below $12
« Reply #1005 on: April 20, 2020, 12:21:45 PM »
God, I love being proved right.  :icon_sunny: :icon_sunny: :icon_sunny:  I lived long enough to see it too!

RE

When I saw the headline, I knew you would rouse yourself from your Fortress of Insolence to gloat.
"Do not be daunted by the enormity of the world's grief. Do justly now, love mercy now, walk humbly now. You are not obligated to complete the work, but neither are you free to abandon it."

Offline monsta666

  • Global Moderator
  • Sous Chef
  • *****
  • Posts: 1532
    • View Profile
Re: WTI oil crashes to -$37.63 May futures contract
« Reply #1006 on: April 20, 2020, 03:07:23 PM »
Concerns over lacklustre oil demand due to global lockdowns has led to the bizarre situation where May's futures contract for oil fell to -$37.63. That is not a typo! This negative pricing means, the first time ever, suppliers will pay the buyer to take their oil contact as concerns mount that excessive oil supply will mean all storage capacity is used up. Those growing stockpiles of oil are happening despite the record breaking deal by OPEC and Russia to reduce production by as much as 10%. Could this end up with a situation where oil companies start pouring oil down the drain like the farmers are currently doing with milk?  :icon_scratch:


(CNN) American oil crashes below $0 a barrel -- a record low

London (CNN Business) - The spectacular collapse in oil markets is showing no signs of easing, as the coronavirus crisis saps demand and producers run out of places to store all their excess barrels of crude.

What's happening: US oil prices plunged, falling below $0 Monday to $-37.63 a barrel. That's the lowest level since NYMEX opened oil futures trading in 1983.

The selloff can be attributed in part to market mechanics. The May futures contract for West Texas Intermediate, the US benchmark, is about to expire. Most investors are already focusing on the June contract, thinning out trading volume and feeding volatility, UBS analyst Giovanni Staunovo said.

The June futures contract for WTI is trading around $22 per barrel, but that's still sharply lower on the day. Brent crude futures, the global benchmark, fell 8% Monday to $25.81 per barrel.

The extreme pressure on the WTI contract for May highlights ongoing concerns about the supply and demand dynamics plaguing the oil market.

"No one in America wants oil in the short term," Jeffrey Halley of Oanda told clients on Monday.

Saudi Arabia, Russia and other producers tried to prop up prices with a deal last week to slash production by 9.7 million barrels per day in May and June, the deepest cut ever negotiated. But that isn't expected to soak up the supply glut caused by evaporating demand for energy.

Oil storage facilities are still at risk of overflowing, raising the chance that some oil producers in the United States and Canada could start paying customers to take crude off their hands, according to Staunovo.
Investors are particularly worried about storage reaching capacity in Cushing, Oklahoma, the main US hub.

Rystad Energy, a consultancy, forecasts that US commercial crude stocks will hit all-time highs by the end of April and will continue rising into May.

The most disappointing earnings season since 1998?

Following the major American banks, Coca-Cola (KO), Netflix (NFLX), Delta (DAL), IBM (IBM) and Intel (INTC) are among the big US companies scheduled to report earnings this week.

First up is IBM, which is on deck Monday after US markets close.

Fewer than 10% of S&P 500 companies have reported results for the January to March period to date. So far, they've "generally disappointed relative to tepid expectations," according to David Kostin, chief US equity strategist at Goldman Sachs. The investment bank calculates that 43% of companies have missed Wall Street's predictions, on pace for the highest rate since at least 1998.

FactSet analyst John Butters predicts that S&P 500 earnings dropped 14.5% in the first quarter. That would mark the largest year-over-year decline for the index since the third quarter of 2009.

Watch this space: Much of the attention will be on expectations for full-year earnings, as investors try to assess how the coronavirus pandemic will hit businesses over a longer period. But Kostin notes that most strategists have written off 2020 entirely and are already looking ahead to 2021.

US stocks have risen three of the past four weeks

US futures are off on Monday as global stocks struggle to find direction and oil crashes. But taking a step back, the stock market appears to be in recovery mode.

See here: The S&P 500 has jumped three of the past four weeks after nosediving into the fastest bear market in history.

The broader picture, of course, is complicated. "The confusing thing for markets at the moment is the huge dichotomy between what will possibly be one of the worst synchronized global economic slumps in history against what is undoubtedly the largest ever intervention," Deutsche Bank strategist Jim Reid told clients Monday.

Deutsche Bank noted last week that top central banks have expanded their balance sheets by $2.7 trillion, two thirds of which has come from the US Federal Reserve. But negative economic data could continue to cause problems for investors who are ready to get back into riskier assets, with uncertainty about how long lockdowns will last remaining a key issue.

Up next

Ally Financial (ALLY), M&T Bank (MTB) and Truist (TFC) report earnings before US markets open. IBM follows after the close.

Also today: The United Kingdom and the European Union restart talks over their future relationship following Brexit.

Coming tomorrow: Coca-Cola and Netflix report earnings.

Offline JRM

  • Sous Chef
  • ****
  • Posts: 4458
    • View Profile
Re: Oil Price Crash: Who Cooda Node?
« Reply #1007 on: April 20, 2020, 03:40:05 PM »
I don't follow oil futures at all. What are the probable wider world implications of this? Will this likely impact the stock market and other factors and indicators of the economy? How so?
My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Offline Surly1

  • Administrator
  • Master Chef
  • *****
  • Posts: 18498
    • View Profile
    • Doomstead Diner
Re: Oil Price Crash: Who Cooda Node?
« Reply #1008 on: April 20, 2020, 03:48:24 PM »
I don't follow oil futures at all. What are the probable wider world implications of this? Will this likely impact the stock market and other factors and indicators of the economy? How so?

Am not an economista-- I'd would favor Monsta's analysis- but I read this as deflationistic AF. Have lived through inflation; but never deflation. Imagine everything you own being valued at some percentage on the dollar. How long before one's house is worth less than one owes on it? This is why Eddie always like to avoid needless debt and avoid leverage. Looks wise now.

Another take:
Oil plunges 321% into negative territory for the first time ever as demand evaporates


Prices plunged to a record low and into negative territory on Monday as uncertainty mounted about storage for excess supply.
WTI crude oil futures expiring in May plunged 321%, to -$40.32 a barrel, while Brent crude slid 9.5%, to $25.41 at intrasession lows.
The coronavirus pandemic has torpedoed demand for the commodity, with fuel use in cars and planes slumping.
The commodity has fallen over the past week even after OPEC and its allies agreed to a historic production cut intended to backstop prices.
The WTI market has entered contango, meaning spot prices are lower than prices for future delivery of crude oil a highly unusual occurrence.
"Do not be daunted by the enormity of the world's grief. Do justly now, love mercy now, walk humbly now. You are not obligated to complete the work, but neither are you free to abandon it."

Offline Eddie

  • Global Moderator
  • Master Chef
  • *****
  • Posts: 19357
    • View Profile
Re: Oil Price Crash: Who Cooda Node?
« Reply #1009 on: April 20, 2020, 04:03:09 PM »
I don't follow oil futures at all. What are the probable wider world implications of this? Will this likely impact the stock market and other factors and indicators of the economy? How so?

The short term consequences is that the US producers go broke when oil is this cheap. So the shale boom fizzles......Saudi can ride it out. Russia can ride it out.

But prices globally will stay low....we've had demand destruction going on even before COVID...and now it's in high gear. Oil companies, the richest corporations......will see their equity disappear in a puff of smoke,

Long term consequences maybe good...in terms of ending FF dependence.......but a very painful process for nearly everyone. Deflation.....yeppers.
What makes the desert beautiful is that somewhere it hides a well.

Offline monsta666

  • Global Moderator
  • Sous Chef
  • *****
  • Posts: 1532
    • View Profile
Re: Oil Price Crash: Who Cooda Node?
« Reply #1010 on: April 20, 2020, 04:06:18 PM »
I don't follow oil futures at all. What are the probable wider world implications of this? Will this likely impact the stock market and other factors and indicators of the economy? How so?

I think a lot would depend on how long oil prices remain low. If it is for a short period of time and demand rises due to reduced lockdowns then the price should go up to normal levels fairly quickly. The issue here is the longer oil prices remain depressed then the more likely future investments in oil production will be suspended as companies go into surivival mode. Big question mark over in the US is how the shale companies will perform as they will be losing a lot of money at current oil prices. If this were to go on for months then a lot of those companies would go bust. This will then lead to a scenario that when demand does rise post-lockdown the supply of oil will not be where it was before the pandemic started.

This will result in prices becoming more elevated which will be a drag on economic growth. We should note that shale oil has been the biggest driver in growth of US oil production in the last 10 years. If that production goes then there would likely be supply problems post coronavirus pandemic. I do think that is a likely scenario as many places in the world will have varying degrees of partial lockdowns for the foreseeable future and this will act as big damper on economic growth and by extension oil demand.   

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41288
    • View Profile
Re: 🛢️ WTI crude prices collapse as trading drops below $12
« Reply #1011 on: April 20, 2020, 05:41:16 PM »
God, I love being proved right.  :icon_sunny: :icon_sunny: :icon_sunny:  I lived long enough to see it too!

RE

When I saw the headline, I knew you would rouse yourself from your Fortress of Insolence to gloat.

Your insults are not appreciated.  I never insult you, why do you persist in doing this to me?  ???   :icon_scratch:

RE
Save As Many As You Can

Offline Surly1

  • Administrator
  • Master Chef
  • *****
  • Posts: 18498
    • View Profile
    • Doomstead Diner
Re: 🛢️ WTI crude prices collapse as trading drops below $12
« Reply #1012 on: April 21, 2020, 06:53:02 AM »
God, I love being proved right.  :icon_sunny: :icon_sunny: :icon_sunny:  I lived long enough to see it too!

RE

When I saw the headline, I knew you would rouse yourself from your Fortress of Insolence to gloat.

Your insults are not appreciated.  I never insult you, why do you persist in doing this to me?  ???   :icon_scratch:

RE

Don't you DARE attempt to strike a victim pose:

http://www.doomsteaddiner.net/forum/index.php/topic,4539.msg184770.html#msg184770

You insult me as you insult most of the posters here, any time it suits you, and whenever it suits you... power of GOD on a forum, and all.

And quite frankly, my comment above is not much of an insult, given your past practice:
http://www.doomsteaddiner.net/forum/index.php/topic,4539.msg185249.html#msg185249

Truth is an absolute defense.
"Do not be daunted by the enormity of the world's grief. Do justly now, love mercy now, walk humbly now. You are not obligated to complete the work, but neither are you free to abandon it."

Offline JRM

  • Sous Chef
  • ****
  • Posts: 4458
    • View Profile
Re: Oil Price Crash: Who Cooda Node?
« Reply #1013 on: April 21, 2020, 07:38:37 AM »
I don't follow oil futures at all. What are the probable wider world implications of this? Will this likely impact the stock market and other factors and indicators of the economy? How so?

The short term consequences is that the US producers go broke when oil is this cheap. So the shale boom fizzles......Saudi can ride it out. Russia can ride it out.

But prices globally will stay low....we've had demand destruction going on even before COVID...and now it's in high gear. Oil companies, the richest corporations......will see their equity disappear in a puff of smoke,

Long term consequences maybe good...in terms of ending FF dependence.......but a very painful process for nearly everyone. Deflation.....yeppers.

What was causing the 'demand destruction' prior to the pandemic and continues on as one of the causes now?
My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Offline Eddie

  • Global Moderator
  • Master Chef
  • *****
  • Posts: 19357
    • View Profile
Re: Oil Price Crash: Who Cooda Node?
« Reply #1014 on: April 21, 2020, 08:01:47 AM »
I don't follow oil futures at all. What are the probable wider world implications of this? Will this likely impact the stock market and other factors and indicators of the economy? How so?

The short term consequences is that the US producers go broke when oil is this cheap. So the shale boom fizzles......Saudi can ride it out. Russia can ride it out.

But prices globally will stay low....we've had demand destruction going on even before COVID...and now it's in high gear. Oil companies, the richest corporations......will see their equity disappear in a puff of smoke,

Long term consequences maybe good...in terms of ending FF dependence.......but a very painful process for nearly everyone. Deflation.....yeppers.



What was causing the 'demand destruction' prior to the pandemic and continues on as one of the causes now?

The term was actually coined by RE's friend, the blogger who goes by Steve From Virginia.  (Steve Ludlum) . He made a chart that explains it pretty well.



The availability of oil is trapped between two levels...one is what consumers are able and willing to pay.....and the other is what producers have to charge to make a profit.

When consumers can't pay what it costs to get oil out of the ground, supply will run out. That's the short version.

What makes the desert beautiful is that somewhere it hides a well.

Offline Surly1

  • Administrator
  • Master Chef
  • *****
  • Posts: 18498
    • View Profile
    • Doomstead Diner
Re: Oil Price Crash: Who Cooda Node?
« Reply #1015 on: April 21, 2020, 08:17:45 AM »
I don't follow oil futures at all. What are the probable wider world implications of this? Will this likely impact the stock market and other factors and indicators of the economy? How so?

The short term consequences is that the US producers go broke when oil is this cheap. So the shale boom fizzles......Saudi can ride it out. Russia can ride it out.

But prices globally will stay low....we've had demand destruction going on even before COVID...and now it's in high gear. Oil companies, the richest corporations......will see their equity disappear in a puff of smoke,

Long term consequences maybe good...in terms of ending FF dependence.......but a very painful process for nearly everyone. Deflation.....yeppers.

What was causing the 'demand destruction' prior to the pandemic and continues on as one of the causes now?

The term was actually coined by RE's friend, the blogger who goes by Steve From Virginia.  (Steve Ludlum) . He made a chart that explains it pretty well.



The availability of oil is trapped between two levels...one is what consumers are able and willing to pay.....and the other is what producers have to charge to make a profit.

When consumers can't pay what it costs to get oil out of the ground, supply will run out. That's the short version.

Steve looking like a prophet today.
"Do not be daunted by the enormity of the world's grief. Do justly now, love mercy now, walk humbly now. You are not obligated to complete the work, but neither are you free to abandon it."

Offline Eddie

  • Global Moderator
  • Master Chef
  • *****
  • Posts: 19357
    • View Profile
Re: Oil Price Crash: Who Cooda Node?
« Reply #1016 on: April 21, 2020, 08:22:01 AM »


Steve looking like a prophet today.

Since 2014.

 Fwiw, I do think that US drivers have at least somewhat been influenced by climate change to reduce consumption, which has made the drop in demand worse that it otherwise would have been.
What makes the desert beautiful is that somewhere it hides a well.

Offline JRM

  • Sous Chef
  • ****
  • Posts: 4458
    • View Profile
Re: Oil Price Crash: Who Cooda Node?
« Reply #1017 on: April 21, 2020, 08:38:53 AM »


Steve looking like a prophet today.

Since 2014.

 Fwiw, I do think that US drivers have at least somewhat been influenced by climate change to reduce consumption, which has made the drop in demand worse that it otherwise would have been.


Yeah, automobile dependence is -- in the eyes of some -- like cigarette smoking. It's not cool. There is secondhand smoke....

Thanks for explaining demand destruction. I had seen that graph before, somewhere, and it rang a bell, so to speak.

My understanding is that the oil industry is immensely subsidized in all kinds of ways. Were it not, gasoline would prolly cost twice or more what it does -- and without even figuring anthropogenic climate disruption, which has a negative economic impact of such a proportion that if it were internalized it would be the instant end of oil, and of the Merkan way of life.

I think the banks are going to get f****** flattened. The banks lent a shitton of money to the frackers which they will never see. NEVER. And pretty soon the banks are going to own a LOT of folks cars, 'cause I hear a vast proportion of cars were bad loans, even before the current triggers of financial collapse set in.  And what about the insurance industry?  Isn't there a lot of loss of business insurance out there and aren't the insurance companies gonna take a hit? And, and, and all of these things will collide into one another and reinforce the trend until we'll simply have to it the Big Economy Reset Button. Which means starting more-or-less from scratch by redefining the value of everything.  Just talking about that -- which we MUST do -- will stir up a political shitstorm. Of course. But three is a fact of economics which is impossible to ignore. It goes like this: You cannot get blood out of a turnip.  That phrase will define our near future, folks.   
My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Offline JRM

  • Sous Chef
  • ****
  • Posts: 4458
    • View Profile
Re: Oil Price Crash: Who Cooda Node?
« Reply #1018 on: April 21, 2020, 08:42:00 AM »
So what's it like to live with significant -- or worse -- deflation? What will this mean for those of us who are neither bankers nor oilmen? What are the implications for the guy who works at the pizza restaurant or the garden nursery?
My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Offline Eddie

  • Global Moderator
  • Master Chef
  • *****
  • Posts: 19357
    • View Profile
Re: Oil Price Crash: Who Cooda Node?
« Reply #1019 on: April 21, 2020, 09:11:18 AM »
So what's it like to live with significant -- or worse -- deflation? What will this mean for those of us who are neither bankers nor oilmen? What are the implications for the guy who works at the pizza restaurant or the garden nursery?

The worst part will be a loss of low level jobs....so many more will be unemployed.

I expect that as long as the central banks can print money, that the real rich will stay rich,,,but they will lose lots of nominal wealth as their stock portfolios lose value.

The tech sector will hold up better than most. Even homeless people have cell phones, 36% of them have a smart phone.

I expect most doctors and dentists nearing retirement age will stop working altogether......and that many of the younger ones struggling with big student loans will see their practices fail. You can't make much money at current fees with social distancing guidelines making it impossible to see more than one patient at a time.
« Last Edit: April 21, 2020, 09:15:48 AM by Eddie »
What makes the desert beautiful is that somewhere it hides a well.

 

Related Topics

  Subject / Started by Replies Last post
Oil Price Crash!!!

Started by RE « 1 2 ... 10 11 » Podcasts

162 Replies
43256 Views
Last post January 15, 2015, 05:57:20 AM
by MKing
1 Replies
1914 Views
Last post December 15, 2014, 05:33:25 AM
by MKing
The Crash of 2015: Day 29-30

Started by Thomas Lewis Energy

0 Replies
1354 Views
Last post February 03, 2015, 01:08:53 AM
by Thomas Lewis