AuthorTopic: Oil Price Crash: Who Cooda Node?  (Read 164122 times)

Offline Surly1

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Re: Oil Price Crash: Who Cooda Node?
« Reply #990 on: March 19, 2020, 10:23:38 AM »

By the way, when I told Surly that I was "ahead of" most others in grasping our situation, I did not mean most others in the Diner.  I meant folks like those I spoke with at my local grocery store yesterday, who thought this whole thing would blow over in a few weeks. That seems plain stupid to me!  Economies can't be readily "re-started" when they have been shut down for a few weeks. I suppose we all here in the Diner understand this.

I appreciate you are impatient, but remember that you at least engage the questions. The people you talk to at the grocery store don't think about stuff like this. It's. to even in their purview. Their worlds are defined by panic grocery shopping and not being able to find toilet paper, bleach or bread, not having enough cash to pay bills, and their nephew's oxycodone habit. Most people live day to day, and as we saw last year, are ill equipped to deal with a cash emergency of more than $400. Those living in  Alan Greenspan's (may he burn in the eternal torments of hell forever) "precariat" are ill equipped to consider planning for a future when they don't know they are going to survive the present.

There's also "normalcy bias" to consider. It's a pernicious trap. "OK, I'll spend the week at home, but things will clear up in a week or two. Amirite? Amirite???"

No. Deal with it.

It takes a certain kind of contrarian to find themselves here. to look beyond the official story, to see just-in-time shipping, just-in-time fulfillment and just-in-time finance as a Potemkin village of grafts and skims constructed to gull the rubes, fleece the unwary, and enrich the owners. It takes a certain kind of contrarian to be aware of the illusory notion of money, and to properly understand the central role of energy in creating wealth. And it takes a certain kind of contrarian to elucidate and identify the conduit schemes used to sieve money from the working class while controlling them perfectly.

So be kind to others who haven 't undertaken a journey that you, at least, have the good sense to have begun.

One of the things that attracted me to RE and the Diner was the espoused ethic of "save as many as you can." There is a lot embedded in that simple sentence, which is why even eight years later it continues to resonate with me. A corollary of that statement, equally embedded, is that not everybody can be saved.
"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

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Re: Oil Price Crash: Who Cooda Node?
« Reply #991 on: March 19, 2020, 10:44:47 AM »

By the way, when I told Surly that I was "ahead of" most others in grasping our situation, I did not mean most others in the Diner.  I meant folks like those I spoke with at my local grocery store yesterday, who thought this whole thing would blow over in a few weeks. That seems plain stupid to me!  Economies can't be readily "re-started" when they have been shut down for a few weeks. I suppose we all here in the Diner understand this.

I appreciate you are impatient, but remember that you at least engage the questions. The people you talk to at the grocery store don't think about stuff like this. It's. to even in their purview. Their worlds are defined by panic grocery shopping and not being able to find toilet paper, bleach or bread, not having enough cash to pay bills, and their nephew's oxycodone habit. Most people live day to day, and as we saw last year, are ill equipped to deal with a cash emergency of more than $400. Those living in  Alan Greenspan's (may he burn in the eternal torments of hell forever) "precariat" are ill equipped to consider planning for a future when they don't know they are going to survive the present.

There's also "normalcy bias" to consider. It's a pernicious trap. "OK, I'll spend the week at home, but things will clear up in a week or two. Amirite? Amirite???"

No. Deal with it.

It takes a certain kind of contrarian to find themselves here. to look beyond the official story, to see just-in-time shipping, just-in-time fulfillment and just-in-time finance as a Potemkin village of grafts and skims constructed to gull the rubes, fleece the unwary, and enrich the owners. It takes a certain kind of contrarian to be aware of the illusory notion of money, and to properly understand the central role of energy in creating wealth. And it takes a certain kind of contrarian to elucidate and identify the conduit schemes used to sieve money from the working class while controlling them perfectly.

So be kind to others who haven 't undertaken a journey that you, at least, have the good sense to have begun.

One of the things that attracted me to RE and the Diner was the espoused ethic of "save as many as you can." There is a lot embedded in that simple sentence, which is why even eight years later it continues to resonate with me. A corollary of that statement, equally embedded, is that not everybody can be saved.


Great response, Surly.  This space is starting to feel a little more promising. There are too few such spaces and people as we, unfortunately.

I did not recently begin the journey you speak of in the second to last paragraph there.  I've been on the trail for many years, all beginning more or less with my reading of Small Is Beautiful (Schumacher) and A Sand County Almanac (Leopold) when I was a precocious and wiry teenager.  Ever since these early days of my inquiry, I've been exploring systems both artificial and natural, and how they intertwine. I know how to spot a fragile (or brittle) system and how to recognize a robust and resilient one better than most -- even among many so-called "experts". Our official experts these days, the ones being promoted on Main-snooze (corporate) media, are either pretending their expertise as propaganda or are stupider than a box of rocks.

I've been taking the long view since I was a bean pole kid with pimples.  And I know the reason most folks don't, or can't, is a social and cultural deficiency, and nothing more. It cannot be attributed to "human nature". That's complete rubbish.  I'm a metacognitive thinker, which, of course, means I not only think about things but I think about my thinking of things.  But nowadays I go one layer deeper than that, and I think about how WE (as a culture and a society) "think" about things.  I'm interested in propaganda and the manufacturing of consent and the delusion of crowds.  I'm interested in why we keep replicating systems and "ideas" (rooted in pseudo-thinking) which not only harm ourselves and our human communities, but the whole of the natural world as well. I'm expert enough in this to know how farking ignorant I am about it, which makes me ten or twenty times smarter about it than most so-called "experts". I am at least a peer to anyone here, and I can rhyme on a dime. But I am not blowing my own horn here.  I'm announcing a danger and an opportunity.

From where I sit it is obvious that we need to rapidly and radically empower people with knowledge and understanding to respond to the present emergency with a longer view than the narrow "precariat" perspective you mentioned above.  If we fail to do so our brief window of opportunity will almost certainly close and the shit will hit the fan so hard we won't have any chance of a future worth living in.
« Last Edit: March 19, 2020, 10:57:40 AM by JRM »
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

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Re: Oil Price Crash: Who Cooda Node?
« Reply #992 on: March 19, 2020, 10:48:04 AM »
For some hints about what I'm thinking about these days, see:

https://www.quora.com/q/vjkvmloowqmytclb

https://www.quora.com/q/cjkzdcszahxbboxj
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 RE

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Re: Oil Price Crash: Who Cooda Node?
« Reply #993 on: March 19, 2020, 11:15:54 AM »


When Plan A fails, you go to Plan B.  When that fails, Plan C.  Then you work through the alphabet until you get to Plan Z.


What if initiating Plan B must begin before you can even KNOW if Plan A has failed or will fail, if Plan B is to succeed? As in the case of communities growing an emergency food supply in the case that Plan A fails.

Up there in Alaska you have a pretty short growing season, so I may not be making much sense to you. Also, you have abundant wildlife as a backup food supply -- but not everyone has that. And, in any case, folks will be needing to eat greens and such. Meat is not a complete diet.

You can live on meat & fish, the Inuit, Aleuts did for 10s of 1000s of years before the European invasion.  In any event I have an enormous supply of Vitamins.

If you watch my food vids, you would know I use mainly locally grown produce.  Alaska Potatoes and Carrots are the best in the world.  We grow the biggest cabbages in the world also.  The growing season is short but the days are long.  We have good Hothouse tomatoes also.

Alaska is also one of the lowest population density locations in the world, beat out probably only by parts of Siberia for places tat will support human life.  Antarctica doesn't count.

RE
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Offline JRM

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Re: Oil Price Crash: Who Cooda Node?
« Reply #994 on: March 19, 2020, 11:34:12 AM »
Quote

Alaska is also one of the lowest population density locations in the world, beat out probably only by parts of Siberia for places tat will support human life.  Antarctica doesn't count.


We have some vast wilderness areas here in NM, too.  I had hoped to have found and stocked a cave in one of these by now, but never got around to it -- yet.  That cave is my Plan C.

Speaking of Plans A, B, C.... One could hypothetically work out a fairly universalizable classification system with which to develop a flow chart for various contingency plans around the coronavirus pandemic and economic crisis.

I've noted that many Plan B schemes are extremely individualistic, others more family-centric and yet others more community oriented.  Those of us who are more sociable tend to favor the latter while the more isolated tend to favor the former.  But, of course, it's a bit more complicated than that, as all things are.  Schemas never fully match the actual world and no map is adequate to the territory.

I'm the type that considers these matters in community terms, since I'm part of a web of community -- with those I love connected with others I don't even know, whom they love.
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 RE

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Re: Oil Price Crash: Who Cooda Node?
« Reply #995 on: March 19, 2020, 12:10:02 PM »

I'm the type that considers these matters in community terms, since I'm part of a web of community -- with those I love connected with others I don't even know, whom they love.

I have a built in community.  The other residents of my complex.  It's all old, poor and crippled people.

If you watched my videos from last summer, you would know I ran a Food Giveaway program for the residents in the parking lot.  Here is one of of the vids.

<a href="http://www.youtube.com/v/opq8ISybBsk?list=PLwZcL5fTVOw7E2Th3-edLyyhL0_YuGImG" target="_blank" class="new_win">http://www.youtube.com/v/opq8ISybBsk?list=PLwZcL5fTVOw7E2Th3-edLyyhL0_YuGImG</a>

RE
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Offline Surly1

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Re: Oil Price Crash: Who Cooda Node?
« Reply #996 on: March 19, 2020, 12:39:38 PM »
For some hints about what I'm thinking about these days, see:

https://www.quora.com/q/vjkvmloowqmytclb

https://www.quora.com/q/cjkzdcszahxbboxj

Well done. I didn't even know Quora did forums like this.
"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 RE

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🛢️ What Happens If Oil Prices Go Negative?
« Reply #997 on: March 22, 2020, 12:45:31 AM »
https://oilprice.com/Energy/Energy-General/What-Happens-If-Oil-Prices-Go-Negative.html

What Happens If Oil Prices Go Negative?

By Stuart Burns - Mar 21, 2020, 12:00 PM CDT


Various reports hit the news feeds today quoting a deliberately headline-grabbing statement by Paul Sankey, managing director at Mizuho Securities, in which he is reported as saying, “Oil prices can go negative.” That is, they could as a combination of Saudi Arabia (and Russia) flooding the market with increased oil and the market running headlong into COVID-19-induced curtailment of activity that is suppressing consumption, which combined will create the perfect storm of excess supply.

In reality, inventory levels are already rising.

CNN quotes Sankey, who said global oil demand is only around 100 million barrels per day.

However, the economic fallout from the coronavirus pandemic could crash demand by up to 20 percent.

This would create a 20 million barrel-per-day surplus of oil in the market that would rapidly exceed storage capacity, forcing oil producers to pay customers to buy the commodity – hence, in effect, negative oil prices.

The American government plans to purchase a total of 77 million barrels of oil starting within weeks the article states, but according to Sankey, this can only be done at a rate of 2 million barrels per day, leaving a massive excess that will be looking for a home.

Brent oil prices have already fallen to the lowest level for 17 years. The consequences for the U.S. oil industry if a coronavirus-induced recession drives down demand could be catastrophic.

West Texas Intermediate crude (WTI) collapsed by a staggering 19.2 percent to $22 while the Mexican Basket is down 22.4 percent.

For a short while, hedges will protect producers and they will continue to pump oil. While that will protect producers for a while, it encourages counter-cyclical practices; producers should be cutting back but instead will probably continue to pump and ship into store.

Francisco Blanch, a commodity strategist at Bank of America, warns in a Fox Business report that the demand destruction caused by the COVID-19 virus and the price war between Saudi Arabia and Russia could cause inventories to swell by 900 million barrels in the second quarter alone. He estimates the world currently has about 1.5 billion barrels of available storage.

Storage, however, is regional and may not match neatly with excess supply.

China continues to build storage capacity, having traditionally been short of space, but is now in a better position to take advantage of ultra-low prices.

“In a severe scenario, if the market struggles to find a home for surplus barrels, then oil prices might have to trade down into the teens,” Blanch suggests. That would leave U.S. and Canadian producers deeply in the red when hedges run out. Weaker OPEC countries, like Iraq, Iran, Venezuela, and Nigeria, could see their economies collapse, while all offshore production would be loss-making if oil prices remain suppressed into the teens over the long term.

Related: How Chevron Could Win Big On “The Worst Oil Deal Ever”

Having laid out the worst-case scenarios, it should be said even Saudi Arabia and Russia will burn through their reserves at a clip if prices fall into the teens. As such, some form of truce, one that would support prices and reduce output, is possible.

In addition, our focus has naturally been on the direst of outcomes from the current pandemic: a combination of short, sharp lockdown shock and the acceleration of new vaccines could see us in a much more optimistic situation two months from now.

A recession? Yes, inevitably, but for how long? The first half of the year, maybe, before some form of stability reasserts itself.

Still, who can blame them? “Negative oil” has a ring to it.

Just don’t expect to get a credit to your card when you fill up your tank — it ain’t going to happen.

By Stuart Burns via AG Metal Miner
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Offline RE

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🛢️ Oil Majors Are Preparing For $10 Oil
« Reply #998 on: March 24, 2020, 12:30:15 AM »
Boy, did I NAIL this one or WHAT?   :icon_sunny: :icon_sunny:

"Usually right, and never in doubt".   ;D

RE

https://oilprice.com/Energy/Energy-General/Oil-Majors-Are-Preparing-For-10-Oil.html

Oil Majors Are Preparing For $10 Oil
By Nick Cunningham - Mar 23, 2020, 8:00 PM CDT


The wave of oil industry spending cuts continues, with the majors now announcing significant reductions to spending as oil remains stuck in the $20s.  Royal Dutch Shell said on Monday that it would cut spending by 20 percent, or about $5 billion, and also suspend its share buyback plan. French oil giant Total SA and Norway’s Equinor announced similar moves.

ExxonMobil and Chevron have suggested they too would be axing their budgets, with Exxon under particular pressure. Goldman Sachs estimates that Chevron needs $50 per barrel in order to cover spending and its dividend. ExxonMobil, on the other hand, needs something like $70.

The majors are relatively more insulated from the downturn than small and medium-sized shale drillers because they have downstream refining and petrochemical assets that have typically performed somewhat better than upstream units when prices fall. Refineries, for instance, spend less on oil during the downturn, and low prices also translate into a boost in sales of refined products.

But the majors do not have that cushion this time around. We are in the midst of a historic meltdown – a supply crisis and a demand event with no precedent. Estimates vary, but oil consumption could be off by 10 million barrels per day (mb/d), or more. It doesn’t matter how cheap crude is, if people are not driving, flying or consuming anything aside from the bare essentials, there is no demand boost from low prices.

On Monday, Exxon announced that it was cutting production at its Baton Rouge refinery, the company’s second largest in the U.S., because poor demand has filled up storage tanks. Exxon also cut 1,800 contractors from the site. In another example, a major closely-watched petrochemical project in Appalachia may not go forward as the market sours.

The first round of spending cuts from the oil industry is now visible, but a second round is beginning, according to a report from Goldman Sachs.

Related: Canada Braces For Oil Cuts As Storage Nears Limit

“We see US oil production falling almost 1.4 mn bpd over five quarters post 2Q20 based on reduced drilling (i.e., before considering shut-ins of existing wells that are likely to be needed) with covered company capex down 35% [year-on-year] in 2020,” Goldman Sachs wrote in a note.

However, budget revisions are not over. The slide in spending, drilling and ultimately in output could deepen as capex cuts grow more pronounced. “There is no sugar coating it, U.S. oilfield activity will collapse with oil prices well below $30 WTI,” Raymond James said on Monday. The initial round of cuts put spending at about 45 percent below 2019 levels, the bank said. “However, the declines will be far more dramatic than these initial cuts and we stress that these announcements skew towards larger cap, better hedged and capitalized operators.”

“Total U.S. capex is likely to fall in excess of 65% with a WTI price persisting in the $20s,” the investment bank concluded.

Rystad Energy put out a similar estimate on Monday. E&Ps are likely to cut project sanctioning by up to $131 billion, or about 68% year-on-year, according to the Oslo-based firm. “Upstream players will have to take a close look at their cost levels and investment plans to counter the financial impact of lower prices and demand. Companies have already started reducing their annual capital spending for 2020,” says Audun Martinsen, Rystad Energy’s Head of Energy Service Research.

It's anybody’s guess how low WTI and Brent go. But more than a few analysts have pointed to the potential for storage to max out as a reason why prices have more room to fall. “[N]o one can exactly be sure that production will be shut-in fast enough to not overwhelm our ability to store oil,” JBC Energy said in a note. The firm pointed to refineries cutting processing because they are running out of storage, such as Exxon’s Baton Rouge. “In such an environment, it is as possible for Brent prices to briefly go to $10 per barrel as it was back in 1986 or 1998,” JBC concluded.

By Nick Cunningham of Oilprice.com
« Last Edit: March 24, 2020, 02:35:17 AM by RE »
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Offline RE

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🛢️ Brent Crude Falls to 17-Year Low
« Reply #999 on: March 30, 2020, 12:32:22 AM »
Can't wait to see the prices at the Pump!

RE

https://www.bloomberg.com/news/articles/2020-03-29/oil-plummets-to-17-year-low-as-virus-threatens-demand-slump

Brent Crude Falls to 17-Year Low


Oil slumped to a 17-year low as coronavirus lockdowns cascaded through the world’s largest economies, leaving the market overwhelmed by cratering demand and a ballooning surplus of crude.

Futures in London fell as much as 7.6% to the lowest since November 2002, while New York crude briefly dipped below $20 a barrel. Physical oil markets are struggling to store fuel, hit by a double whammy of virus restrictions eroding demand and a damaging war for market share between Saudi Arabia and Russia that has prices on track for the worst quarter on record.
Brent crude poised for the worst quarter on record

The kingdom said on Friday that it hadn’t had any contact with Moscow about output cuts or enlarging the OPEC+ alliance of producers. Russia also doubled down, with Deputy Energy Minister Pavel Sorokin saying oil at $25 a barrel is unpleasant, but not a catastrophe for the nation’s producers.

“Demand concerns are critical but well known, what really took the market down were the signals we got from Saudi Arabia and Russia that they intend to continue their current path,” said Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia. “Market hopes of a deal have come undone.”

OPEC nations aren’t giving support to a request from the group’s president for emergency consultations over tanking prices, according to a delegate. Algeria, which holds the cartel’s rotating presidency, has urged the secretariat to convene a panel but the call has failed to gather the majority backing necessary to go ahead. Riyadh is among those opposing the idea.
More oil-market news:

    Goldman Sees U.S., Russian Oil Most Vulnerable to Demand Crash
    Pipelines Ask U.S. Oil Drillers to Curb Output as Tanks Fill Up
    One Corner of U.S. Oil Market Has Already Seen Negative Prices
    Oil-Industry Collapse Accelerates With Scores of Rigs Going Dark
    Oil Tankers Fill at Record Pace as Glut Overwhelms Storage

The world normally uses 100 million barrels of oil day, but forecasters predict as much as a quarter of that has disappeared in just a few weeks. The plunge in consumption is without precedent since a steady flow of oil became essential to the global economy more than a century ago. The great crash of 1929, the twin oil shocks of the 1970s and the global financial crisis don’t come close.

Brent crude for May declined $1.45, or 5.8%, to $23.48 a barrel on the ICE Futures Europe exchange as of 7:21 a.m. in London after falling to $23.03 earlier. The contract is also set for the worst month on record, down about 54% in March, and 64% lower this quarter.

The six-month spread for Brent was at a contango of more than $13 a barrel after closing at the widest gap since late 2008 on Friday. The prompt timespread was also at more than a $3 contango.
Brent oil's 6-month contango widens after closing at biggest gap since 2008

West Texas Intermediate slid 82 cents, or 3.8%, to $20.69 a barrel on the New York Mercantile Exchange after falling to $19.92 in early trading. The contract is down 54% this month and about 66% this quarter.

Global oil demand is in freefall and consumption may decline by as much as 20 million barrels a day, according to the International Energy Administration. That is forcing producers worldwide to slash output, while independent trader Trafigura Group expects as much as 1 billion barrels to be sent into storage tanks in the coming months.

— With assistance by Sharon Cho
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Offline RE

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Does this mean they'll pay me to pump gas into my SUV at the Convenience Store?  ???   :icon_scratch:

RE

https://www.cnbc.com/2020/04/01/coronavirus-oil-prices-could-turn-negative-as-storage-nears-capacity.html

Oil prices could soon turn negative as the world runs out of places to store crude, analysts warn
Published Wed, Apr 1 20207:13 AM EDTUpdated 2 hours ago
Sam Meredith   @smeredith19


Key Points

    The coronavirus pandemic has meant countries have effectively had to shut down, with many governments imposing draconian measures on the daily lives of billions of people.
    It has created an unprecedented demand shock in energy markets, with storage space – both onshore and offshore – quickly running out.
    Analysts at Goldman Sachs have warned the coronavirus shock is “extremely negative for oil prices and is sending landlocked crude prices into negative territory.”

An Aramco employee walks near an oil tank at Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia.
Ahmed Jadallah | Reuters

Global oil storage could reach maximum capacity within weeks, energy analysts have told CNBC, as the coronavirus crisis dramatically reduces consumption and some of the world’s most powerful crude producers start to ramp up their output.

The coronavirus pandemic has meant countries have effectively had to shut down, with many governments imposing draconian measures on the daily lives of billions of people. It has created an unprecedented demand shock in energy markets, with storage space – both onshore and offshore – quickly running out.
VIDEO04:14
Cramer: The oil patch is falling apart

At the same time, a three-year pact between OPEC and non-OPEC partners to curb oil output ended on Wednesday, paving the way for oil producers to ramp up production.

OPEC kingpin Saudi Arabia has pledged to hike output to a record high.

“Refineries in many places are now losing money for every barrel they process, or they have no place to store their output of oil products,” Bjarne Schieldrop, chief commodities analyst at SEB, told CNBC via email this week.

He pointed out that when refineries shut down, many oil producers have nowhere to send their crude if the refinery is also part of the logistical chain to the market.

“For land-based or land-locked oil producers, this means only one thing,” Schieldrop continued. “The local oil price or well-head price they receive very quickly goes to zero or even negative, because if they have too much oil, they must pay someone to transport it away until they have managed to shut down their production.”
Landlocked crude prices seen falling below zero

International benchmark Brent crude traded at $25.33 Wednesday afternoon, down more than 3.8%, while U.S. West Texas Intermediate (WTI) stood at $20.54, around 0.3% higher.

Both benchmarks recorded their worst-ever quarter through the first three months of the year, according to data compiled by CNBC.

Brent futures collapsed over 65% in the first quarter, while WTI slumped more than 66% over the same period.

To date, around 862,000 people have contracted COVID-19 worldwide, with 42,404 deaths, according to data compiled by Johns Hopkins University.
VIDEO02:43
Don’t expect to see any change in oil market diplomacy for now, analyst says

Analysts at Goldman Sachs have warned the coronavirus shock is “extremely negative for oil prices and is sending landlocked crude prices into negative territory.”

The U.S. investment bank estimates that the world has around 1 billion barrels of spare storage capacity, but much of that will never be accessed “as the velocity of the current shock will breach transportations networks.”

“Indeed, given the cost of shutting down a well, a producer would be willing to pay someone to dispose of a barrel, implying negative pricing in landlocked areas,” analysts at Goldman said in a research note published Monday.

To be sure, Goldman said it expects waterborne crudes like Brent to be far more insulated from the coronavirus shock, with the international benchmark likely to stay near cash costs of $20 a barrel — albeit with temporary spikes below.

In contrast, WTI (which is landlocked and 500 miles from accessible tanker storage) is expected to be among those hardest hit, alongside WTI Midland and Western Canada Select (WCS).

Earlier this week, the price of WCS was quoted as low as $4.18 a barrel, traders told CNBC’s Brian Sullivan. That’s thought to be less than a good pint of beer in Canada.
Storage capacity to hit its limit ‘by midyear’

“With demand collapsing but supply rising after OPEC and non-affiliated Russia failed to reach a production cut agreement in early March, global inventories could reach their maximum capacity within weeks,” analysts at Eurasia Group said in a research note published Monday.

“Industry participants are saying it is virtually impossible to find conventional onshore tanks. Even if OPEC and other producers start restricting their output again soon, the supply overhang from the global lockdown is so big that storage capacity will likely hit its limit by midyear.”

“Already, ports and refiners are turning away oil tankers. This will put even more downward pressure on prices and pose an existential threat to many companies,” Eurasia Group said.
Dock workers haul the mooring rope of a cargo ship onto the dockside at Bandar Imam Khomeini (BIK) port on Friday, May 24, 2019.
Ali Mohammadi | Bloomberg | Getty Images

Analysts at Energy Aspects expect the ongoing oil price war between Saudi Arabia and Russia will keep production elevated until the end of the year.

This means the world will run out of crude storage capacity early in the third quarter of the year, they added, with product containment arriving earlier.
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🛢️ OPEC, Russia approve biggest-ever oil cut amid coronavirus pandemic
« Reply #1001 on: April 12, 2020, 07:23:35 PM »
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https://www.cnbc.com/2020/04/20/oil-markets-us-crude-futures-in-focus-as-coronavirus-dents-demand.html

US crude plummets more than 19% as one analyst says the situation stateside is ‘quite dire’
Published Sun, Apr 19 202010:07 PM EDTUpdated 28 min ago

Eustance Huang    @EustanceHuang


Key Points

    U.S. crude prices plunged in afternoon Asian trade on Monday as traders continued to fret over a slump in demand due to the coronavirus pandemic.
    ANZ’s Daniel Hynes described the situation stateside as “quite dire.”
    Prices on the May contract for West Texas Intermediate crude futures tanked by more than 19% to $14.73 per barrel. The futures contract is set to expire on Tuesday, according to Refinitiv.

GP: US Oil Workers Oil Boom in Texas's Permian Basin 191030
Workers extracting oil from oil wells in the Permian Basin in Midland, Texas on May 1, 2018.
Benjamin Lowy | Getty Images

U.S. crude prices plunged in afternoon Asian trade on Monday as traders continued to fret over a slump in demand due to the coronavirus pandemic — and one analyst described the situation stateside as “quite dire.”

Prices on the May contract for West Texas Intermediate crude futures tanked by more than 19% to $14.73 per barrel. Earlier on, WTI had fallen to $14.47 per barrel, its lowest level since mid-March 1999 when it traded for as low as $14.40 per barrel. Meanwhile, international benchmark Brent crude futures edged 2.5% lower to $27.38 per barrel.

ANZ’s Daniel Hynes told CNBC’s “Squawk Box” on Monday that one of the reasons behind the “crater” in U.S. crude prices was the impending expiration of the May futures contract, set to happen on Tuesday, according to Refinitiv. The June WTI contract fell nearly 6% to $23.64 per barrel.

Front month futures contracts typically converge with spot prices as they near expiry.

“There will be traders in the market who only want to trade the paper, so they will roll over into the next futures contract. That means selling the May contract and buying the June,” Hynes, who is a senior commodity strategist at ANZ, told CNBC in a follow-up email exchange.

“But there are also traders who are buying for clients who trade the physical. So they hold the contract to expiry and deliver the crude,” or accept the crude if they are on the other side of the trade, he said.

This could be why there’s a steeper fall in the May futures contract compared to the June contract. Spot prices are “particularly weak” at the moment, Hynes said, adding that spot U.S. crude is trading for as low as $12-13 per barrel. This was caused by a combination of a “collapse in demand and a subsequent lack of storage,” he said.

In a normal market, the spread between the spot price and the one month forward futures contract “may only be around 40-50 cents per (barrel),” he said. “At the moment, it’s been as high as $8-10 (per barrel).”

Hynes said that prices are likely to “remain under pressure” over the next month or so.

The coronavirus pandemic has dealt a severe blow to economic activity around the globe and sapped demand for energy. While OPEC and its oil producing allies finalized a historic agreement earlier this month to cut production by 9.7 million barrels per day, the International Energy Agency has warned that the cuts may not be enough to offset a severe plunge in oil demand.

With demand at near-paralysis, oil and fuel tanks around the world are close to brimming — a stark evidence of the global glut and a function of the “contango” structure of the futures market, where contracts for later delivery trade at a premium to the front-month.

That’s led to a dash by traders to lease floating or onshore storage in a bid to sell the fuel for a profit when prices rebound.

Global oil storage is “rapidly filling – exceeding 70% and approaching operating max,” Steve Puckett, executive chairman of TRI-ZEN International, an energy consultancy, told CNBC earlier this month.

— CNBC’s Sri Jegarajah contributed to this report.
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Offline RE

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🛢️ WTI crude prices collapse as trading drops below $12
« Reply #1003 on: April 20, 2020, 10:56:18 AM »
Let's get Ben Lichtenstein to the Pit of the Chicago COMEX STAT!

"Here they come to sell 'em again!  CALL ALAN!

<a href="http://www.youtube.com/v/njwf1FZ-l4k" target="_blank" class="new_win">http://www.youtube.com/v/njwf1FZ-l4k</a>

It's OVAH! The DEFLATIONISTAS have WON!   ;D ;D ;D

Notice Speedy Gonzalo Lira is nowhere on the map!

God, I love being proved right.  :icon_sunny: :icon_sunny: :icon_sunny:  I lived long enough to see it too!

RE

<a href="http://www.youtube.com/v/HM6Qx_JIWI4" target="_blank" class="new_win">http://www.youtube.com/v/HM6Qx_JIWI4</a>
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Offline K-Dog

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Re: Oil Price Crash: Who Cooda Node?
« Reply #1004 on: April 20, 2020, 11:54:59 AM »
It is like dumping milk.  Oil is not dumped but pumped and this price crash tells the suppliers to stop pumping.  This is a temporary situation and in time price will swing the other way.
Under ideal conditions of temperature and pressure the organism will grow without limit.

 

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