Oil Crashes to $2.30 a Barrel

[JVM225]

FWIW:
I’ve noticed a lot more local traffic on the roads in the last week.
Seems like as soon as our Governor said he was keeping the lockdown in place until at least May 15th people have been engaging in a silent revolt.
The lines to get in places like Home Depot and supermarkets around here have increased dramatically since then and lots more cars in the parking lots.
I was in Home Depot this afternoon and the parking lot was as crowded as it is on a typical weekend.

 

[Creekwood]

Great explanation I heard today: Too many paper barrels chasing too little physical storage.

That is exactly what it is. There are a lot of commodity traders that make paper commitments to buy crude and then sell off that contract before delivery. They act as trading intermediaries and make a profit to take what used to be a bit of calculated risks. Some (including some people I know) got fabulously wealthy doing it right. I cannot see any scenario when anyone in that business with open positions would have not taken an absolute bloodbath today. No one can take delivery anywhere. Virtually all storage is full everywhere. So they have to buy their way out of the contract (thus paying to have someone take the contract away) The spread from their committed price to the cost to sell is pure loss. Maybe $50 to 60 per barrel loss on whatever notional contracts they were caught with.

 

[Blueone]

FWIW:
I’ve noticed a lot more local traffic on the roads in the last week.
Seems like as soon as our Governor said he was keeping the lockdown in place until at least May 15th people have been engaging in a silent revolt.
The lines to get in places like Home Depot and supermarkets around here have increased dramatically since then and lots more cars in the parking lots.
I was in Home Depot this afternoon and the parking lot was as crowded as it is on a typical weekend.

Same thing in Indy... I was at Home depot today and it was busier than ever... samething on the streets

 

[RBB]

Been that way here past week.

 

[RBB]

That is exactly what it is. There are a lot of commodity traders that make paper commitments to buy crude and then sell off that contract before delivery. They act as trading intermediaries and make a profit to take what used to be a bit of calculated risks. Some (including some people I know) got fabulously wealthy doing it right. I cannot see any scenario when anyone in that business with open positions would have not taken an absolute bloodbath today. No one can take delivery anywhere. Virtually all storage is full everywhere. So they have to buy their way out of the contract (thus paying to have someone take the contract away) The spread from their committed price to the cost to sell is pure loss. Maybe $50 to 60 per barrel loss on whatever notional contracts they were caught with.

Traders ruined the coal business. I agree with your thoughts. They have no mercy or commitment to the industry. It’s all paper but it cost someone $$$$ big time.

 

[northern]

The US can be like Canada and milk and have a quota system that keeps supply equal to demand and allows those producing milk to make a good income. But the consumer pays. US milk is less than Canadian milk because a US farmer can produce as much milk as he wants. Be very carful in asking for a home country price for a commodity as you may find you will pay more than you want. When the world starts again there may not be enough oil to start as you do not turn off a well like a tap and you do not turn it on like a tap. There will be a lag between demand and start up and oil will rise more than people expect. If you want to see the demand for oil go up demand that ethanol be removed from gas. But this would not be good for farmer.

 

[JVM225]

Although a lot of people are out of work around here, it doesn’t seem like they are sheltering at home.
Just got back from Dunkin Donuts. Roads all have typical 8:00 AM traffic.
I think the people of NY have decided this is over.
Most are wearing masks and gloves, but they’re out and about like normal.