Ha! This is exactly what I thought of. Great episode.Step 1. Collect gas.
Step 2.
Step 3. Profit.
Oil is trading close to $1.00 per barrel
- Thread starter bobroars
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That almost resembles 1970's pricing. Did you get 4 Dino the Dinosaur glasses with your fill-up?
My older brother anticipated this some what by buying NAT, Nordic American Tankers Limited. Because when the Saudi's and Russians broke off talks and oil prices fell there were people/companies out there buying oil and renting oil tankers to store it in. Just floating storage tanks so to speak. Betting on the price rising and then reselling. But now with the prices low, all the storage filled (even the Chinese reportedly have storage full), and really no end in sight to a at least somewhat restricted economy, those tankers will have to be fully rented at the rates that were negotiated when everyone wanted tankers. i.e. higher rates than what has been seen in some time.....
Likely not. The economy won't be consuming the normal rate for some time so it could be a long time before tankers and other storage comes open......
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Ultimately if your long the market you will be long on oil too up to about $40/barrel right? Two strong quarters and everything will off to the races with the exception of the airlines and maybe mall retail.
Can somebody help me out with this and tell me I am wrong....Why do I think Russia and the Saudi's are happy about this?
https://www.rollcall.com/2020/03/19/doe-moves-to-fill-reserves-as-oil-prices-plummet/
This and other corroborating links are appx 1 month old. The 23 MMBO figure is close to the 30 MMBO for tranche #1. The DOE can provide storage assistance to the US petroleum industry without taking actual ownership.
Do you think they are playing some very long term game and are actually on the same side on this? Otherwise, it's hard to see why either would be happy with low prices on their main export.
Maybe to put many independent U.S. oil companies out of business, than the Saudis and Russians can use their surplus to charge outrageous prices to the USA. Not a stock market guy, just talking to a financial guy today...
For sure oil is still a good portion of the market, if you are talking the overall market, S&P, etc. But you can avoid oil all together in your own portfolio of stocks if you so choose. I was in oil/energy stocks for the dividends, and still am. And have bought in further particularly in the pipeline segment as I believe companies like Energy Transfer have been beat down way too much. Their dividend coverage was somewhere around 180% even with a robust capital program, so even if they cut back some on their capital outlays they should have no trouble covering their dividend payout. NG transport should not be impacted nearly as much as oil - people will still heat their homes, but yes some of the topping facilities that are put on line for peak AC demand will not be needed until manufacturing demand for electricity ramps back up fully.
We will see. For someone that enjoys investing these are trying times. But there are still lots of winners and money to be made. Just like in the discussion of the penny oil today, someone lost a whole lot of money, but someone else made that money.
The Russians came right out and said that is their plan. The Saudis wanted cuts to maintain prices but the Russians refused to cooperate.
they may run some Indies out of business, but there will be a new generation ready to take their place. there's plenty of oil.
No, and I never suggested otherwise. You can wave your cyber white flag at any time. Sooner might be better
Part of what happened today is margin calls and companies unloading oil they don't need. Oil is a commodity with a lot of traders just trading without ever holding for delivery. Lots of companies buy oil futures to hedge their costs. So they buy a few months or even a year in advance. Could be a lot of them were unloading contracts they didn't want. Say nine months ago they contracted for oil at $45/B for May delivery. They have no room for it so they paid $30 to cancel the contract.
Tomorrow will contracts for June delivery and the price now is$22. Look for it to drop but not to negative numbers.
You can go online and see future prices for every month a year in advance. Even buy/sell more than a year out.
Tomorrow will contracts for June delivery and the price now is$22. Look for it to drop but not to negative numbers.
You can go online and see future prices for every month a year in advance. Even buy/sell more than a year out.
"The government plans to initially buy 30 million barrels and ramp up its total purchase to 77 million barrels — enough to fill the strategic reserves to the brim."No, and I never suggested otherwise. You can wave your cyber white flag at any time. Sooner might be better
So you said, but it's not the plan.
Perhaps the DOE, in an act of fiscal prudence, is Dollar Cost Averaging on their path to filling up the salt mines? Tranche #2 and Tranche #3 are yet to come.
Today the DOE might have fulfilled Tranche #2 at ($35.00)/bbl. As an ex-accountant even you have to understand the financial significance of parenthetical and conveniently shaded numbers, don't you?
It appears that you've jumped into the deep end of the pool despite an inability to swim.
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You cant put you oil where others store theirs. It's only one space. As an ex kindergartner one would think you would understand that.
Next thing to look out for is how much of producers forward production has been sold forward months/ years ago. Usually, if they hedge at all, it is for a couple years.
Feel for the shale companies, not for the ....... Saudis etc. and Russians.
Have to imagine a huge rally over the intermediate term with so-called smart money going into levered oil ETFs. Speculators unite.
Check the bottle on the hand sanitizers. Unsubstantiated rumor that the alcohol content is too low in their sanitizers to kill most germs.
Unlike a pipeline or a storage tank where physical separation is possible, the DOE salt mines, purposely separated along sweet vs. sour criteria, thereafter don't care about specific identification of injected or extracted barrels
The following link might be of assistance in the course of waiving your cyber white flag. It's not difficult to notice your meandering position of argumentation. You're all over the road.
https://www.energy.gov/fe/services/petroleum-reserves/strategic-petroleum-reserve/spr-quick-facts-and-faqs#Q15
• What type of crude oil is stored in the Reserve?
During the years that the Strategic Petroleum Reserve has existed, crude oil has been acquired from 25 countries. The oil is categorized as either "sweet" (with a sulfur content not exceeding 0.5 percent by weight) or "sour" (with a sulfur content greater than 0.5 percent but less than 2.0 percent). The SPR accepts only crude oil that meets its quality specifications and it is co-mingled in caverns designated as either sweet or sour.
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77 million barrels is approximately eleven percent of US annual consumption.
Hopefully, the electric car will turn out to be a fabulous success and ........ that are major producers will return from whence they came. Of course, we would need some incremental amount of electric production capacity; I know not how much.
Exactly. You don't look to the front-end contracts now. You look to the STRIP. That's what equities are trading in relation to. For example, on a day like today XOM and CVX held up relatively well. The major refiners - VLO, PSX and MPC held up even better.
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Theres only so much space. If you have rented out 10% for Oil Co, Inc. to store IT'S OIL, that space is not there to store OUR oil. Kindergarten.Unlike a pipeline or a storage tank where physical separation is possible, the DOE salt mines, purposely separated along sweet vs. sour criteria, thereafter don't care about specific identification of injected or extracted barrels
The following link might be of assistance in the course of waiving your cyber white flag. It's not difficult to notice your meandering position of argumentation. You're all over the road.
https://www.energy.gov/fe/services/petroleum-reserves/strategic-petroleum-reserve/spr-quick-facts-and-faqs#Q15
• What type of crude oil is stored in the Reserve?
During the years that the Strategic Petroleum Reserve has existed, crude oil has been acquired from 25 countries. The oil is categorized as either "sweet" (with a sulfur content not exceeding 0.5 percent by weight) or "sour" (with a sulfur content greater than 0.5 percent but less than 2.0 percent). The SPR accepts only crude oil that meets its quality specifications and it is co-mingled in caverns designated as either sweet or sour.
While there are no certainties in the current dynamic (beyond uncertainty of course) I believe the pandemic may have accelerated us through global peak oil production. If global travel is very slow to recover (likely), tele-work shrinks the commuter consumption (likely), governments push conversion to renewables as part of their stimulus efforts (starting to happen in Europe) and electric vehicles ramp up (China and Europe) then we’re probably there. US tight oil production is gonna get creamed.
If there's no storage for the May contracts, where will they put the June delivery?
What we've mainly been talking about here is WTI (West Texas Intermediate). It is landlocked and when the storage in Cushing, Oklahoma is full or a good bet to be full there is chaos with respect to the contracts. Most think it will be full by mid-May. Companies will have to curtail production. That will be messy.
There is this possibility too:
Bloomberg News - 4/15
"Administration sources told Bloomberg News the Department of Energy has drafted a plan to pay oil producers to leave oil in the ground. The administration would pay for up to 365 million barrels that would count toward the US national reserve. The key to the plan, as reported by Bloomberg, is that it does not need Congressional approval. “Federal law already gives the Energy Department authority to set aside as much as 1 billion barrels of oil for emergencies -- without dictating where they should go. That creates a legal opening for storing crude outside the government’s existing reserve and even blocking its extraction in the first place.”
Who knows how long this demand destruction will last though.
As a side note - over the weekend some made a big deal about the Saudis sending 7 full tankers to Texas. Most Americans are completely unaware that Motiva Enterprises owns the Port Arthur, Texas refinery. It is the largest refinery in North America. That's right - Motiva Enterprises - an affiliate of Saudi Refining Inc., which is a subsidiary of Aramco - owns the Port Arthur refinery. It was a 50/50 JV with Shell that broke up in 2017. The die was cast for all of this when Standard Oil of California sent a team of petroleum geologists to Saudi Arabia in 1933. They struck serious black gold.That resulted in California-Arabian Standard Oil Co. The US and Saudi Arabia have been bound together ever since. Just a bit of an effect on world geopolitics ever since.
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Demand will increase slightly in May but airtravel is still going to be a fraction of what it was, as will car travel. This problem is only going to get worse in May and June as the demand is going to come nowhere near the supply even if things start to lighten up a little on the quarantine front. There will be a fraction of air travel all this summer and international travel will be near zero as well. Some demand for car gasoline will increase but still not be anywhere near normal demand in May and June. So the huge issue now is only going to get worse the next few months as storage is full. Producers are going to have to stop producing and it is obvious from yesterday that they now know that and I am sure in rooms all across the country in this oil producers and investment houses are frantic meetings on what to do next.
One reason for importing crude oil is that we have been importing oil for so long that most of our refineries are designed for high sulfur foreign oil and not sweet domestic crude.
The number of contracts vs the number of barrels of oil aren't tied.
I can write a contract to deliver oil. So can you.
LdN
I think his point is there is no place for the oil to go.
According to reports some were paying others to take the oil off their hands due to costs related to finding places to put it.
This deflation in oil prices is going to be mirrored in other commodities. Producers will lay off people if they have no market. Then you get an economy in a classic deflationary spiral.
We live in interesting times.
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