Oil suffers record plunge below $11 amid historic glut

[Yo_Mama_Been_Loggin]

Oil suffered its biggest one-day price plunge in the modern era, at one point crashing about 40% to below $11 a barrel as traders contended with an historic glut.

Despite OPEC+’s unprecedented output deal agreed a week ago, the oil market remains massively oversupplied as the lockdowns to fight the spread of the coronavirus reduce global crude demand by about a third. Storage tanks across the globe are rapidly filling, including at the key U.S. hub in Oklahoma.

“There is no limit to the downside to prices when inventories and pipelines are full,” tweeted Pierre Andurand, the head of the eponymous oil hedge fund. “Negative prices are possible,” he added.

In early trading in New York, West Texas Intermediate fell to as low as of $10.96 a barrel, the weakest level since 1998. The plunge was exaggerated as the May futures contract expires on Tuesday, leading to a fire-sale among traders who don’t have access to storage. The June contract fell 13% to $21.80 a barrel at 9:13 a.m. local time. Brent declined 7.1% to $26.08.

https://www.msn.com/en-us/money/markets/oil-suffers-record-plunge-below-dollar11-amid-historic-glut/ar-BB12Taj9?li=BBnbfcN&ocid=hplocalnews

[brokephibroke]

1. Holy Shite!

And the two year is at .2%.

Strange days indeed.

[Shermann]

2. Under $8 now nt

[SWBTATTReg]

3. And yet our prices at the pump still aren't going down fast enough. Why not? Something seems off

here. Like the prices are being supported by artificial means (pumped up illegally)?

[Shermann]

4. Slow to fall, fast to rise

Also there's going to be a bottom in the price of refined petroleum products due to fixed infrastructure costs.

[Miguelito Loveless]

5. Oh, they fall, just you don't see the price adjustment

until the station's next delivery. A station will buy once or twice a week. The price changes when the gas is bought, unless supplies go tight suddenlly, due to say, a pipeline explosion, that hits the headlines. Then the price will get jacked up immediately, since the station owner can blame the problem all over the news at the moment.

Gas prices are always quick to rise, slow to fall. Hikes occur immediately, cuts when the next delivery arrives.

[mathematic]

7. This is the price of only a very small portion oil and due to forced selling

Like it says in the OP, oil contracts that don't have the same forced selling are going for twice as much.

That said, gasoline futures have also dropped by 50%, from about $1.40 before all this started to about $.70 now. Retail gas average has dropped from $2.42 in the beginning of march to $1.85 last week (and likely another drop will be reported this week). Retail gas prices will never drop the same % as the raw commodities as taxes, employees, and rent all are fixed costs that don't decline with commodity prices.

[Amishman]

9. most of what we pay for gas isn't the oil

Spot price for refined gasoline right now is 0.70, or $29.40 for 42 gallons (42 gal is an oil barrel). That is after transit and refining

add in transit to the gas station, a tiny profit for the station, and anywhere from $0.35 to $1.00 per gallon tax, and it does add up.

The refining, transit, middlemen, and tax now make up most of the cost of gas - and those don't drop whe oil does.

[JCMach1]

10. Don't forget the taxes too... How much farther can it fall?

Not much... $1.33 in Dallas today

[mitch96]

6. With his one commodity income, Putin must be freaking out.......... good! nt

[gratuitous]

8. Well, that's just plain weird

It was just six days ago that Trump crowed about the deal he'd made to prop up oil prices:

https://fortune.com/2020/04/14/trump-oil-deal-inside-story-saudi-arabia-russia-price-war-ended/

Trump’s oil deal: The inside story of how the Saudi-Russia price war ended
BY
JAVIER BLAS
AND
BLOOMBERG
April 14, 2020 1:48 AM PDT

[Much snippage with the money quote late]

The biggest winner appears to be Trump, who refused to deliberately cut American oil production, but was still able to broker the final deal. His phone call with Mexican President Andres Manuel Lopez Obrador, followed by a three-way conference call with Russian President Vladimir Putin and King Salman of Saudi Arabia, came up with the proposal that resolved the Latin American nation’s objections to the agreement.

[HAB911]

11. futures contract down 80% to record low under $3

[SWBTATTReg]

16. And this will have a habit of bouncing back against the producers of oil eventually, being that ...

they probably got themselves into this whole mess, being that rump seemed initially an oil man (favored oil, definitely not solar or wind or the like). So they (the oil producers) kept pumping oil out of the ground even while shutting down fracking sites at the same time (too much excess being produced).

Oil capacity is being stretched to the limits (storage wise) and what are they going to do if they keep running out of storage? I suspect that low producing wells will be shut down, unless those that money are owed to banks, investors, etc. keep demanding that the pumps keep going. I think that this is what is happening in a lot of fracking sites.

In effect, this industry has killed itself by producing too much. Go figure. A bunch of greed, lenders, producers trying to pay down debt or cover debt loads, etc. I don't think that the Saudi or Russians could have ever anticipated these events at all, being that the CV epidemic has mauled consumption of oil products.

The Russians and Saudi have got to be hurting big time, after all, their one commodity markets are now hurting their revenues/income.

So, instead of really helping the oil industry, rump is helping kill it. Ha! I bet all of those western states w/ the tons of fracking sites (and the land owners) aren't happy, as well as other oil producers in other states. This will crimp their incomes hugely (I love rump's own words here to describe this disaster).

Another one of his stupid mistakes. By putting oil first (vs. solar, wind, etc.), rump guaranteed that an excess of oil would come onto the marketplace and flood the markets, because producers thought that hey, we got a friend in the WH, lets pump! Nice planning, eh?

[ProfessorGAC]

20. An Odd Definition Of Winning

And of success.
As I said last week, a 10 million bbl cut is PR. They were running out of room, 10 days ago.

[roamer65]

12. We should be buying like crazy and filling the strategic reserve.

[SoonerPride]

15. The reserves are full.

There is literally no where else to put it all.

[dalton99a]

13. Maybe they'll close some refineries

[IronLionZion]

14. Below $0 now

so is it free?

American oil crashes below $0 a barrel -- a record low
https://www.cnn.com/2020/04/20/investing/premarket-stocks-trading/index.html

[SWBTATTReg]

17. Wow. I suspect that they'll be forced buyers of the crude oil, to filfull their disasterous futures

contracts (if they sold or sold the oil at a guaranteed futures price (depending on the type of futures contract they engaged in), they're banking on getting a better price for their oil later, or locking in better prices while they're producing it). What a mess.

Think of all of the banks left holding worthless oil (below ZERO dollars) contracts. Think of thousands of investors playing in the oil commodities markets, banking on making some money. Some speculators will make a killing (they sold the contracts at a higher price earlier/prior to all of this happening, and then will go back and buy the by far cheaper oil contracts to fulfill their outstanding obligations).

I suspect loans will be called in, margin calls will go out to a lot of speculators, and a lot of brokers in Chicago at the commodities exchanges, etc. are all freaking out. Literally freaking out.

All of them are going to blame TRUMP for screwing up their markets and costing them HUGELY (trump's words again).

We'll get better prices at the gas pump, hopefully, when we all start driving again.

Can you imagine such a thing like this ever happening? Only in trump's world, does he manage to get everybody and everything he touches bankrupt with his stupid policies. I suspect that the only energy policy rump ever had was allow the oil industry unlimited tax breaks and keep pumping. That is the whole summary of his 'energy policy', and he managed to screw this up even.

[rdking647]

18. the low was -40/barrel

the oil price is a fluke
. the may future contract is expiring tomorrow so if you own it you have to take delivery. most people cant actually take delivery since its 1000 barrels delivered to a specific spot (cushing oklahoma). so they have to sell at any price before tomorrow. thats why it went negative. the next months contract is trading around 21/barrel.

[Hugin]

19. So...

When are they gonna call me to come down and fill the tank?