As cheap as oil is I keep thinking I should pick up a few barrels, just to have around, ya know. Probably be great for getting my burn pile started, piss off the neighbors at the same time.
In all seriousness, it’s not just the glut of oil but every capital investment made from upstream thru downstream and refining of chemicals and other products that use petro feedstocks is based on the price of oil. So if it doesn’t get back up soon there will be a huge ripple effect in every related industry.
Is a function of oversupply or is something more nefarious going on.
I did read about something that most of the people buying and selling commodities don't ever actually take possession of them. When they buy a future, they're saying they'll take possession on that future date. However, they sell the commodity before that date. If they're holding the commodity on the date the future comes due they have to take possession. Trump mentioned earlier that the Saudi-Russian pump war was going to have repercussions, and that there were currently tankers serving as warehouses because there was no place to offload the oil.
The example I read was soybeans, but it said a guy with an office, a desk a computer and a phone couldn't take delivery of 100,000 pounds of soybeans, so he would have to sell them at a loss.
Most of these guys put up a small percentage of the price as a deposit, and if it comes due and they haven't sold, they'e liable for the entire amount. So, a guy puts up $10,000 and buys $100,000 worth of oil futures at $50.00 a barrel. Only now, there's no place to store the oil, nobody is buying, and they can't take delivery cause they never intended to take possession.
Apparently, a lot of guys are prepared to pay for the entire price of the contract and offload the contract because they can't take delivery.
Anyone smarter than me on this, please make corrections.
And, it isn’t a benefit to refineries on the demand side.
They were at near-capacity with $60 oil so, with reduced output mandated by the gummint, they are still at capacity with cheap oil but, no where to sell it to.
They aren’t making money hand over fist as many would think.