Posted on 04/20/2020 12:18:41 PM PDT by Jess Kitting
A futures contract for U.S. crude prices dropped more than 100% and turned negative for the first time in history on Monday, showing just how much demand had collapsed because of the coronavirus pandemic.
But traders cautioned this collapse into negative territory was not reflecting the true reality of the beaten-up market. The price of the nearest oil futures contract, which expires Tuesday, detached from later month futures contracts, which continued to trade above $20 per barrel.
West Texas Intermediate crude for May delivery fell more than 100% to settle at negative $37.63 per barrel, meaning producers would pay traders to take the oil off their hands.
This negative price has never happened before for an oil futures contract. Futures contracts trade by the month. The June WTI contract, which expires on May 19, fell about 18% to trade at $20.43 per barrel and was better reflecting the reality of the market. The June contract was more actively traded. The July contract was roughly 11% lower at $26.18 per barrel.
The international benchmark, Brent crude, which has already rolled to the June contract, settled 8.9% lower at $25.57 per barrel.
The front part of the oil futures ‘curve,’ which is the May contract that expires on Tuesday, was hit the hardest since it applies to fuel that’s set to be delivered while most of the country remains on lockdown thanks to the coronavirus. The only buyers of oil futures for that contract are entities that want to physically take the delivery like a refinery or an airline. But storage tanks are filled so they don’t need it.
(Excerpt) Read more at cnbc.com ...
They’ll run out of space to store it soon, I expect.
If you had some oil tanks right now you could make a k8llin.
It will still cost you about $20 a barrel. This is just a futures contract expiration.
No; you would get PAID $20 (now $35) for taking delivery of 1000 WTI bbl crude!
Well, well, well...
The lock down has created vehicles that get 3 weeks to the gallon. No wonder demand is down.
Correct.
IF the months further out collapse, then there’s big trouble.
Not that 20 is great but it’s a lot better than 2 or 3.
That is a futures contract. A financial product. The price of oil is around $20 a barrel if you want to buy some.
I have a big basement.
I’m not surprised that oil demand has collapsed. Before this draconian lockdown was imposed I was buying a tank a gas every week mostly just from my work commute. in the past six weeks I’ve only bought two tanks of gas and I still have an almost full tank.
This is what happens when you let ‘intellectual’ pinheads centrally plan an economy.
Questions is, where do you put it if you take physical delivery?
Damn straight!
CNN just reported oil price at US$ -37/barrel.
strange times ahead...
https://www.usatoday.com/story/money/2020/04/20/dow-stocks-trading-monday-oil-prices/5164359002/
When this “crisis” is over there will be some who are going to become gazillionares and some zeronares.
Correct. It ain’t gasoline, which is quite a bit more volatile.
LOL, so the producers would PAY someone $37 per barrel to take the oil off their hands? Why wouldn’t they simply stop pumping it out of the ground?
There is a ton of oil on tankers sitting out in the oceans. Can it cost more than $37 per barrel to store it?
Unless someone comes up with a sensible reason for this I call it bs and I am backed by the futures prices which still hover at something over $20.00 per barrel.
I haven’t filled my tank since March 1, and I’m still half full.
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