There is nowhere to store oil for May delivery. That’s what’s behind the price crash. The CME says it will allow prices to go negative.
The last day for May trading is today. Traders long the May contract are in deep trouble.
June Crude
The price of crude for June delivery is $21.09, down from $53.78 in February. Those rolling crude contracts expecting the price to go up have been hammered for months.
The Art of a Failed Oil Deal
Supposedly, Trump saved the oil market with his production cut deal with the Saudis earlier this month.
On April 14, the Wall Street Journal crowed about The Art of an Oil Deal.
I panned that idea on April 15 in The Art of a Failed Oil Deal.
These were my comments.
Real Deal
As soon as storage facilities fill up, nations will have to curb production.
Trump did not negotiate a thing that was would not have occurred on its own by brute force of the market.
A cut of 9-10 million barrels was not enough. So the price fell after a brief market surge.
Hooray, the Saudis saved face. But what good did it do? The cuts were coming because they had to.
Voilla!
If demand destruction amounts to 20 million barrels per day, guess what?
Production will ultimately fall by 20 million barrels per day, deal or no deal.
I believe we now know which view was correct.
COT View
The above chart shows speculators were long 195,355 contracts.
Anyone long the May contract has now been carted out the door.
I do not have a count as I believe most of those contracts are for June. Even still, those losses are massive.
Some traders will be wiped out today.
Mish
Putin is in big trouble with Russian oil oligarchs.
One has to wonder if even after the environmental fines of allowing Cushing to spill over once full (crude allowed to spill into the wild), just to take unlimited -$40 barrels, is a profitable trade even after those fines… interesting proposition.
Are the US strategic reserved full? if not, fill ’em up!
Even bigger troubles coming – with CLOs again.
This news is like hearing the iceberg tearing a hole in the Titanic. Nothing has gotten tippy just yet, and there’s an eerie calm….
Time to place your aluminum foil helmets on your heads. PPE is critical in these situations.
It’s now down to NEGATIVE (-$35.20 per barrel)…
USD/bbl. -35.20 -53.47
see bloomberg.com/energy
AND that’s were the Dow and other casino indices would be amidst the biggest crisis EVER ….in absolute negative territory ! ….if it wasn’t for unprecedented centralised intervention…
Oil prices drop 200% into negative territory, and VDE is down 3%.
The casino has new rules: It’s CalvinBall from here on out.
The price of WTI crude is now NEGATIVE $36.47 because there is just one day to go to close out the May contract and there is no place to put the deliveries. Storage is full. Meaning someone (s) is willing to PAY YOU to take it off their hands. It could also be a hedge fund blowing up.
Your comments aren’t correct. They are negative because the long can’t make delivery of their contract. They should have closed their contract out prior to the last few hours of expiry which is when the real games of chicken are played. VERY Few contracts ever go to delivery but it is an option if you don’t close out your contract. If you are a physical player you can play this game, if you are a paper player you are fighting with all your limbs bound by a dominatrix.
You might be right but it is not I who is wrong in that event but CNBC which just did a lengthy bit on how negative oil prices are actually even possible, hence the comment about a hedge fund possibly blowing up, because they reserved that as a potential explanation as well. I am merely reporting on what the financial media is putting out there.
CNBC also said there is one more trading day for the May contract.
One thing is sure, at a negative price with oil off over 300% in one day there are bound to be some window jumpers today and this evening as some people realize what they have lost today.
I stand corrected – the contract expires tomorrow as noted. Regardless, the dynamics I mentioned are correct. There are limits each trader has to be under for the 3rd to last day, 2nd to last day and last day. Someone had to close contracts to get under limits and got massively squeezed. Other than physical players very few people are even trading the front contract in the last 3 days. Someone played chicken and lost. It will be an intersting dynamic for next month’s expiry for sure.
Well, the old saying goes “the cure for low prices is … low prices”, however perhaps that should come with a caveat – “but, it doesn’t matter if your dead.”
Will have to check ANS tomorrow (data lags, they only have prices from the 16th at the moment):
Our budget up here is already thrashed and the legislature is grinding through the savings account … not going to be pretty!
Regards,
Cooter
Indeed. I wonder how much people count on that oil distribution check. It could get pretty grim. I hope the salmon runs are good.
I used to trade on the exchange – this is the way things go with settlement of a contract. A contract holder must close out your position prior to expiry OR make or take delivery. If there were only two people and the long can’t make delivery and the short can take it and the short is willing to play chicken until the end you get a result like this. It will embolden the shorts going into expiry next month but also people will be ready to try to take delivery should it get big time negative again.
Well my pool holds about 320 bbl so they can deliver to my house and drop off a check for $12,085 @ <$37.60> per bbl.
Over / Under of traders or persons who were oil rich jumping out of windows?
The difference between the May contract and spot price reflects completely full storage tanks globally. The June futures now reflect the belief oil use will be enough before expiration so delivered oil can be stored.
When in all likelihood, this monthly rolling death march is likely to continue for what… 3, 6, or more months?
Waiting for some hedge funds to implode as well, should be seeing that soon too I would imagine.
Deflationary depression much?
A number of brokers are going to be sued for failing to know that these contracts could traded negative. One example is Interactive Brokers who does not allow a price below 0.01 except for spread orders.
-$3.70 a barrel now.
A lot of traders are going to wind up with an awful lot of crude dumped on their front lawns since you must take delivery and there is no place to store it. LOL
Tim
You are correct sir.
WTI went negative around 2:00 pm E.S.T. Never happened before. Where the price goes from there is anybody’e guess. I wouldn’t hazard a guess right now.
Maybe the Fed needs to buy some oil futures. Seems like they are buying everything else to keep all the plates spinning.
Let’s hope it doesn’t come to
Buy the futures, take delivery, flare it inside the Fed building…..