Bloomberg
By Catherine Ngai, Olivia Raimonde, and Alex Longley
April 20, 2020, 2:59 PM EDT



Of all the wild, unprecedented swings in financial markets since the coronavirus pandemic broke out, none has been more jaw-dropping than Monday’s collapse in a key segment of U.S. oil trading.

The price on the futures contract for West Texas crude that is due to expire Tuesday fell into negative territory -- minus $37.63 a barrel. The reason: with the pandemic bringing the economy to a standstill, there is so much unused oil sloshing around that American energy companies have run out of room to store it. And if there’s no place to put the oil, no one wants a crude contract that is about to come due.

Underscoring just how acute the concern is over the lack of immediate storage space, the price on the futures contract due a month later settled at $20.43 per barrel. That gap between the two contracts is by far the biggest ever.

“The May crude oil contract is going out not with a whimper, but a primal scream,” said Daniel Yergin, a Pulitzer Prize-winning oil historian and vice chairman of IHS Markit Ltd.

“There is little to prevent the physical market from the further acute downside path over the near term,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets. “Refiners are rejecting barrels at a historic pace and with U.S. storage levels sprinting to the brim, market forces will inflict further pain until either we hit rock bottom, or COVID clears, whichever comes first, but it looks like the former.”

Since the start of the year, oil prices have plunged after the compounding impacts of the coronavirus and a breakdown in the original OPEC+ agreement. With no end in sight, and producers around the world continuing to pump, that’s causing a fire-sale among traders who don’t have access to storage.

The extreme move showed just how oversupplied the U.S. oil market has become with industrial and economic activity grinding to a halt as governments around the globe extend shutdowns due to the swift spread of the coronavirus. An unprecedented output deal by OPEC and allied members a week ago to curb supply is proving too little too late in the face a one-third collapse in global demand.

There are signs of weakness everywhere. Even before Monday’s plunge, buyers in Texas were offering as little as $2 a barrel last week for some oil streams. In Asia, bankers are increasingly reluctant to give commodity traders the credit to survive as lenders grow ever more fearful about the risk of a catastrophic default.



Source:
https://www.bloomberg.com/amp/news/articles/2020-04-19/oil-drops-to-18-year-low-on-global-demand-crunch-storage-woes?sref=vuYGislZ&__twitter_impression=true

Lalasticlala mynd44 dominique

-$35/barrel, how?

As in, if you buy 1 barrel, after not paying, you will still get $35?

Simplyleo:
-$35/barrel, how?

As in, if you buy 1 barrel, after not paying, you will still get $35?

No, WTI has become inelastic. At whatever price, theres zero demand. No one can buy it even if they wanted to. No storage.

Oil costs $ to store. Due to the economic collapse, oil isn't being used much. All the storage facilities are filled up, american strategic reserves are full. So nobody who can store it will buy it from you. If you want to get rid of your oil, you have to pay someone to take it off you. That is what that amount represents.

leaculpa:

No WTI has become inelastic. Too much supply, zero demand. No one can buy it even if they wanted to. No storage.

Oil costs $ to store. Due to the economic collapse, oil isn't being used much. So all the storage facilities are filled up. So nobody who can store it will buy it from you. If you want to get rid of oil, you have to pay someone to take it off you.

As in, to get rid of the oil, after giving it out free, I will now pay someone to take it away?

Which kind wahala be dat?

If I go to sell and no buyer, I no sabi road back to my house?

Simplyleo:

As in, to get rid of the oil, after giving it out free, I will now pay someone to take it away?

Which kind wahala be dat?

If I go to sell and no buyer, I no sabi road back to my house?

So dts the situation. You take it back & the ones u cant sell has filled up everywhere. You definitely cant bring anymore out of the ground without getting rid of those in storage. Bad news for oil field workers & oil infrastructure.

WTI crude has this much price pressure because these particular contracts are due tommorrow (tuesday) & customers dont want it. The WTI due next month are currently at $20. Brent crude (the benchmark used by the rest of the world including the OPEC basket) is at $25, because theres no pressure yet on that. That will happen in june when its futures are due. Hopefully the virus would have gone by then & demand would've risen. If not, all those prices would probably remain volatile and eventually go negative too. Banks are already getting cautious with funding oil traders crude liftings.

Simplyleo:
-$35/barrel, how?

As in, if you buy 1 barrel, after not paying, you will still get $35?

That’s right, sellers were actually paying buyers to take the stuff off their hands.

The reason: with the pandemic bringing the economy to a standstill, there is so much unused oil sloshing around that American energy companies have run out of room to store it. And if there’s no place to put the oil, no one wants a crude contract that is about to come due.

At last the unholy marriage between the north and the south will come to an end without a gun shot.....

leaculpa:

No WTI has become inelastic. Too much supply, zero demand. No one can buy it even if they wanted to. No storage.

Oil costs $ to store. Due to the economic collapse, oil isn't being used much. All the storage facilities are filled up, american strategic reserves are full. So nobody who can store it will buy it from you. If you want to get rid of oil, you have to pay someone to take it off you. That is what that amount represents.

Fantastic analysis and you're damn right.
To summarize your point in one sentence, it is cheaper to pay countries to collect your oil than to store it.

Businext:
This is simple business principle.
Demand and supply.

On a very simple note, I went to Jara stores and saw pineapple for a slightly higher amount than I saw its worth.
Then later I went to our traditional food market and saw a stack of pineapples on the ground just at the entrance which had been abandoned by the owner because they had become over ripe and rotten over time while being shaded no one bought!

Well, as for the pineapple the seller probably placed a high price that no one agreed on, let's say N500
then when the seller saw it was getting riper she took it down to N250 until probably to a buy one at N100 get one free tag, till no one still priced and that stack got bad.

It's sad
Market, business, pricing, demand and supply, all complex, simple, sad, happy, tact and opportunity!

Well, as for the crude oil Nigeria has had no reason whatsoever to leave PMS at 125 or whatever amount the independent markets sell.

Nigeria Is Not Prepared For All Archetypal Issues In A Depression!
(As an aside you must agree with me that the issue of covid19 is not well managed, too many secrets, unprofessional approaches and lies, cover ups, looting, diversions, one sided palliative, ridiculous palliative. )
Now there is a glut our beloved technocrats, OPEC, NNPC and all the people will fat bucks should now reason that all this while we ought to have had oil banks, reservoirs to store PMS or even the oil in its crude form, it won't expire, evaporate or congeal ! Also they should stop being insensitive and further reduce the price in the downstream sector in all forms especially diesel and kerosene. But you see since a country like Nigeria only deals with raw crude, we still have to pay ridiculously high amount for domestic use.

#NigeriaHearWord&Diversify
#GlutComesWithDepression
#NigeriaIsNotPreparedForAllArchetypalIssuesInADepression

See as I read your comment finish.... mtchew

https://www.youtube.com/watch?v=m-3q7hiPxF4

Oil price crashes into negative territory for first time in history

Now that oil price is in the negative, so you can now get paid for buying oil. What's the word for that?