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calendar   Monday - April 20, 2020

economic fubar

It’s A Free For Oil !!

Insane oil market prices plummet. West Texas Intermediate tumbled to $4 a barrel this morning. Later on it hit $0. ZERO DOLLARS. Oil for free.

Now it’s at NEGATIVE $36.73. That’s insane. That’s impossible. WTF is going on? Duh, what’s going on is the One World Government shutting down, overnight, the greatest economy in the history of the world. Production up, everywhere. Income up, everywhere. Quality of life up, everywhere.

And then COVID-19. 

And the utterly insane panic overreaction to it.

This has to stop, and it has to stop now.

U.S. oil prices plummeted in historic fashion Monday, crashing below zero as traders unloaded positions ahead of the May contract’s Tuesday expiration.

West Texas Intermediate crude oil futures for May delivery cratered by 305 percent to -$36.73 a barrel. At a price below zero, buyers would be paid to take delivery as there are costs associated with transportation and storage. The selling had WTI on track to close at its lowest level since recordkeeping began in March 1983, according to Dow Jones Market Data.

The June contract was trading lower by 18 percent at $20.43 a barrel.

The May contract is a “horror show” and “heading into the worst delivery situation in history,” Phil Flynn, senior market analyst at Price Group Futures, told FOX Business. “With demand still dead and OPEC+ cuts not hitting fast enough, the market looks like it has no bottom.”

CORONAVIRUS PRESSURES US MANUFACTURERS TO BRING PLANTS HOME FROM CHINA

Demand for crude oil is projected to fall by 29 million barrels per day this month, according to the International Energy Administration, as COVID-19 has forced countries around the world to issue “stay-at-home” orders to slow the spread of the disease. Lower economic activity means weaker demand for crude oil and its byproducts, including gasoline and jet fuel.

The sharp drop in demand has storage tanks in Cushing, Oklahoma, a key U.S. oil hub, filling up at an astounding rate. Inventories have ballooned by 48 percent to about 55 million barrels, according to a recent report from the Energy Information Administration. Capacity at the hub is about 76 million barrels, according to the EIA.

Oil supplies were swelling even before Saudi Arabia launched a price war against Russia on March 8 after the latter refused to join OPEC in slashing production, causing oil prices to post their largest single-day drop on record.

After more than a month of pumping out oil at elevated production levels, the world’s largest producers agreed on April 12 to historic cuts that will reduce output by 20 million barrels per day beginning May 1.

The collapse in the world economy has led to a collapse in demand for oil, and pretty big problems for those who are trying to sell it. Oil doesn’t work like a share in a company – it’s not something you can just hold on to, waiting for the right sale price. If you buy an oil contract, you are buying an agreement to accept delivery, on a given date, of one barrel full of oil.

Oil is heavy, it’s toxic, and you have to supply your own barrel. It’s costly to ship and to store – and sorting all of that is the responsibility of whoever is holding the contract on its due date. The contract that hit $0 (though all oil prices have collapsed spectacularly) is for US oil to be delivered in May 2020.

Factories are currently producing less, and so need less energy and less oil for raw materials. We travel less during a recession. We buy fewer cars. Demand drops across the board during any economic slowdown. That can often be moderated by people filling up their stockpiles with oil. If you happen to have a huge warehouse, or a series of huge tankers, and oil is unusually cheap… why not stock up and wait for the market to recover? Those with the capacity have been doing exactly that already. The problem is they’re all now almost full.

At the moment, oil trading is an international game of hot potato, with billion-dollar stakes, and no one wants to be left holding the barrel. That means that no one thinks we are coming out of the coronavirus crisis soon, or that when we do, it will end quickly.

We are all hoping deaths from the coronavirus have peaked already. It could be that we haven’t even begun to see the scale of the economic damage it could wreak.

Granted, there is considerably lag time between pumping the black goo out of the ground and sticking the nozzle in your gas tank. But while gas prices all around the country have been below $1.80 a gallon for several weeks, and often even below $1 even before this latest wave of insanity, gas prices refuse to drop below $2.03 around where I live in NJ. If I had any kind of freedom, I’d think about driving about driving to Minnesota for that 78¢ gas. Or even out to Ohio, where I can find it for a buck and a quarter. Maybe there’s a price fix going on in NY / NJ / PA ? Prices are not dropping Free Market style there at all. A bit lower, but not the give away levels elsewhere. And this is for $25 oil. What happens when the futures come due for MINUS 26 bucks?

What the hell is going on??

[ and when the oil companies go out of business and all the overstock gets used up, then oil will go back up to $400 a barrel ( again, right Bush-Obama? ), gas will hit $5-6 a gallon plus the raised state taxes, and we’ll all have to drive microscopic electric cars, and the Green Nude Eel will rule us all forever ]

If this isn’t the biggest commie plot that ever was, I don’t know what is. And all these assholes fell for it hook line and N95 mask. Because VIRUS RISK ... with what will turn out to be a 0.01% death rate, if anybody can ever put together some honest numbers. Which won’t happen either.


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Posted by Drew458   United States  on 04/20/2020 at 05:41 PM   
Filed Under: • EconomicsOil, Alternative Energy, and Gas Prices •  
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