Negative Prices Mark The End Of U.S. Shale
Some companies had taken on the obligation to buy a large amount of West Texas Intermediate crude oil at a certain price. The price offered by the sellers looked cheap at the time when the contracts were signed. The settlement date of the contracts was April 21.
Usually such contacts are settled in money but this time the sellers insisted on physically delivery the oil to the buyers.
That was a problem. The buyers did not have the storage capacity to accept the oil they had bought months ago. They now had to accept a large amount they could not put anywhere. The only way out was to immediately sell it to someone else. But nobody was interested. All had their storage capacity already filled to the rim. The companies with the obligation to accept the oil from the producers then offered to pay others to take their oil.
When the price started to go into negative territory I offered extra storage:
Moon of Alabama @MoonofA - 18:09 UTC · Apr 20, 2020If you give me 50 bucks, I'll let you fill up my car.
Quoted Tweet
Bloomberg @business · 17:51 UTC · Apr 20, 2020
BREAKING: Oil drops below $1 a barrel https://trib.al/l9YLU35
Offering to take the oil at -$50 was a bit too greedy. The WTI May option contract closed out at -$37.
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For the first time in memory, US West Texas Intermediate (WTI) oil futures were trading in negative territory on the New York Mercantile Exchange (Nymex) on Monday, and US crude for May delivery lost $55.90 over the course of the trading day to close at negative $37.63/bbl.One insider said the drastic drop was in part the result of the forced liquidation of a position in the futures market “at any price.” The contract has one more day to trade as it expires Apr. 21. The May contract had an exceptionally high open interest of 109,000 contracts at the start of Monday trading.
But fundamentally, the price reflects extremely distressed crude cargoes that are stranded with refineries ramping down runs, as they cannot sell products in a market where demand has collapsed from consumers who are staying home to prevent the spread of the Covid-19 pandemic.
The steep negative price “means storage is full,” said Albert Helmig, CEO of consultancy Grey House and former vice president of the Nymex.
Cushing is the delivery and pricing point of US oil futures and has an operational capacity of some 70 million barrels of oil. It held 55 million bbl last week.
Several large consumer countries are in lockdown. Global air travel is down by more than 80%. There is only little demand for gasoline or other refined products.
The WTI benchmark, which reflects the price in landlocked Cushing, Oklahoma, was not the only trade index in trouble. West Canadian Select oil also traded in negative territory. Contracts for WTI deliveries in June were still positive at $20/barrel as were Brent oil contracts ($25/bl) which reflect delivery at sea.
U.S. shale oil producers have already cut back some of their production but they will have to cut much more. The Baker Hughes count of active U.S. oil and gas rigs fell from more than 1,000 active rigs last year to 529 active rigs on Friday. I expect it to drop below 100 during the next few weeks.
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More drilling will have to stop because the refineries simply can not sell their products:
The trainwreck in Cushing is the result of various factors coming to a head. Refiners are cutting runs faster than upstream players can shut in production, and differentials have been signaling oil to go to Cushing for weeks, even prompting some midstream operators to reverse infrastructure.In addition, market sources say that inexperienced traders hold high positions too close to expiration, and that some contracts stipulate average prices for trades ahead of expiration.
When a futures trader holds a position this close to expiry, chances are high they will need to deliver physical crude. They can do so via an exchange futures for physical (EFP) arrangement, one trader said, but that requires finding a physical player willing to take delivery.
This means that even under normal circumstances, there is a reconciliation between physical and futures prices close to expiry. And physical prices have been underperforming so-called paper barrels for the past several weeks, reflecting fundamental dynamics and causing that reconciliation to be abrupt and violent.
It costs about $45/bl to produce shale oil. No U.S. shale producer is currently in profitable territory. All are already highly indebted. They still hesitate to shut down their wells. Once shut down the wells tend to clog up. They will need expensive rework to be reopened. That is unlikely to be profitable during the next two to five years if ever.
The stone age did not end for a lack of stones. The oil age will not end for a lack of oil. Oil demand has probably seen its global peak. Alternatives have been developed. The pandemic will likely be with us for some two years. It will change the behavior of many people.
There is no reason to expect crude oil to ever again reach its previous peak price of more than $100/bl.
The total debt of U.S. shale oil producers is estimated to be above $200 billion. None will be paid back. The carnage may well lead to collapses in the banking system.
All countries whose budgets depend on oil sales are now in deep trouble. As they lose their importance as producers and consumers the global policies around them will also change.
The pandemic only amplifies the existing structural problems and imbalances in our markets and societies. It is likely to leave permanent marks on them.
Posted by b on April 21, 2020 at 8:01 UTC | Permalink
next page »Bigger picture: "UN recognized" Tripoli gov + Erdo making progresses against Heftar again. Erdo in Brussels 6 weeks ago. Officially he was "summoned" because of his use of the migrants against Greece and the EU, but in fact he was probably offered a juicy deal.
Nice covid smokescreen, no wonder they let it develop until it was too late to hide
https://apnews.com/7ea9da6e5943ac9c5c03fa02c88db21c
This event in Lyon provoked one of the biggest clusters (the so-called Auvergne-Rhône Alpes) next to the evangelical one-week gathering in Bas-Rhin region.
Someone here said "in some regions" of France you can't go out without a written letter (printed or made) with 1 of the 3 reasons allowing you daily to go out, but it is everywhere in France.
Posted by: Mina | Apr 21 2020 8:42 utc | 2
@dan of steel #2
Regarding Dollar there is some info @ saker..
https://thesaker.is/no-the-Dollar-will-only-strengthen-post-corona-as-usual-its-a-crisis-after-all/
http://thesaker.is/strengthening-the-us-dollar-comments-on-ramin-mazaheri/
Posted by: ARN | Apr 21 2020 8:46 utc | 3
dan of steele
Learn about Eurodollars. Understand why USD is rising against most currencies. Learn why Yuan is not freely convertible.
The US banking system is the one of the best capitalized banking system today. Check out how well capitalized the Chinese banking system is? Or the European. Understand why Deutsche Bank is trading at the bottom of the barrel?
Posted by: ab initio | Apr 21 2020 8:47 utc | 4
Posted by: ab initio | Apr 21 2020 8:47 utc | 5
In the US the debt bubble moved from the banks to the corporate sector, it is now at an all time high.
Moreover, for the US economy to run, even in good times trillion dollar deficits are needed.
This year, it needed 19 % budget deficit and 2 trillion Fed balance sheet expaansion in order to simply stop the US economy from collapsing.
Posted by: Passer by | Apr 21 2020 9:32 utc | 5
@dan of steel #2
Another one from another point of view..
https://www.strategic-culture.org/news/2020/04/20/revolutionary-times-and-systemic-collapse-the-system-cannot-handle-it/
Posted by: ARN | Apr 21 2020 10:01 utc | 6
What -$37/bbl oil means to you:
Oil futures paper contracts market (in normal times of stable->rising oil prices and plenty of tank storage capacity a simple safe "buy low, hold, sell high" investment vehicle used heavily by investment banks, hedge funds, ETFs and teachers', municipal employees', etc, retirement/pension funds) explained in 5 minutes by Chris Martenson starts at ~minute 35:00:
https://www.youtube.com/watch?v=R8Pv77R3g1E
Posted by: gm | Apr 21 2020 10:36 utc | 7
"If you give me 50 bucks, I'll let you fill up my car."
Let's hope they only fill up the tank. But I think crude in the tank is still not the best idea.
Posted by: Norwegian | Apr 21 2020 10:56 utc | 8
'Peak' oil?
Peak oil Glut.
How did someone make such an error and probably pocketed millions making it?
It was always bilge....
The energy equivalent of global warming?
Posted by: Emily | Apr 21 2020 11:43 utc | 9
- The silver/gold ratio took a HEAVY beating today. Doesn't bode well for the financial markets ..................
Posted by: Willy2 | Apr 21 2020 11:51 utc | 11
Similar to dan of steele's question, is inflation going to be a possible concern?
Posted by: Scotch Bingeington | Apr 21 2020 11:56 utc | 12
Dr. Raschid Buttar reported In Principia Scientific International, that the current pandemic is in reality not a virus but a case
of toxicity. 5g is not the cause he says, but contributes to the toxins in the environment making us sick. Certainly the aluminum drooped on us, compliments of Uncle Sam does not help. And vaccines will only add to the problem of toxicity in my opinion.
He favors using hydroxchloroquine since the reaction to the toxins behave like malaria, or more like an immune disease caused by parasites.
Posted by: warren schaich | Apr 21 2020 12:01 utc | 13
Thanks b. This looks like an interesting study on how derivatives can be unwound.
Posted by: financial matters | Apr 21 2020 12:03 utc | 14
Can't wait for my local Oil Company's offer to fill my home heating oil tank for free.
Posted by: Enrico Malatesta | Apr 21 2020 12:03 utc | 15
Emily, We may still be at or around peak oil. That does not mean that all of the heavily indebted countries and oil companies won't pump what's left as fast and hard as they can. Now you have to stir in a massive plunge in demand to the equation. Seems to me that all newer oil discoveries are deep sea or shale. All of which require much more energy to produce then say thirty years ago.
When it takes the equivalent of one barrel of energy to produce one barrel of energy it will be lights out.
Posted by: arby | Apr 21 2020 12:10 utc | 16
dan of steele @2
The petrodollar was not in and of itself the mechanism that the US used to "export debt" and enrich itself off global trade. Rather, the petrodollar was the mechanism used to lock-in the US$ as the global reserve currency. If you wanted oil, you needed US$. After that it was just convenient to use US$ for other internationally traded commodities as well. Of course, this made even more sense way back in the distant past of the middle of last century because most of the international trade in manufactured goods was for American products, for which you'd have to use dollars to buy anyway.
The empire fanbois will cook up all kinds of explanations for why the dollar will remain the Global Reserve Currency in order to reassure themselves of the empire's continued hegemony, but the fact is that all of the "locks" locking other countries into that regime are now gone. Countries can choose to walk away now whereas in the past that would mean giving up access to oil and no longer importing all of those awesome things that the US used to make. That is not a barrier anymore.
Posted by: William Gruff | Apr 21 2020 12:10 utc | 17
I also think that the way the US has abused the privilege of having the world's reserve currency will be the cause of its downfall. More and more it is being used as a weapon to more and more countries. This will not hold.
Posted by: arby | Apr 21 2020 12:15 utc | 18
Negative Prices Mark The End Of U.S. Shale...
...and AmeriKKKa's thuggish approach to diplomacy?
It would be fun to be a fly on the wall to hear Washington's Right-wing Cranks deciding who to blame for letting Putin get his hands on the Oil Market steering wheel...
Posted by: Hoarsewhisperer | Apr 21 2020 12:22 utc | 19
"There is no reason to expect crude oil to ever again reach its previous peak price of more than $100/bl." There's a hostage to fortune. No matter that I spent the last two years preparing for this downturn/crash, I still don't believe what is happening, people don't want to understand what's coming.
Posted by: ramon | Apr 21 2020 12:30 utc | 20
b chimed: "If you give me 50 bucks, I'll let you fill up my car."
b, did you consider how much oil the cars of all barflies *together* could hold?
Sign up all barflies at:
#MeToo-oil
You, as the middleman, could take a piece off the top of each tank-full. Perfectly legitimate.
Posted by: librul | Apr 21 2020 12:38 utc | 21
As it turns out, these guys are actually not selling gold. They are, in fact, only selling gas. Does the 'petrodollar' die today? Or, tomorrow?
Arby 17.
Thank you for taking the time to reply.
But something to ponder
Forbes
https://www.forbes.com/sites/michaellynch/2018/06/29/what-ever-happened-to-peak-oil/
Yergin
https://www.technologyreview.com/2011/09/22/191161/peak-oil-debunked/
Well good news for those of us who agree with Edgar Cayce.
'Russia is the hope of the world'.
Russia has 60 years worth left and thats with its known reserves.
Hasn't touched the Arctic yet.....
https://www.worldometers.info/oil/russia-oil/
Posted by: Emily | Apr 21 2020 12:56 utc | 23
Joshua @23
It's already dead. There are just lots of folks keeping the corpse around out of habit and nostalgia.
Posted by: William Gruff | Apr 21 2020 12:58 utc | 24
Bigger picture:
https://www.jpost.com/arab-israeli-conflict/annexation-as-early-as-july-1-under-netanyahu-gantz-deal-625304
Posted by: Mina | Apr 21 2020 13:01 utc | 25
US/Western financial markets are a "musical chairs" game, where right now more chairs are being pulled out from the game faster than the FED and the central banks can 'digitally print' new chairs to keep the game going.
Posted by: gm | Apr 21 2020 13:19 utc | 26
Will other petroleum producing companies suffer the same fate as shale oil? I suspect so, and once the value of these companies hits rock bottom, who will be there to buy them up? You guessed it - Big Finance with the money they shoveled to themselves from the U.S. Treasury when the coronavirus scare started up. More than almost makes one think that the Plan is reaching its final stages. In four years the Western world will be unrecognizable to someone growing up in the last half of the 20th century.
Posted by: JasonT | Apr 21 2020 13:22 utc | 27
"It's interesting, although terrifying, to watch the world we have all known be strangled by fear right before our eyes. Who knew so few would even put up a fight?"
In my crosshairs@1
Is is not worth fighting for, not with so many ready to fight against it.
The "world' whose passing you're lamenting brought poverty, fear and insecurity to billions. The world will be a better place when capitalist exploitation and class rule have
been replaced by cooperation and love.
It is the passing of industrial scale cannibalism that brings tears to your eyes.
Posted by: bevin | Apr 21 2020 13:23 utc | 28
"If you give me 50 bucks, I'll let you fill up my car."
Better yet do you have a swimming pool? At 42,000 gallons per futures contract a 25' x 43' x 5' deep pool would suffice. This would net you $37 pb x 1000 barrels = $37,000. US
Posted by: Don't Flayme | Apr 21 2020 13:30 utc | 29
People are talking as if Covid-19 is one clear and define disease (with a clear x% lethality rate), or as if it affects the same way everybody in everyplace, but there are many strains of this virus, and in general... well it seems it tends to be much more deadly for the white people than to the asian people, hummmmmm.....fortuity or causality?
Because when I see those beautiful trends of cases and deaths of all the asian countries, all of them, even the poors and very close to China, have managed the pandemic perfectly, seamless, almost without a flaw; and compare them with the terrible, dramatic trends in every western country, and I cannot find an easy, convincing, explanation for that...We and our governments are all much more stupid, conceited and clumsy than the asians, but... so much?
What if the chinese government have in fact overestimate and not underestimate the number of deaths? what could that means?
May be, just may be, something stinks in Denmark (or Wuhan)
Posted by: DFC | Apr 21 2020 13:38 utc | 30
DFC
With SARS 1 US quarantined anyone that tested positive. Not so this time. Why.
Spread is due to policy and lethality is due to a populations average health and quality of medical care. Asians have better health, better medical care, and better policy than US and west Europe.
US couldn't even make a functioning test kit.
Posted by: Peter AU1 | Apr 21 2020 13:50 utc | 31
Filling up a swimming pool would be the go. The stuff would need refining but ISIS should have some handbooks on backyard refining.
Looks easy.
https://cdn.newsapi.com.au/image/v1/fe2fd96a27c51e712341dfe7686431e1
Posted by: Peter AU1 | Apr 21 2020 13:56 utc | 32
JasonT @28
Yes, oil producing companies will continue to go under until supply and demand equalize. Those with the highest production costs die first, followed by next highest, and so on until supply drops sufficiently for prices to rise and halt the carnage. That's how capitalist markets are supposed to work, and for people who like capitalism that is a good thing. You do want cheaper gas, don't you?
Sure, there will be ijits who buy up the failed companies betting that big increases in oil prices are just around the corner, but they will only get burned too. It is kinda like throwing money into a hole in the ground. The point that our host raised that "There is no reason to expect crude oil to ever again reach its previous peak price of more than $100/bl." is very realistic. While oil prices may eventually rise above the $45/bl break-even point for shale, the profits will always be slim from here on out. That is something that whoever buys up the shale assets will have to contend with. Just getting those assets for super cheap will not make them profitable.
Posted by: William Gruff | Apr 21 2020 14:00 utc | 33
In the 60-70's theredeveloped a POV that price wars (in retail gasoline at the pump) was a result from oversupply, as a way to increase storage capacity by inducing consumers to fill their tanks, and increase retail in ground storage.
The Pricing of Gasoline. Wednesday, March 1, 1967
Posted by: erichwwk | Apr 21 2020 14:08 utc | 34
@31 DFC your insinuation is ludicrous. I was in one of those Asian countries less than a month ago, and I saw first-hand why it did so much better than the complacent and incompetent “West”.
It’s no secret: they did better because they knew what they were doing. And they knew what they were doing because They Had Been Through This Before with SARS and swine flu and avian flu and other deadly viruses.
So they had learnt their lessons, taken the appropriate steps, stockpiled the necessary equipment and distributed the detailed response protocols.
So when the corona virus hit they immediately - and I do mean immediately - swung into action. Co-ordinated action.
I was there. I saw it with my own eyes.
This is very simple: they have done better because they already understood that a condescending smirk isn’t *actually* an effective way of combatting a viral pandemic.
Posted by: Yeah, Right | Apr 21 2020 14:20 utc | 35
DFC @31: "...compare [fatality trends in Asian countries] with the terrible, dramatic trends in every western country, and I cannot find an easy, convincing, explanation for that...We and our governments are all much more stupid, conceited and clumsy than the asians, but... so much?
Yes, the level of incompetence in western societies, not just governments but whole societies, is obscene. Auto mechanics who cannot fix cars, plumbers who cannot join pipes, burger flippers who cannot flip burgers, aerospace engineers who cannot design airliners that do not auto-crash. From top to bottom western societies are filled with incompetent clods who cannot perform the functions that they presumably trained for.
Fortunately for westerners it is not politically correct to draw attention to other people's stupidity and incompetence, so as long as we can hire Asians to do the mental heavy lifting and Mexicans to do the manual labor that requires having an attention span, then we're good.
Posted by: William Gruff | Apr 21 2020 14:26 utc | 36
Looks like energy dominance will get a bail out.
"We will never let the great US Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!" Trump said via Twitter.
https://sputniknews.com/us/202004211079043543-trump-instructs-treasury-energy-depts-to-devise-plan-to-fund-us-oil-gas-industry/
Posted by: Peter AU1 | Apr 21 2020 14:27 utc | 37
thanks to all who provided links to enlighten me. It appears that though petro-dollars got everybody hooked on using dollars to settle debts, oil sales are no longer absolutely crucial.
psychohistorian used to rant a lot about public ownership of the financial system. with the Fed doing whatever it wants to save the bacon of the very rich....and having some success, I wonder how a public office would have fared. I have very little confidence in our current bunch of deputies and don't see that they will become concerned for the little people any time soon.
as painful as it will be for me, I have been frugal throughout the years and managed to put a little bit of money away, I am less than certain that I will be able to use that money in the coming years. I have seen, not personally but very nearby, massive inflation. Greece and the drachma, Turkey and the Lira, Yugoslavia and the Dinar as well as Italy and their Lira. I went to Yugoslavia back in the 70s and you could eat well for a few dinar, at the height of their crisis a cup of coffee cost something like a billion dinar. What on earth is stopping the US from going down the same path? All of the aforementioned countries had their own currencies.
I guess we hope for the best and prepare for the worst. should I buy ammo?
Posted by: dan of steele | Apr 21 2020 14:29 utc | 38
Is this a result of all the lockdowns? A sort of automotive general strike occasioned by the virus, aided and abetted by government enforcement of restrictions on industry, travel, general hulabaloo?
Peace has descended upon a weary world. Nature has commanded us to cease and desist from gigantic insults upon the earth. Stop digging! she says, Leave it in the ground! Cease and desist making war for oil!
What does it profit a man? It profits him nothing! I have no idea where this leads, but it is a delicious moment. Look, see the power we have to bring everything to a standstill, even when we only do it because we are forced to! What if we did it willingly?
Where are your trillions now, moghuls?
The earth has spoken. We should all listen. Me, I am going out to plant potatoes.
Posted by: juliania | Apr 21 2020 14:36 utc | 39
@Posted by: Don't Flayme | Apr 21 2020 13:30 utc | 30
Right you are, but my worry is we will start finding 42,000 gal "oil spills", dumped like old couches or broken refrigerators, all over the country.
Posted by: gm | Apr 21 2020 14:39 utc | 40
Disabuseer--
"China’s national debt is currently 54.44% of its GDP, a significant increase from 2014 when the national debt was at 41.54% of China’s GDP. China’s national debt is currently over ¥38 trillion (over $5 trillion USD). An International Monetary Fund report from 2015 stated that China’s debt is relatively low, and many economists have dismissed worries over the size of the debt both in its overall size and relative to China’s GDP. China currently has the world’s largest economy and the largest population of 1,415,045,928 pe"
Posted by: arby | Apr 21 2020 14:43 utc | 41
Disabuseer @44
Incompetence isn't a good societal foundation for socialism. We in the West are much more likely to enjoy Dark Ages Mk II, which at least should be interesting.
Posted by: William Gruff | Apr 21 2020 14:52 utc | 42
William Gruff @34
I am not talking about shale oil only. Big Finance will be buying up as much of the oil industry as they can lay their hands on. This also not about money. Big Finance now has an endless supply of money now that the Fed and the Treasury were merged and put into the hands of Big Finance. Buying oil assets is about control of oil supply, not making money.
What we are witnessing is the final stages of Big Finance taking control over the Western world and perhaps the whole world. Taking control over energy supply is an important step in this regard.
Control is what this is all about.
Posted by: JasonT | Apr 21 2020 14:53 utc | 43
dan of steele | Apr 21 2020 8:25 utc | 2
To add to William Grufff's comment:
The use of the dollar meant that it was useful to have somewhere to put them. ie Treasury Bonds (US debt.), or keep them in their own Banking system. The TBonds market has fallen through. For 2020 there are no more "Official" buyers and ion fact they are sellers only. $2 trillion of the 3trillion issued has been bought by the Federal "reserve" (The Private bank that "issues" electonic bits laughingly called "money"), the rest is bought by money managers and Banks (mainly short term - to make a fast buck). No other country now wants to back up the US debt pile of over $23 trillion and counting.
I'd say that they have already left, rather than "the Countries can choose to walk away now" that William Gruff thinks - but the end result is the same.
Leaving aside the practical problem at the moment of too much oil (same as if you leave the tap running in the bathroom, and the plug in place, sooner or later the bath will overthrow).
The next part is the spraying of $trillions (literally) at favoured corporations and Banks, by the Fed.. Controlled by Blackrock, the biggest Hedge fund in the world who "gives aid to those they favour or who have paid their "dues"". This will allow favoured corporations to cannabalize smaller businesses, and the four or five top Banks to "look after" the competition. There will be biz bankruptcies agogo and more in the Banking sector. (Which people do not seem to realise yet). Many Banks have masssive debts (leverage) and speculative positions, not only "declared" but also in the "shadow-parallel-derivatives" market. Uncountable and unaccountable. Estimates vary up to 700 T but it could easily be more not less. Someone has said that ALL the assets in the world cannot cover the "positions" held :ie example of ONE series of problems; If a speculator you have never heard of needs a sudden influx of cash he could call in some of his holdings (which are part of bundles made of other bundles, of other bundles....) until someone can seize your house. One big problem are the other speculators who ALSO have a claim on your house. There could be many loosers and lots of lawsuits.
All over? Not at all. Bank mortgages are at the beginning of the daisy chains. Banks and Mortgage lenders will be among the ones loosing out heavily. Private debt is....enormous.
Back to the Big Banks: Deutche Bank and possibly Credit Swiss are among those who have massive "unstable" derivative positions (There are certainly others).
Do you see one reason for the "lockdown yet?"
If you want your money FROM the bank (for your own debts) it is going to be embarassing for them to say "we don't have any". If your Bank is going belly-up then in the EU all you possess in the Bank belongs to the Bank. You are an unsecured creditor and might get a few bits in compensation after the Bond holders and shareholders get paid off first. What you do get has to be paid into a new Bank ...repeat.....leads to > Civil "unrest" and "let them eat Brioche"... (The french revolution was because there was no food, blé or money to buy any. Brioches not cakes)
-----
Memories are made of this.
1) Trial to see if taxpayers would bail out failed Banks. Allied Irish Bank was acting as a "conduit" for the German Lander Banks who who were facing rout after speculations gone bad. They were legally forbidden to do such trades but went through AIBs. The Irish Prime Minister signed into a "suckers deal" where the Irish taxpayer would "bail out AIB" (saving the german Landers Banks).
2) Group killing of a major competitor. 2008 Bear Sterns, the target, was hit with coordinated waves of massive short selling of shares and "naked" short selling. (The latter is the buying and selling of shares you do not possess nor have the agreement of the real holder.) ie. JP Morgan "saved" the Bank by offering, ooohh so risky $2 a share, later raised to $10. (Cost about 60 billion, which was approximatively the sum of just their real estate assets. Nice profit if you get it.) Lehman was probably an "accident" as they just had made so many bad speculations that nobody knew about...)
-------
Emily | Apr 21 2020 12:56 utc | 24
Well good news for those of us who agree with Edgar Cayce.
'Russia is the hope of the world'.
He also said to watch Etna as that is when it all starts .... See Etna yesterday?
Posted by: Stonebird | Apr 21 2020 14:54 utc | 44
A spot price of -37 for WTI makes for a great headline but most oil is not bought at the spot price or at the front month price. I'm pretty sure the majority isn't even bought/sold via the futures market at all, though the privately negotiated price will typically track a blend of Brent or WTI futures at various time periods. The time horizon depends on the nature of the capital investment ... E.g. a giant deep sea project has to live on 10-year timescales. Shale, with each well producing most of its output in a year, is among the fastest to respond. Look at a the contacts 1-2 years out. Many modern corporations are further prone to "optimizing their exposure to the market", i.e. gambling on expected price movements in the upcoming year, to boost stock price. (the stock market has been very forgiving of this kind of foolery).
Finally, mass bankruptcies does not necessarily equal the end of an industry. It may simply mean new ownership.
Posted by: ptb | Apr 21 2020 14:54 utc | 45
Just think about when 50 million homes turn their heating system from oil to geothermal heating. It's about 600 million barrels less oil annually while 250 million megawatt hours more electric needed. How about very likely change of attitudes leading to less tourist air flights and more video conferences? Especially older folks won't fly as much as before Covid-19. Even 5% cut has immense consequences. Shale oil is doomed and some worst places of sea oil too.
Posted by: Frankie | Apr 21 2020 14:59 utc | 46
JasonT
The current slump in oil prices wont help big finance control much oil they cannot control now.
Venezuela, Iran Russia ect. Perhaps they could use it to get hold of a bit more Iraq or Saudi oil but that's about it. The big western oil companies are into most oil fields around the world.
Posted by: Peter AU1 | Apr 21 2020 15:02 utc | 47
In 2014 only 27% of US GDP was real economy. Now less than 25%. On the other hand China produces 52-54% of steel and aluminum while US just 1-3%. How many other figures is needed to confirm how much bigger Chinese industrial production is compared to that of US? Yep, they print there fake money in US but at the end what really matters are strategic resources, industrial capacity, agriculture, capacity to produce real things and protect own people.
Posted by: Matias | Apr 21 2020 15:04 utc | 48
"There is no reason to expect crude oil to ever again reach its previous peak price of more than $100/bl."
There is no reason to be so sure. Energy will be required and the "alternatives" are prohibitively expensive when not subsidized heavily by governments.
However, there is another way the prediction could become truth, that is if oil is priced in, let us say Yuan, and not "ever again" in US$.
Posted by: Norwegian | Apr 21 2020 15:09 utc | 49
Money can only buy what people are willing to sell and only if they accept the currency. US & Western Finance might have all the fiat currency in the world, infinite money even. But China, Russia, India & even Africa are increasingly telling the US to get stuffed when they come around trying to buy key assets. I believe the US and the "West" will become increasingly isolated, big finance will probably succeed in buying every key asset in the US, but an Impoverished people ruled by an out of touch elite playing at world ambitions while their people starve, that sounds like Tsarist Russia and how did that turn out for the Russian nobility?
Posted by: Kadath | Apr 21 2020 15:13 utc | 50
JasonT @46: "What we are witnessing is the final stages of Big Finance taking control over..."
Does it really matter to you what the name of the corporation is that owns the oil assets? Assuming you yourself are not an owner of a fracking company that is going under, what difference does it make who the owner is? Businesses failing, being bought out for pennies on the dollar and then asset-stripped are all normal and "healthy" features of the Free Market. I don't see what people are getting excited over.
To be accurate, though, Big Finance is getting burned here. They don't want oil wells, particularly not ones that cannot turn a profit.
Posted by: William Gruff | Apr 21 2020 15:19 utc | 51
DFC @31
"... when I see those beautiful trends of cases and deaths of all the asian countries... and compare them with the terrible, dramatic trends in every western country, and I cannot find an easy, convincing, explanation for that...We and our governments are all much more stupid, conceited and clumsy than the asians, but... so much?"
Much, much more than so much, my friend. Where have you been these last thirty or so years?
Posted by: Piero Colombo | Apr 21 2020 15:20 utc | 52
Peak shale has arrived. The energy inefficiency of fracking - directly related to the economic efficiency of producing shale - killed it off. This would have happened even without COVID-19.
The same will (eventually) happen with oil. The global economy - already teetering - has now been pushed over the edge by COVID-19. The demand side of capitalist growth has been temporarily (and in some cases permanently) crushed - which is a good thing for the planet - as workers are idled for the foreseeable future, and many out of a job forever.
Bottom line is that we live on a finite world which capitalism treats as an infinite resource.
Posted by: Trisha | Apr 21 2020 15:27 utc | 53
I imagine we will eventually see oil reach $100/barrel, but not for some time, and when it does it will be because production has declined to the point that the net income for oil producing nations is still far below what they had become accustomed to.
The only part of b's prediction I disagree with is that the financiers of fracking will take it on the chin. They won't. They'll be the first to be bailed out. Banks in the West haven't had to suffer because of an unwise investment for many, many years. Ultimately there will be a price to be paid, but it will likely be paid by Western bankers, hedge funds, and the like last. It's an upside down world.
Posted by: J Swift | Apr 21 2020 15:31 utc | 54
Peter AU1 @32
"US couldn't even make a functioning test kit"
That's true but the real reason we are screwed is why they wouldn't use the available test and felt they had to make one themselves:
it was a nonprofit test; their buddies couldn't make money on it!
That neatly summarizes it all.
Posted by: Piero Colombo | Apr 21 2020 15:31 utc | 55
JasonT | Apr 21 2020 14:53 utc | 46
"I am not talking about shale oil only. Big Finance will be buying up as much of the oil industry as they can lay their hands on. This also not about money. Big Finance now has an endless supply of money now that the Fed and the Treasury were merged and put into the hands of Big Finance. Buying oil assets is about control of oil supply, not making money.
What we are witnessing is the final stages of Big Finance taking control over the Western world and perhaps the whole world. Taking control over energy supply is an important step in this regard."
They have had an endless supply of money for quite some time, and they have been in control, more or less, of most the energy supply for quite some time, and they have been in control of the entire western world and lots of the rest of the world for quite some time.
Who exactly do you think was in control yesterday? These guys have been in control for at least 107 years.
Posted by: David F | Apr 21 2020 15:32 utc | 56
@ Posted by: Peter AU1 | Apr 21 2020 14:27 utc | 39
If he really do that, then he's entering very dangerous territory.
A fund with taxpayer's money dedicated to keep bankrupt shale oil businesses will only make the agony last longer. It's literally using money-capital to prop up attested unprofitable businesses.
That's not how capitalism should work.
On the previous thread, Piotr Berman @ 417 did bring up the subject of this post by b, and had the following final comment: "...Actually, the most acute pain is among the clever folk who provided the so-called hedges, namely who sold the obligations to buy oil at a certain price. They are losing hundreds of billions -- my guess. Now they are forced to buy AND store, hence the negative price."
Thanks, Piotr. Some of what is happening makes a bit more sense to me as far as the strange dealings in the stock market are concerned.
Also, just above at 416, karlof1 had this to say: "...Was the West ever on the path to making its goal the improvement of the Common Man as advocated by Wallace and his political allies?..." His answer is NO (exclamation point.)
My answer is YES (exclamation point.) Even if you only progress as far as the creation of the UN, with the leadership of Eleanor, that is an important pivotal moment for mankind which we cannot ignore. But I will state uncategorically that the JFK administration had similar idealistic goals and would have carried them out, had it not been for divisive powers plotting against it. That such dastardly powers succeeded does not negate the previous effort.
And even the example of China proves that this is not an impossible dream for mankind in general. As also is the example of Russia. We are fortunate in this generation to have two role models instead of one.
I don't have the Frost poem at hand so I will thusly mangle the last lines (sorry)
Two paths lay in the woods, and I
Took the one less travelled by
And that has made all the difference.
I've mangled it, but the meaning is there, I think. (I'll go find the correct version, and point of reference, I was a college student when Robert Frost came to Johns Hopkins and I heard him read his poems. He did so also at Kennedy's inaugural.)
Posted by: juliania | Apr 21 2020 15:43 utc | 58
The Road Not Taken by Robert Frost
Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;
Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,
And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I -
I took the one less traveled by,
And that has made all the difference.
Posted by: juliania | Apr 21 2020 15:46 utc | 59
@In my crosshairs | Apr 21 2020 8:12 utc | 1
It's interesting, although terrifying, to watch the world we have all known be strangled by fear right before our eyes. Who knew so few would even put up a fight?
(Please allow for poor English, it is not my native language.)
One could say there are generally 2 honest standpoints on what is happening (ignoring the dishonest ones). On the surface these 2 groups appear to have diverging opinions based on essentially the same fear: What happens to the economy.
One group fears the extreme actions taken by governments and institutions are causing far more damage to society and individuals in terms of economic damage, unemployment, eradication of democratic and personal rights and ultimately also deaths. These actions are seen as real and deliberate attacks on individuals and modern society.
The other group senses the same fear, but the fear is so strong that cognitive dissonance kicks in to deny reality. One is simply not able to accept the implication of governments and institutions willingly crushing society. So the official virus doomsday line is internalized as the truth, instead of causing a revision of one's world view, even though the numbers show that it is an irrational standpoint.
--
Strange days have found us
Strange days have tracked us down
They're going to destroy
Our casual joys
We shall go on playing
Or find a new town
Posted by: Norwegian | Apr 21 2020 15:47 utc | 60
I should say that the last consideration of Frost's poem is also in response to William Gruff @ 45. The poem took on new meaning for me as I looked at karlof1's remark, but I'm also in your debt for commenting as you did. Perhaps we need more poets. In my own brief experience of teaching young readers, we tackled to great profit, Robert Frost's poems as we explored the elements of grammar. I have never forgotten how excited my students became as nouns, adjectives and verbs came to life within that context.
Posted by: juliania | Apr 21 2020 15:55 utc | 61
i listened to about 3 mins of some bill gates ted talkish thing, wondering, will these dim bulbs ever assume responsibility for anything?
all the msm talking heads have been revealed for what they are: state propagandists. not one krugmanian friedmanite will ever say, "I didn't see this coming and I pimped myself out for the last 40 years selling snake oil and getting nobel prizes for it and have revealed myself to be unqualified to turn on a light switch no matter how much money I have made and recognition I have received. Clearly I know nothing". why would anyone listen to an msm personality that's been sold to them as some kind of "expert"?
Posted by: ron | Apr 21 2020 15:59 utc | 62
Apparently, no barflies watch the Keiser Report programs I link to as they've reported for several weeks now that the system's rigged such that the Money Power no longer faces any risk of losing money on its investments, meaning that Capitalism as once practiced is now dead. The loses will be socialized while the profits remain privatized as the article linked by Peter AU 1 @39 indicates, which really isn't news if you've been following along.
What we're witnessing is what happens when a Ponzi Scheme begins to fail. But as was reported, neither the Fed nor any other central bank can print a supply chain or any other physical product used by people. All those banks can do is continue their fraudulent printing of worthless fiat currency. What no one wants to admit except for the assorted commentator or non-Neoliberal economist is that the system's completely broken and beyond repair, so they're literally papering over reality.
karlof1 | Apr 21 2020 16:02 utc | 66
I do appreciate a lot of the stuff you post, and I do read quite a few of the links. I don't read/listen to the kaiser report, because this is information I have known for a long time, at least 20 years.
Posted by: David F | Apr 21 2020 16:05 utc | 64
"There is no reason to expect crude oil to ever again reach its previous peak price of more than $100/bl."
That is unless the US can engineer a major war in the ME with Iran vs. the Gulf states. Then it will go through the roof.
Posted by: Blue Dotterel | Apr 21 2020 16:07 utc | 65
karlof1 @ 66
What we're witnessing is what happens when a Ponzi Scheme begins to fail. But as was reported, neither the Fed nor any other central bank can print a supply chain or any other physical product used by people.
———-
That’s what I thought was interesting in the current case of demanding the transaction in physical oil. Apparently some collateral is tied to multiple derivative contracts. A game of musical chairs as gm mentioned above.
Or to paraphrase Warren Buffett, we’ll find out who read the fine print.
Posted by: financial matters | Apr 21 2020 16:12 utc | 66
Pepe Escobar has a friend who is interviewed by PressTV about this issue whereupon he elaborates. It's well beyond Must See/hear.
Norwegian @63
There is a group who thinks everything will return to normal next month and then we will be saddled with these unimaginable massive $trillion debts. They fear we must do something to try to stop the $trillions being thrown into banks' coffers. They fear that money actually has real and concrete value. They don't understand money.
But in fact these $trillions are just evaporating. The US Treasury/Fed hybrid is blowing as hard as it can into a balloon with a giant gaping hole in it. That balloon will never re-inflate, no matter how hard they blow. The damage has already been done and there is no monetarist policy in the world that can fix it.
So will western societies be destroyed? Quite likely, but they were on life support already anyway. It is best to let those decrepit and diseased societies die, just as some insensitive types advocate for letting the elderly and ill die from the covid. There is no capitalist fix for this situation. The only capitalist solution to the West's current predicament is a full economic rollover. Total reset. Complete debt jubilee. That will, of course, completely upend western society, and almost certainly involve world war.
The inevitable capitalist cycle of growth and destruction can be halted before the destruction part, but only by a socialist revolution. Frankly I don't see that the western "Global North" is up for that challenge. That being the case it is best to just enjoy the ride. Relish the interesting parts of living in interesting times.
Posted by: William Gruff | Apr 21 2020 16:22 utc | 68
@Posted by: Blue Dotterel | Apr 21 2020 16:07 utc | 68
"That is unless the US can engineer a major war in the ME with Iran vs. the Gulf states. Then it will go through the roof."
If so, the Invisible Hand will have to rig things things so that Saudi Arabian oil gets shut down. It was SA that started massively dumping their oil, and all the other major high volume producers, save US and Russia, have already been throttled by sanctions, embargoes, coups and regional wars.
Posted by: gm | Apr 21 2020 16:30 utc | 69
thanks b.. i liked these lines you wrote - "The stone age did not end for a lack of stones. The oil age will not end for a lack of oil. Oil demand has probably seen its global peak." maybe that is what was meant by peak oil as opposed to running out of oil... i never figured it out..
norwegian - my post to you showed up on the previous thread @ 313 area.. not sure if you saw it as it too was held in moderation..
@ dan of steele.. yes - psychohistorian has discussed these issues before.. my own of putting it is pretty simple.. after ww2 a system of international institutions was put in place which heavily favoured the usa $... the bretton woods agreement.. beginning of the imf, world bank, pricing oil in us$ and etc. etc.. this was taken to a further degree with nixon taking the us$ off the gold peg in 1973... all of this has led to the us$ taking an esteemed position in world finance, but there are signs of what you allude to in your examples - inflation basically means the value of the us$ continues to do down, so one needs many more of them to buy whatever one previously needed to buy such - like your yugoslavia example of a cup of coffee.. it is possible for oil to get back to 100 a barrel again and it is thanks the devaluation of the us$ - inflation... it is looking likely something else will happen before that though....
when it comes right down to it this is why money and war are intimately connected... the one with the most military power continues to hold the power.. this was set up as described after ww2 and it is falling apart, but unlike some rosy eyed socialists on the board here, i don't see this happening as quickly as many would like...
Posted by: james | Apr 21 2020 16:30 utc | 70
@ #6 Passer by
In the broadest sense the US deficit is a measure of how much money the govt has created (not entirely accurate as the creation of money - really debt - has been largely outsourced to private banks). If the national debt was 'paid off’ It would suck all the money out of society and the economy would collapse.
The Fed doesn’t need taxes as revenue as it just creates whatever money it needs. The budget deficit is simply a ruse to make you believe that government funding is limited when in reality they create money on demand with a few keystrokes. Thus there is always money for corporate welfare, the military, tax relief and benefits for the oligarchy but never money for health care, education, infrastructure, etc. The deficit is 1/2 of a balance sheet, the deficit on the govt side is balanced by a surplus (money in circulation) in the economy. Note that states are revenue constrained and depend on taxes and federal outlays to operate as they cannot create their own money on demand.
But what about inflation? Too much money in circulation lowers its value. Taxes are the real federal economic regulatory mechanism. When there is inflation, higher taxes directly remove money from circulation. The disinformation campaign is that interest rates control inflation, which has a) repeatedly been demonstrated false and b) is simply another system of rewards for the banking cartel.
The best metaphor is a sink. The faucet is the creation of money, the basin is the economy, and the drain is taxes. When the sink starts to overflow (inflation) the solution is to open up the drain (raise taxes).
Note also that this is for a sovereign economy, one that is controlled by the government. The EU has effectively destroyed all the sovereign economies in Europe with its central bank. Thus Greece, Italy, Spain, etc. have no control of their own economies and as such are unable to economically regulate themselves and subject to foreign predatory forces.
Posted by: Noah Way | Apr 21 2020 16:42 utc | 71
Posted by: William Gruff | Apr 21 2020 16:22 utc | 71
"There is a group who thinks everything will return to normal next month..."
Not next month, but the banks will failed, not guarantee but most likely
Posted by: JC | Apr 21 2020 16:47 utc | 72
@Posted by: Noah Way | Apr 21 2020 16:42 utc | 75
Shorter version: "Deficits Don't Matter" Dick Cheney, 2002.
https://www.chicagotribune.com/news/ct-xpm-2004-01-12-0401120168-story.html
Posted by: gm | Apr 21 2020 16:51 utc | 73
William Gruff | Apr 21 2020 16:22 utc | 71
"The only capitalist solution to the West's current predicament is a full economic rollover. Total reset. Complete debt jubilee."
I agree things are falling apart, and that it is necessary, and it will be painful, whether we come out on the other side with a better world is less certain.
In addition to the 'total reset' you mention above, an additional requirement would be for nations to be the 'money creators' in any given society.
Having a private 'fed' creating our money is a debt trap that can literally never be repaid.
I don't recall the exact rate that this private institution charges for creating money. But, basically whenever they create money, it comes with a debt attached to it.
They create a dollar that includes a .0015 debt (I don't remember exactly what the rate is) with it. In order to pay of the debt that comes with the dollar, you need a second dollar, which also comes with the same debt.
The result of this is that the debt is always greater than the amount of money, so you must create more money, creating more debt. Rinse and repeat.
"Give me control of a nation's money supply, and I care not who makes its laws," Amchel Rothschild. (There are some who say that this is either misquote or taken out of context. I don't see what context it could be a part of that doesn't scream fuck you, but that is just my opinion. The people who say this are usually economists and others who are benefiting from the current system and are thus defending capitalism. So, I don't know for certain if this is an accurate quote or not, but I tend to believe it is.)
Believe it or not, I learned this from Elizabeth Warren (IIRC), long before she got into politics and disappointed everybody. I watched it on youtube 10, maybe 15 years ago.
Posted by: David F | Apr 21 2020 16:54 utc | 74
Disabuseer | Apr 21 2020 16:38 utc | 74
Just curious, was this analysis written by the extremely fiscally responsible economists and practitioners of sound fiscal policy from the west?
Posted by: David F | Apr 21 2020 16:57 utc | 75
Posted by: gm | Apr 21 2020 16:30 utc | 72
Saudi would be one of the combatants,and Iran would shut it down.
Posted by: Blue Dotterel | Apr 21 2020 16:58 utc | 76
@Posted by: Blue Dotterel | Apr 21 2020 16:58 utc | 80
Blowing up Iran's meager oil output won't stop the SA-produced world oil glut.
Posted by: gm | Apr 21 2020 17:02 utc | 77
Instead of posting here you could have made a killing (word choice intentional).
Crude Oil May 20 (CL=F)
At 9:48 AM ET this morning it was at 1.30
now at 1:05 PM ET it is at 4.50.
My wife said that would be like buying weapons manufacturers stock.
Have to let it go.
But will be curious to watch.
Before I pushed the post button I rechecked.
At 1:07 PM it is at 5.25
https://finance.yahoo.com/quote/CL=F?p=CL=F
Posted by: librul | Apr 21 2020 17:09 utc | 78
End of shale fracking? We'll see, but, the ecology will surely benefit.
Posted by: ben | Apr 21 2020 17:17 utc | 79
@William Gruff | Apr 21 2020 16:22 utc | 71
There is a group who thinks everything will return to normal next month and then we will be saddled with these unimaginable massive $trillion debts. They fear we must do something to try to stop the $trillions being thrown into banks' coffers. They fear that money actually has real and concrete value. They don't understand money.
This may have some truth in it, but even if the money is not real, many of the consequences are. The consequences in the north we can live with for a while, but not long. In other places the consequences are life threatening almost immediately.
What follows is entirely anectdotal, but I have a Peruvian friend who told me about the situation in Lima. Many people there come to work from villages far away and live without any safety net, they work one day to be able to eat the next day. Now everything is closed and they have lost everything. He tells me their only option is to try to return to their home villages, sometimes 300 km away in the Andes mountains. The trouble is that all transportation has also been cancelled, so some have started to walk. You can imagine the outcome of that situation and similar situations elsewhere.
This is nothing but a killing strategy.
Posted by: Norwegian | Apr 21 2020 17:33 utc | 80
Disabuseer | Apr 21 2020 17:18 utc | 85
Neither. Was asking a question. Who did the analysis? Is it unbiased? Or, is it another case of western propaganda against a rival?
Granted, I did ask it in a sarcastic, cynical tone. But it is still a legitimate question.
Posted by: David F | Apr 21 2020 17:36 utc | 81
@james | Apr 21 2020 16:30 utc | 73
norwegian - my post to you showed up on the previous thread @ 313 area.. not sure if you saw it as it too was held in moderation..
Thanks for the notification, I have read your post now. That thread became a monster, and it is very hard to follow when posts pop up many hours after they were submitted. As for the contents, we can agree to interpret statistics slightly differently. However I do appreciate your other comments, and being receptive to other viepoints. Again thanks for the constructive feedback!
Posted by: Norwegian | Apr 21 2020 17:45 utc | 82
Posted by: Disabuseer | Apr 21 2020 17:05 utc | 82
Socialism will be necessity be imposed at the point of a bayonet on the capitalist's neck....because the current system is likewise imposed...on our necks.
Fascism is more likely to be imposed than the socialism.
To idiots they look the same, until is too late.
And it is not the capitalism that will be dethroned, but liberalism.
Capitalism is not an -ism. It is just called so to muddle the waters.
Posted by: hopehely | Apr 21 2020 17:49 utc | 83
Disabuseer | Apr 21 2020 17:18 utc | 85
Do you have any links to the data you provided?
BTW, Baker Hughes wasn't convicted, they entered into a deferred prosecution agreement (which means they were almost certainly guilty).
Also, a rig count isn't something that is subjective, it is a physical count of physical items, it is either accurate or not, regardless of the perspective of the person who is doing the counting.
Economical analysis is purely subjective. So it does matter who did the analysis.
Posted by: David F | Apr 21 2020 17:53 utc | 84
#58 - "That's true but the real reason we are screwed is why they wouldn't use the available test and felt they had to make one themselves:
it was a nonprofit test; their buddies couldn't make money on it!"
A major focus of Event 201 was enhancing private sector participation in pandemic preparations. Senior CDC officials were part of these panels. The testing kits produced by CDC through the month of February were flawed via some form of contamination. Recent reporting about this (Wash Post) blamed the CDC's own lab, and suggested the problem was resolved by private sector involvement. I suspect the opposite occurred - i.e. a private sector actor botched the tests. Lack of testing kits in February / March exploded the pandemic in USA, as infected persons were not properly identified.
US capitalism rejects the public sector. The health system, education system, post office, etc must be controlled by private interests. The model is a neo-feudal system, as discussed by Keiser/ Hudson last week. But this system has no means to respond to a public emergency.
Posted by: jayc | Apr 21 2020 17:53 utc | 85
I think b is extrapolating too far from a single data point.
It is increasingly clear that the negative WTI price was due to one or more hedge funds/oil traders making an enormous mistake.
Yes, storage is fairly full - but this is still early in the developing situation so is unlikely the primary cause.
If we see a similar delta with June or July, then this is more meaningful.
But even if the situation repeats, the notion that "we will never see $100 oil again" is extremely doubtful.
Among the many reasons:
1) The value of the dollar will continue to decline. More so as printing of them continues to accelerate
2) The consumption of oil is still going to happen, and will grow once the nCOV vaccine comes out - if for no other reason, than population still is increasing
3) The short term destruction of oil production capacity - principally US shale but there are some others out there too - will lead to a boom in the future as demand outstrips supply.
What we're seeing now is a particularly pernicious boom - shale fracking underwritten by historically low interest and voluminous financing meeting up with another historic decline: a near shutdown of worldwide consumption for an extended period.
I am unconvinced that the world is going to switch off to bicycles and shank's mare - cheap oil = cheap gas = cheap driving and cheap flying.
If anything, alternative energy is going to be crushed because the outright subsidies will no longer be competing vs. relatively expensive gas fueled transport. Gas prices in the US are in the same range as in the 1990s - despite 25 years of inflation: $1.81 per gallon. If this persisted, it would be even worse but the futures markets are still thinking $40s in late 2020.
We'll see.
Posted by: c1ue | Apr 21 2020 17:54 utc | 86
Disabuseer | Apr 21 2020 17:56 utc | 93
Hey, I am not trying to argue with you, I enjoy reading your posts. Did you notice in the last thread I said something to another poster who I thought was being unfair to you?
"Would it not be more appropriate to research for yourself whether the reports are accurate then present your own evidence in rebuttal?"
No, you made the assertion, or provided the information. It is up to you to provide the links to support that. I think most here would agree with me on this point.
I only asked my original question, because I was genuinely curious if it was true, or if it was propaganda.
Posted by: David F | Apr 21 2020 18:01 utc | 87
All I know is that the collapse of China because of it's debt , and empty cities and whatever has been predicted for the last 15 or twenty years. During that time it has become such a formidable economy that the US is scared silly of it.
Posted by: arby | Apr 21 2020 18:06 utc | 88
Disabuseer | Apr 21 2020 18:12 utc | 97
I am not going to research your claims. I don't know if their debt to GDP ratio is 310%. I find your refusal to provide links to your assertions disconcerting.
You claim you didn't do an analysis, so you are repeating someone else's analysis, why not just provide a link?
If you are not going to back up your assertion, then we have nothing else to discuss.
Posted by: David F | Apr 21 2020 18:16 utc | 90
@c1ue | Apr 21 2020 17:54 utc | 92
I mostly agree with your analysis. Energy in the form of oil will still be in demand and isn't being replaced by bicycles and subsidies any time soon, even if some around me where I live seem to think that it is happening.
Posted by: Norwegian | Apr 21 2020 18:19 utc | 91
Not sure what happened to that post, here it is again.
Has anyone else read the latest post by tomas pueyo.
What appears to be working to control and stop the outbreak is scary stuff, like '1984' scary stuff. Americans will never go for that, which means we might just end up with rolling outbreaks.
It is a lot to think about.
Posted by: David F | Apr 21 2020 18:20 utc | 92
Dan @31:
The average Asian weighs 150lb. The average westerner weighs, what, 250+lb plus half a kilo of sugar in her/his blood? Would that be a crucial factor in how these people breathe to garner enough oxygen?
Posted by: Oriental Voice | Apr 21 2020 18:22 utc | 93
Correction to my last post: It should have address to DFC, not Dan :)
Posted by: Oriental Voice | Apr 21 2020 18:24 utc | 94
There is also a fairly large difference between debt that has been created to sustain gambling banks losses, military adventurism, hedge funds who made bad bets and debt that has been created to build infrastructure like the BRI. A massive undertaking that will return trillions of dollars or whatever will be the fiat of choice.
Posted by: arby | Apr 21 2020 18:31 utc | 95
Posted by: David F | Apr 21 2020 18:20 utc | 101 Has anyone else read the latest post by tomas pueyo.
Yup. Read it last night. Waiting for Part 2.
"we might just end up with rolling outbreaks."
And serial lockdowns... This will be life for the next couple years or until herd immunity happens, whichever comes first.
Posted by: Richard Steven Hack | Apr 21 2020 18:33 utc | 96
I have searched for debt to GDP by country and nowhere is disabuser's numbers seen. Not even close.
Posted by: arby | Apr 21 2020 18:36 utc | 97
William Gruff @54
It matters not to me who owns oil assets as long as I can live a free life.
But, you are missing the big picture. This is about the desire of a few people at the top of Big Finance to control everything and everyone else. These people wish to institute a completely totalitarian world society where they control everything, even at the micro level. That will result in the inability of everyone else to live a free life. That is what matters to me.
People who want everything most certainly want oil wells too. Taking control over all oil production will control the cheapest and most ubiquitous useable energy source, which will make taking control over everything else that much easier.
The biggest glitch in the plan is Russia and China, who are strong enough to push back successfully. This is why the corrupt Western media has been hyperventilating over Russia and China. All part of the propaganda effort to get the plebs to agree to sacrifice themselves in a war so that the people at the top of Big Finance can control everything and everyone in Russia and China too.
David F @59
The control over the last 107 years has been more diffuse than the few people at the top of Big Finance. Other oligarchs in industry also had a measure of control, and all of the oligarchs still feared a popular uprising. Big Finance is now in the process of concentrating their control even more by breaking the other oligarchs, and they no longer fear a popular uprising in the West because the ordinary people West has become complacent sheep. As I said above, the people at the top of Big Finance want control of everything and everyone, even ultimately to the point of controlling when and where you and I can take a bowel movement. That is the depth of desire for control these few people have.
Posted by: JasonT | Apr 21 2020 18:37 utc | 98
Meanwhile, an associated topic to the thread's--Fraud in the markets and deliberate lack of oversight and enforcement. An outline of all that is available here. The drop in price was 273%:
"On Monday, West Texas Intermediate Oil (WTI) May futures contract prices dropped from around US$23 down to a low of -US$40 owing to delivery constraints. To be clear, that’s a difference of US$63 or -273 percent."
Yes, there was a rebound but massive trouble awaits:
"Which brings us to the majestically titled United States Oil Fund ETF. USO has collapsed by 73 percent this year. Its general partner/sponsor is United States Commodity Funds LLC and it’s managed by Ray Allen. According to Bloomberg, USO owned 25 percent of the outstanding volume of May WTI oil futures contracts as of last week. If one party is allowed to own 25 percent of any futures contract, any buy order or sell order of that large a futures position will easily distort prices lower if selling, or higher if buying. It sets the table for price manipulation. The Commodity Futures Trading Commission and US Securities and Exchange Commission should conduct a thorough investigation into the large holdings of 25 percent by one counterparty and how ETFs selling 25 percent of any futures contract can massively distort prices – and they should do this right away!
"Was USO responsible for the liquidity problem that magnified the other possible factors above? Its actions were definitely a contributory factor in this debacle, if not the entire cause. Should the US Securities and Exchange Commission and other regulators investigate? You bet. Will they? Unlikely, because fraud is never genuinely investigated on Wall Street. In fact, it’s enabled." [My Emphasis]
It appears BigOil's in for the same treatment BigMortgage received although the attack the former's getting isn't as planned as was the demise of the latter. As I wrote several days ago, the financialized, fiat, fraudulent basis of the Outlaw US Empire's economy has ruptured and is now in freefall as zero thought's being given to the genuine economy that produces items of value.
b misses the real story, not yesterday but today.
https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_quotes_globex.html
Click the chart icon besides say August 2020 to see what real prices have been doing.
Real oil transactions are for prices in the future anywhere from 3 months to 20 months in advance.
The collapse of spot prices yesterday meant very little, and was purely a function of storage.
(The May contract ended trading today, anyone still holding buy contracts is committed to take deliver in early May).
The $7 fall today in August 2020 contracts is very very real (and similar for all forward dates).
There have been 2 big movements recently - down $20 in early March and down $7 (as I write today). Everything in between and all the reaction to OPEC+ meetings have been tiny sideways movements.
Oil is dead (IMO) as a product in 40 years, possibly less. Pump now or forget it.
Posted by: Michael Droy | Apr 21 2020 18:55 utc | 100
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some have spoken a lot about petro dollars and the US's need to make sure oil is traded in dollars. This is supposedly why the US invaded Iraq and destroyed Libya...they both had the idea to use other currencies.
now that oil can't be given away for free what will happen to all those dollars floating around the earth?
if someone who understands how this all works can offer some insight, I for one would be very grateful
Posted by: dan of steele | Apr 21 2020 8:25 utc | 1