Oil price discussion and analysis

[rederob]

Looks like finviz has jumped to the next month futures contract without any adjustment yet.

View attachment 102368

Thanks to @InsvestoBoy for the alert.

Yep, I am tracking WTI by the minute and spot is $19.45 @ 3:47pm.

 

[rederob]

Support just capitulated:

 

[OmegaTrader]

Oil storage costs have many variables - onshore, at terminal, tanker, cavern - but a safe ballpark figure is 50cents/bbl/month, so we have a fundamental price driver as the oversupply situation drags out.

.50 during normal times ??
Now spread is blown out.Is it expectation or is it storage?
do you think oil will be at 26-30 in next 1-2 months? well that is only break-even at the moment.







This is one not as accurate based on last weeks data




front month spread only.







IV options index


My two cents only this not advice only hypothesise

play 1 :Shorting call options strategies to take advantage of high IV and spread at the same time
a bit risky and requires capital in case iv spikes again, hard and complex

Play 2: Buying put options on further along the curve to take advantage of spread but still losing on high iv.

I can take a 30 put for 1-2 months and break even at 24-25 mark. Ie oil has to go past 24-25 for me to lose money because of the large spread.

simpler

 

[OmegaTrader]

chart I found online for front month spread. -7 mark atm

 

[Smurf1976]

Oil's at $12.50 a barrel now (WTI) and some grades are substantially lower than that for physical delivery.

This is about to get "interesting" in that the AUD price of oil on an energy content basis is now significantly cheaper than the Australian domestic market wholesale gas price. That hasn't happened in the US yet, since their gas prices are lower, but the gap's narrowing rapidly.

Now regarding that gas issue, a few points come to mind that may not be obvious.

1. LNG prices linked to oil prices and the impact on the LNG exporters is one.

2. Pipeline companies is another. If the LNG producers cut physical production or gas-fired power stations shift to oil-based fuels then that's potentially an issue. Pipeline costs are largely fixed but in at least some cases payment is based on throughput volume where a third party owns the pipeline.

The impact of those are company specific whereas my comment is intended as a general "heads up" that if you're investing in LNG or pipeline companies they are potentially impacted by the oil price crash depending on the detail of their contractual arrangements. Tread carefully......

 

[Smurf1976]

I should have added to my previous post that given the speed of the price plunge, there's an assumption on my part that oil for physical delivery follows the spot price at least roughly and that the situation isn't limited to the US.

I acknowledge there's some risk in that given the sheer speed of it all unfolding at the moment. Oil has after all dropped 10% in price during the 20 minutes since my previous post, now at USD 11.25 per barrel (WTI).

So I'm assuming that we'll see at least a broadly similar move globally.

For the US at least, oil is now just above the inflation adjusted price last seen in 1931 based on historic data I can find online. Below that, there's doesn't seem to be anything lower going back to 1861 which is the furthest back records seem to go (unsurprising given the first well was drilled only 2 years prior to that). So we're on the edge of the lowest price ever, it would only need to fall a few more cents to get there.

 

[$20shoes]

When you're on the right Elliott Wave, it has some very accurate forward looking targets.

This posted from Lara @ Elliottwavegold in June 2019.



Her target has since been modified to 9.77

 

[Smurf1976]

Anyone willing to try and pick the bottom here?

At any other time in the history of the intentionally produced (by drilling) oil industry, oil at current prices would have been a bargain buy.

That doesn't mean it couldn't go lower however, we're living in an era when financial matters overall are different to those prevailing historically.

Anyone got any thoughts?

Personally I have no firm view. Fundamentals of producing oil say it's massively undervalued at this price but given the money printing and major political considerations of it all it would be brave to assume that something won't happen just because it's unprofitable.

 

[peter2]

The perfect storm for oil, starting with the Saudi/Russia tiff and escalating with the economic shutdown by almost every country. OPEC did not see this coming. It's been fascinating watching this unfold. Oil storage is filling up fast and nobody is prepared to stop pumping. The economic reboot is going to take many months and the progress will be slow. Slower, if there's further waves of infections.

What happens next? I don't think anyone knows. The oil industry has never seen this situation before. Miners can shut down and farmers can plow their crops into the ground when there's too much supply or no demand. You can't get rid of oil so easily.

When that $20 support level was breached, what a cascade, down through $15 and ending near $10. This 50% fall should have sent all leveraged oil ETFs to zero. If their goal is to track the price of oil x2 then 2 x 50% is 100%. There's going to be some rocket scientists scratching their heads tonight. They'll be working overtime to recalculate their ETF prices. Luckily they can change the rules to stay in business.

I'm like most here in thinking that the price of oil will go up at some stage, but it's months away.

Can the POO go to $5/bbl? Suitable acronym as the industry is neck deep in the poo.

 

[Smurf1976]

Can the POO go to $5/bbl?

Barely an hour after you made that comment and it has actually happened.

WTI has plunged to $4.97 per barrel.

That doesn't seem to be an error as I've checked more than one source and all saying the same.

Add that to the list of things which I never thought I'd see but which have now actually happened. Amazing.

At this level I think the oil price itself will trigger a broader crisis if it's sustained for long. Pretty much nobody in the industry, large companies or small, is profitable at that price.

 

[Smurf1976]

Well that $4.97 didn't last long.

Down to $2.06 now.

If this keeps up then I'll be able to go to the servo down the road, fill the tank and they'll hand me money for taking the stuff off them.

Posted the following since the $2.06 could be anything from negative to a million $ a barrel by the time the sun comes up.

 

[peter2]

The current May futures contract expires tomorrow and it seems nobody wants to take delivery so all the holders have to sell before then. I don't know who they're selling to as there has to be a buyer.
Edit: perhaps China might buy them at cheap price if they've got storage available.

Another example of panic in the oil market.
btw: The cfd spot prices remain at $12

 

[peter2]

Now <$1 bbl.


The next months contract has dropped >10% this morning (US time).

Equity indices and oil cfds are starting to react as I type. This is fascinating stuff.

 

[ducati916]

Well that $4.97 didn't last long.

Down to $2.06 now.

If this keeps up then I'll be able to go to the servo down the road, fill the tank and they'll hand me money for taking the stuff off them.

Posted the following since the $2.06 could be anything from negative to a million $ a barrel by the time the sun comes up.

View attachment 102499

Even the Arabs will feel this pain.

The big exporters that rely on oil revenues for their budgets (Saudi's & Russia) who pretty much triggered the war in the first place, must be regretting that decision now.

However, the cure for low prices, are low(er) prices.

Military action ahead?

jog on
duc

 

[ducati916]

Well they went negative:

NEW YORK (AP) — Oil prices plunged below zero on Monday as demand for energy collapses amid the coronavirus pandemic and traders don’t want to get stuck owning crude with nowhere to store it.

Stocks were also slipping on Wall Street in afternoon trading, with the S&P 500 down 0.9%, but the market’s most dramatic action was by far in oil, where benchmark U.S. crude for May delivery plummeted to negative $3.70 per barrel, as of 2:15 pm. Eastern time.

https://www.barchart.com/story/news/4726154/oil-price-goes-negative-as-demand-collapses-stocks-dip

But the June contract:

Benchmark U.S. crude oil for June delivery, which shows a more ”normal” price, fell 14.8% to $21.32 per barrel, as factories and automobiles around the world remain idled. Big oil producers have announced cutbacks in production in hopes of better balancing supplies with demand, but many analysts say it’s not enough.

jog on
duc

 

[Smurf1976]

Price is now at -$6.90 per barrel down more than 100% for the day.

Yes, negative.

Edit - beat me to it.

 

[peter2]

Still going down, settling at -$37.63/ bbl down 300% in a day.

We're watching price movement that'll be remembered forever (unless it happens again next month).

 

[PZ99]

Burn it all and start again


"Be careful what you wish for"

 

[qldfrog]

This is so mind-blowing, and a sign in my view how screwed and irrational markets can become in crisis time

 

[ducati916]

For posterity:



jog on
duc