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OIL, Discussion
nipper
post Posted: Apr 28 2020, 12:57 PM
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In Reply To: nipper's post @ Apr 27 2020, 11:27 AM

triage (and others)
hat-tip to Investoboy
Contagion in Oil futures. Paper buyers and Physical sellers.

when storage tanks are full, what happens? (= the May anomaly of negative prices likely to occur again)
Retail is piling in to ETPs like USO; producers have buyers BUT futures have an end date. Normally, settlement of paper and rolling forward is achievable, but the imbalance is pushing out into following months

https://www.macrovoices.com/podcasts-collec...with-jim-bianco
ETPs not necessarily capped at zero. .... a loss that won't be covered, so who carries the loss. Broker, manager, exchange? And the squeeze. 130,000 July contract. 100,000 Aug contracts. (June should be OK as Cushing may absorb)
USO owns 1/4 of market, broker can't liquidate if there are no buyers of physical oil. (no wonder trump wants to kick start economy)

But how do you buy a failed market??? Are ETPs a flawed structure? will this bring everything down like mortgages did in 2008?
Financial incentive to continue to produce oil that has no place to be stored. Producers have binary choice, to keep pumping or shut down (and trigger widespread defaults which are already junk status)
When?
there is a sequence of events. By early June (July contracts) out of storage; .... rinse, repeat




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Apr 27 2020, 02:32 PM
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.
QUOTE
the OPEC deal and other cuts deal isn’t enough, not with a 29 million barrels a day drop in demand this month, according to the International Energy Agency which reckons total demand this year will be around 89 million barrels, down from 101 million a day in 2019.

The 9.7 million barrels a day cut by OPEC only lasts till the end of June, then it drops to 8 million a day.
QUOTE
Reuters reports that there are suggestions from Russia that it might start burning oil in the open because it can’t store its surplus. That will be great for global warming. More gas is also now being flared as well around the world.

https://www.sharecafe.com.au/2020/04/27/can...the-oil-market/



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Apr 27 2020, 11:27 AM
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triage said elsewhere, about the current price shakeout
QUOTE
I have read one argument that even if many / most US oil shalers go broke then someone else will buy the assets for a really low price and the US will become able to be competitive even with oil staying supercheap.

With the shale oil drilling, the swing producers, one challenge is if drilling is stopped, it is quite likely impossible to return to previous output. Shale has short timeframes and needs fraccing, horizontal drilling, etc. If the pumps are halted, formation may close off, collapse.

https://oilprice.com/Latest-Energy-News/Wor...-At-31-Oil.html




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: triage  
 
nipper
post Posted: Apr 22 2020, 01:57 AM
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In Reply To: early birds's post @ Apr 21 2020, 10:11 PM

QUOTE
i smashed piggy bank to bought heaps more.

As long as it's not the kids' piggy banks smile.gif

Sophisticated thinking ....make a plan and stick to it.



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  triage  
 
jacsar
post Posted: Apr 21 2020, 10:31 PM
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In Reply To: early birds's post @ Apr 21 2020, 10:11 PM





EB, this is a political/economic war between the ruskies and the saudis backed by china to destabilise the USA and they are doing a great job...similarities go back 100 yrs or so to the 20's/30's


Said 'Thanks' for this post: early birds  nipper  
 
early birds
post Posted: Apr 21 2020, 10:11 PM
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In Reply To: nipper's post @ Apr 21 2020, 08:15 PM

never shoot the messenger like you.

give you my thoughts
we all know months ago when a lot of countries close their boards, all get idea of lock down can do the job. the result of that is reduce demand of oil in big way.
my bet on the long side is based on produce price. thought if oil keeps low price longer than a month then there will be a lot of drillers bites the dust, so that will get demand and supplies to a balance level so the oil price will correcting itself to the up side. but -40/b on the eve of expiry day is really extreme, although i know long time ago that if you trade oil at chicage mercantile exchange you might end up with physical stuff that delivered to your back yard and you gonna pay the delivery fees. that is the reason that see traders pay someone to take the hot potatoes out of their hands as US run out of contango.
to me it's just technical issues. and it will force US shale to stop drilling in short term. that will get supply/demand back to reasonable ---kinda normal situation.

i smashed piggy bank to bought heaps more at CMC market at it cash traded under usd$8/00ish, now it back above usd$9ish. think it will pay me within two months time or even really short term.
i made sure that i have enough margins to hold it for two months no matter how low the price will go. just to make sure that i'm out of this trade with profit.

thanks for the info nipper!! i really do!!




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nipper
post Posted: Apr 21 2020, 08:15 PM
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don't want to rub your noese in it, eb, but the current oil collapse is remarkable

In the US (and likely replicated worldwide)
Diesel demand down 20%
Gasoline demand down 50%
Aviation fuel/kero down 80%

https://www.cmegroup.com/trading/energy/cru....html?optid=425




--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
early birds
post Posted: Apr 21 2020, 01:05 PM
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In Reply To: nipper's post @ Apr 21 2020, 11:28 AM

https://www.cnbc.com/2020/04/20/june-oil-fu...tive-price.html

The May contract traded at $1.17 per barrel, after earlier trading at negative $14.04 per barrel, meaning traders would effectively pay to have the oil taken off their hands. As the contract approaches expiration, trading volume is typically thin, so longer-term contracts can be more indicative of how Wall Street views the price of oil. The most active contract, for June delivery, traded 7.29% higher at $21.92 per barrel. The July and August contracts were also firmly above the $20 level.


“Even as OPEC++ oil production cuts are set to kick in May 1, and supply and inventories should tighten significantly in 2H′20, the next 4-6 weeks are seeing severe storage distress, likely to drive wild price realizations and unusual disconnects, including supercontango and negative prices,” Citi analysts led by Eric Lee wrote in a note to clients Monday.

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indeed , "Volatility. and a real shake out."!!



 
nipper
post Posted: Apr 21 2020, 11:28 AM
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In Reply To: early birds's post @ Apr 21 2020, 11:08 AM

Rationally, no one's going to make money selling oil at sub $20 a bbl, at least not for long.

But when there's a 30% drop in demand (imagine the price for Avgas ?!) with lockdowns and economic slump, then two of the three biggest producers, Saudi and Russia, go head to head while the third player USA has a lot of high cost producers, then what have we got.

Volatility. and a real shake out.



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
early birds
post Posted: Apr 21 2020, 11:08 AM
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ok, my apology, forgive me guys. i'm might be too sensitive at this extraordinary time
i'm not as cool as i use to be. my bad!!


back to the oil price, something has to give, i reckon this time there will be more US driller go bust and they might stop over 90% rigs for shale just to get through this extreme price dive.
to get oil price back to usd$20 within two months is still a big possibility to me. but as i hold heaps of it. it's clear that i'm really biased .
so DYOR please. before you make a long trade!!



 
 


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