Comment by Digory
5 years ago
The negative price has to do with the short delivery date, and the lack of storage at the (landlocked) delivery point. June 2020 WTI is still over $20/barrel.
If anyone had storage to bring online in the next few weeks, in Cushing, Oklahoma, they'd make a killing. At this point, they're going to need to ship it to a port, to get on a tanker.
Anyone got a spare oil tanker? :-) I only slightly kid, makes me wonder how quickly I could acquire a number of oil storage units.
edit: this tanker is off the gulf coast right now... https://horizonship.com/ship/274m-suezmax-crude-oil-carrier-...
Actually, I think the real players have already been doing this for a few weeks. If there's a buck to be made, you can bet someone is on it.
I was wondering whether they couldn't rapidly build some new storage (cost-effectively), but probably the answer is no.
I'm not sure there's much of anything that will get the NIMBYs riled up more than a million barrels of crude.
5 replies →
That's one of the reasons why spot prices are crashing: we've used up the supply of spare oil tankers to store the oil we're not using.
Just with a cursory "oil tanker for sale" search, they appear to be for sale in the $10-20MM range.
Just make sure they don't sell it to you already filled with "thank you" oil...
1 reply →
If the oil tanker can hold 2,000,000 barrels at -$35/ barrel you are being paid $70 million to store the oil for a few months...
Of course, the next question is who pays for transport to/from the tanker, labor, dock fees, employees in ship (unless you can simply "park" it for a fee)
3 replies →
Did you read the part where I wrote, "there's no place to put the stuff?"
I also specifically said "front month contract".
June oil is barely over $20 today and will probably drop under that mark by week's end.
The point of futures is that I could sell my oil _today_ to be delivered in June for $20. Any change in June oil prices from that point onwards doesn’t matter once I’ve sold the contract.
If the price collapses for June you buy a june pick up contract, trade it for your June delivery contract, and sell a July delivery contract. So long as you have the oil and can deliver you can make money on it until prices return to where it doesn't work out at which time you deliver your oil.