[late]

"A global oil glut sent prices so low Monday that sellers holding U.S. crude contracts paid buyers as much as $30 per barrel to take it off their hands. The collapse went international Tuesday, with futures prices for the global benchmark, Brent crude, dropping to a fraction of the $50 or so needed for a producer to make money."

"Analysts said nearly 40 million Saudi Arabian barrels are on their way to U.S. shores, adding to the tens of millions already in storage here. The deliveries are “probably going to be the final dagger in the heart of the U.S. shale oil industry”

https://www.washingtonpost.com/business/2020/04/21/oil-crash-stocks-today-coronavirus/

[B0ycey]

Why have you started this thread @late? What were you expecting in terms of demand for oil when global production has stopped?

The reason for negative price was cost of storage. If you can store the barrels, it is a great time to buy oil. The price is soon to shoot up I can assure you.

[late]

Why did you start this thread @late? What were you expecting in terms of demand for oil when global production has stopped?

The reason for negative price was cost of storage. If you can store the barrels, it is a great time to buy oil. The price is soon to shoot up I can assure you.

I have lived through a number of oil shocks, 2 just in the 1970s.

Oil is a commodity, and commodity prices are notoriously unstable. But... the world is addicted to oil, the demand is most always up. If you had told me earlier that crude would go negative, I'd have thought you were nuts.

Yet here we are.

Aside from the surprise and novelty, this is a moment of transition. But who the hell knows how all this is going to play out. I'm always looking for clues, even hints, about what's coming.

[B0ycey]

I have lived through a number of oil shocks, 2 just in the 1970s.

Oil is a commodity, and commodity prices are notoriously unstable. But... the world is addicted to oil, the demand is most always up. If you had told me earlier that crude would go negative, I'd have thought you were nuts.

Yet here we are.

Aside from the surprise and novelty, this is a moment of transition. But who the hell knows how all this is going to play out. I'm always looking for clues, even hints, about what's coming.

And if you told a Victorian coal pit miner that we would have closed most of our pits in a hundred years time he would have thought you nuts. But it doesn't change anything. Commodities price is due to supply and demand. And oil traders got caught out buying oil they couldn't store hence the negative price. And that is down to low demand as global production has stopped but that isn't permanent nor anything energy suppliers should worry about (although the same is not true for their employees). It is going to be short lived especially as nations are now beginning to loosen their lockdowns.

As for our dependence in oil, this virus doesn't change anything - although I will say that climate change is changing our behavior. What you can expect to see in the future is when global production restarts, the price of oil will rise. And it is why if you can store oil, you should be buying it now.

[late]

But it doesn't change anything.

It might, some analysts have been wondering when oil supply would permanently exceed demand.

That may have just started.

[B0ycey]

It might, some analysts have been wondering when oil supply would permanently exceed demand.

That may have just started.

Do you seriously believe that? Especially in the near future? Or do you expect planes to be grounded, highways to be empty and factories to be closed as the new norm?

It doesn't take Einstein to see that the current low oil demand is down to production ceasing.

[quetzalcoatl]

I have lived through a number of oil shocks, 2 just in the 1970s.

Oil is a commodity, and commodity prices are notoriously unstable. But... the world is addicted to oil, the demand is most always up. If you had told me earlier that crude would go negative, I'd have thought you were nuts.

Yet here we are.

Aside from the surprise and novelty, this is a moment of transition. But who the hell knows how all this is going to play out. I'm always looking for clues, even hints, about what's coming.

The level of uncertainty and unpredictability is high, so take the following as danger signs, not predictions:

Don't expect a strong rebound in consumer demand in the US economy over the rest of the year, due to depression levels of unemployment (which may or may not be temporary). Re-starting the economy from a dead stop is a pipe dream.

Therefore:

Vehicle sales, down. Vehicle miles driven, down. Oil demand, down. Air passenger traffic, down.

Airline industry will shut down.
Car manufacturing industry will shut down.

Oil price stays low.

Bottom drops out of home sales. Prices plummet.
Construction industry will be almost nonexistent.

Problems in distribution will remain. Spot food shortages. High food prices.

Cash will be king. Treasuries remain strong. Gold holds its own.

Biggest wild card will be the possibility of a deflationary spiral. Hyperinflation is very unlikely unless their is widespread civil unrest and unraveling of US society - but it can no longer be completely discounted.

Do you seriously believe that? Especially in the near future? Or do you expect planes to be grounded, highways to be empty and factories to be closed as the new norm?

It doesn't take Einstein to see that the current low oil demand is down to production ceasing.

Marginal changes in the supply/demand relationship could be equally devastating. Industry doesn't have to completely shut down. All it would take is a long-running depression. I'm not predicting this, but a re-start of the economy will be far more difficult than people realize.

[B0ycey]

Marginal changes in the supply/demand relationship could be equally devastating. Industry doesn't have to completely shut down. All it would take is a long-running depression. I'm not predicting this, but a re-start of the economy will be far more difficult than people realize.

I completely agree that consumption will depend on the state of the global economy output. But that doesn't really affect energy companies as they will reduce production to counter the price deficiency. Which will ultimately affect energy jobs, their absolute profits I guess but not the price per barrel or company survival of those who produce. And more importantly than that it doesn't stop our dependency in oil either.

[late]

Marginal changes in the supply/demand relationship could be equally devastating.

This.

We're not far from EV cars becoming competitive with gas powered cars. Alternative energy sources will keep growing. By the time demand recovers, I expect the Age of Oil will be over.

[Pants-of-dog]

Do you seriously believe that? Especially in the near future? Or do you expect planes to be grounded, highways to be empty and factories to be closed as the new norm?

It doesn't take Einstein to see that the current low oil demand is down to production ceasing.

While demand will increase again after the lockdown, global demand for oil has been steadily eroding for the last few years. This, coupled with climate change, has reduced the price of oil substantially.

Then there was the feud between Russia and SA that also dropped the price significantly. This is now over, but with an ever dwindling market for oil, we can assume that global producers will do stuff like this in the future if they think it will help them sell their oil.

For landlocked oil producers, like here in Alberta, pipelines are also essential to make ends meet, since producers cannot get their oil to foreign markets without them. But with so many protests against pipelines, people are not investing in them. And so the demand for landlocked oil has a demand ceiling.

And all of this scares investors. My beloved and I just lost our retirement funds because the company taking care of it invested in a pipeline that never happened. Billions of dollars gone, and no decent company will want to bet money on something that may never happen.