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Who is selling for $25 a barrel and why would they?

By komputodo follow komputodo   2020 Apr 2, 8:39am 1,304 views   31 comments   watch   nsfw   quote   share      


1   Tenpoundbass   ignore (16)   2020 Apr 2, 8:50am     ↓ dislike (0)   quote   flag        

I've been called a liar here on several occasions when I said the Oil and Gas price pull back was due to no storage space available for the refined Gasoline, due to the decline in people driving due to the price of high gas.
The reality is nobody can sell Oil for $25 a barrel even if they wanted to. There's no where to put it, and nothing to consume it with.

There's just no demand. Work at home employees just don't use fossil fuels.
2   Heraclitusstudent   ignore (2)   2020 Apr 2, 8:58am     ↓ dislike (0)   quote   flag        

Russia and Arabia need some income. The more prices are down, the more they need to sell to get their money.
+ they want to destroy the US shale industry by dumping cheap.
+ they know they have to monetize their oil in the next 10-20 yrs before massive moves to renewables.
3   Bd6r   ignore (1)   2020 Apr 2, 9:05am     ↓ dislike (0)   quote   flag        

It is Saudis being offended by Russians and trying to drive them into ground economically + a side benefit of hurting shale. Russians did not sign up for oil pumping reductions, so Saudis are showing them who is the boss. Oil production in Russia loses money at about $20/barrel if i recall correctly, for Saudis this number is below $10/barrel.
4   komputodo   ignore (3)   2020 Apr 2, 9:38am     ↓ dislike (0)   quote   flag        

If I was a large oil producing country, I think I would have my future oil already sold far into the future so i could plan my budgets....and that price would be about $50-$60....just like farmers do......If I needed money, would it make sense to spend $30 a barrel to pump it and sell it for $20?
5   komputodo   ignore (3)   2020 Apr 2, 9:43am     ↓ dislike (0)   quote   flag        

Tenpoundbass says
There's just no demand. Work at home employees just don't use fossil fuels.

when oil is the discussion, why does everyone just think of cars? plastics, textiles, farm chemicals, paint, electricity generation, heating, etc
6   komputodo   ignore (3)   2020 Apr 2, 9:45am     ↓ dislike (0)   quote   flag        

Heraclitusstudent says
they know they have to monetize their oil in the next 10-20 yrs before massive moves to renewables.

So this is a 20 yr plan and they just happened to initiate it last week? lol
7   Heraclitusstudent   ignore (2)   2020 Apr 2, 9:50am     ↓ dislike (0)   quote   flag        

komputodo says
So this is a 20 yr plan and they just happened to initiate it last week? lol

No but it's not like they can keep their oil to sell later for a better price.
8   komputodo   ignore (3)   2020 Apr 2, 9:51am     ↓ dislike (0)   quote   flag        

I think that there is a big discrepancy between paper oil and real physical oil prices...and please dont say the free market determines the price...I think we have all learned over the last 15 yrs that there is no such thing.....its all been manipulation, secret bailouts, fed propping up prices, etc.
9   komputodo   ignore (3)   2020 Apr 2, 9:52am     ↓ dislike (0)   quote   flag        

Heraclitusstudent says
komputodo says
So this is a 20 yr plan and they just happened to initiate it last week? lol

No but it's not like they can keep their oil to sell later for a better price.

Why can't they leave it in the ground....why isn't it already sold under contract for a set price?
10   B.A.C.A.H.   ignore (1)   2020 Apr 2, 10:00am     ↓ dislike (0)   quote   flag        

Just not enough demand increase from crematoriums.
11   Tenpoundbass   ignore (16)   2020 Apr 2, 11:33am     ↓ dislike (0)   quote   flag        

komputodo says
when oil is the discussion, why does everyone just think of cars? plastics, textiles, farm chemicals, paint, electricity generation, heating, etc


Because when you run out of room to store the Gasoline, a byproduct of refining Oil. Gasoline isn't something you convert a drum Oil into. It's just one of the substances made from the refining process. We have Gasoline Combustion engines all due to this inconvenience. J. D Rockefeller went to Henry Ford and told him, that he has a problem with a volatile substance, that doesn't have much industrial use. He didn't want to just burn it and waste it, and dumping it was too toxic.
If not for that problem Rockefeller was having, cars would be Steam, Wood Burning, and Electric today.

When the Gasoline Storage is topped off, all refinement stops.

So you see it is connected.

The Value of Crude Oil is not in the commodity itself, it's in the value it creates by being the life giving blood to modern humanity.
It needs to be under $50 a barrel, and transportation needs to be cheap, so that all of the other things Oil contributes to, can be realized.

When Gas it expensive to consume, people stop driving, and the production of Oil stops.
12   komputodo   ignore (3)   2020 Apr 2, 2:35pm     ↓ dislike (0)   quote   flag        

Tenpoundbass says
I've been called a liar here on several occasions when I said the Oil and Gas price pull back was due to no storage space available for the refined Gasoline, due to the decline in people driving due to the price of high gas.
The reality is nobody can sell Oil for $25 a barrel even if they wanted to. There's no where to put it, and nothing to consume it with.

There's just no demand. Work at home employees just don't use fossil fuels.

If china made a deal with the Saudis for example or any major producer for that matter, to buy 2 million barrels a day for $50 a barrel and now china's consumption is way down and they have no place to store it..........what happens next.....does china default on their contracts? Does china try to resell its surplus? Does china keep paying the saudis and beg them to deliver the oil at a later date?
13   Shaman   ignore (2)   2020 Apr 2, 2:42pm     ↓ dislike (0)   quote   flag        

Greta Thunberg’s wet dream has come true.
14   Booger   ignore (7)   2020 Apr 2, 3:16pm     ↓ dislike (0)   quote   flag        

Tenpoundbass says
Work at home employees just don't use fossil fuels.


15   Malcolm   ignore (2)   2020 Apr 3, 9:51am     ↓ dislike (0)   quote   flag        

komputodo says
Why can't they leave it in the ground....why isn't it already sold under contract for a set price?


No, that doesn't work for several reasons.
1. As a producer, why in the world would you lock yourself into a commitment to produce something at a loss in the future?
2. Why would the businesses that use oil lock themselves into a price that is still likely to fall? And for the bulls out there, the fact that people aren't locking in low prices for the long term indicates where the major players' views of future growth and demand lie.

Oil prices are largely determined by those types of contracts. It is funny, when prices are high and threatening to go higher is when airlines and other large players try to lock in prices. Oil is one of those funny things that sometimes seems to defy economic theory, because of its inelastic demand nature, its high cost to pump out of the ground with all of the infrastructure and financial instruments needed. And what I mean by that is the answer to the post, which is when people are in the oil business, you can't just stop producing it. All of that overhead still continues, so the dilemma is produce for less money, or don't produce and let your competitor fill the market at a higher profit margin.

That's why consortiums and cartels are the only ways to keep profits stable in commodities.
16   HeadSet   ignore (3)   2020 Apr 3, 3:32pm     ↓ dislike (0)   quote   flag        

Oil is back up to $29.
17   Cash   ignore (2)   2020 Apr 4, 10:50am     ↓ dislike (0)   quote   flag        

Just a thought or idea I would look to consider shorting oil $31.50+/- if/when SL 34.50+/- TBD (moving tgt) for when the USD train leaves the station and oil flops to $15+/- and USD shoots for the stars ;) I have an idea that is exactly what is going to happen everyone tight fisting the USD
18   Onvacation   ignore (7)   2020 Apr 4, 10:56am     ↓ dislike (0)   quote   flag        

Cash says
USD shoots for the stars ;)

Don't you mean the moon?
19   Cash   ignore (2)   2020 Apr 4, 11:01am     ↓ dislike (0)   quote   flag        

Onvacation says
Don't you mean the moon?


That works ;) Fine with me
20   Automan Empire   ignore (1)   2020 Apr 4, 11:27am     ↓ dislike (0)   quote   flag        

That Greta drawing is terrible, because it depicts a figure she'll never achieve in real life.
21   NDrLoR   ignore (1)   2020 Apr 4, 11:42am     ↓ dislike (0)   quote   flag        

Malcolm says
It is funny, when prices are high and threatening to go higher is when airlines and other large players try to lock in prices.
And when a Windfall Profits Tax was levied on the oil companies in the late 70's because of the "obscene" profits they were making at people's expense. Never mind that over the long run the oil industry is a huge crap shoot as to whether or not you're going to drill a producer even when all the indications seem to be favorable geologically. That tax lasted until August, 1988, well into the collapse of oil prices, so obviously there were no windfall profits to tax anymore and was repealed by Reagan. It would have only seemed fair if some of those taxes could have been recycled back to struggling firms in the late 80's, but it was perfectly acceptable for oil workers to loose their jobs wholesale.
22   Malcolm   ignore (2)   2020 Apr 4, 7:24pm     ↓ dislike (0)   quote   flag        

NDrLoR says
And when a Windfall Profits Tax was levied on the oil companies in the late 70's because of the "obscene" profits they were making at people's expense.


I did not know about that. Very interesting. I'll look into it further.
23   komputodo   ignore (3)   2020 May 28, 10:19am     ↓ dislike (0)   quote   flag        

How did the world's oil glut go from having to pay someone $100 to take a barrel of oil 6 weeks ago to now being priced at $32 during an economic shutdown and very low consumption it wan't just a paper manipulation? TPB?
24   Tenpoundbass   ignore (16)   2020 May 28, 10:40am     ↓ dislike (0)   quote   flag        

komputodo says
How did the world's oil glut go from having to pay someone $100 to take a barrel of oil 6 weeks ago to now being priced at $32 during an economic shutdown and very low consumption it wan't just a paper manipulation? TPB?


There's ten times the amount of cars on the road today than there was at the time this thread was started.
Also OIl production has been stopped for over a month now.
Also $32 is still mighty low. Don't forget the idea price the peak Oil cheerleaders would like to see it as is well over $75 a barrel and not a penny less.

There's a perfectly good reason why even Blue states allowed people to drive all over hell if they wanted to. But they couldn't stop at the beach, parks, and other usual destinations to enjoy them. The Liberals were welcoming any and all wasted fruitless trips, to consume as much gas as you could. While not letting them get out of the car.
Seems to me if people are locked down and not supposed to go anywhere other than the store. Then cops would have been pulling over people for being out after curfew.
Broward had a 10, then 11 and even 12 oclock curfew. My band mates came over and we played music until 1 or 2 oclock in the morning. They said they passed lots of cops and other cars out on the road, nobody got pulled over.
25   ad   ignore (0)   2020 May 28, 10:49am     ↓ dislike (0)   quote   flag        

Tenpoundbass says
There's just no demand. Work at home employees just don't use fossil fuels.


What percentage of the population works at home now and no longer drive into work ? How many miles did they commute by car each day ?

I would say if 1/2 the white collar working population will work from home now that it will reduce gas demand by at least 25% from its peak consumption level.

From what I've read, US oil drillers need at least $45 a barrel for West Texas Intermediate in order to break even.
26   Tenpoundbass   ignore (16)   2020 May 28, 11:48am     ↓ dislike (0)   quote   flag        

ad says
I would say if 1/2 the white collar working population will work from home now that it will reduce gas demand by at least 25% from its peak consumption level.


Ah it wont matter much as long as gas is cheap, people are going to make more frivolous trips they would put off otherwise.
More frivolous trips, more domestic spending on other goods.
When people are taxed by over paying for gas, they drive less, and spend less, less GDP growth.
27   WookieMan   ignore (6)   2020 May 28, 3:42pm     ↓ dislike (0)   quote   flag        

Tenpoundbass says
When people are taxed by over paying for gas, they drive less, and spend less, less GDP growth.

Besides shipping and teenagers, who really cares about the price of gas though? Is it really that big a part of someone's monthly budget to make ends meet? If it is, maybe stop the Starbucks in the morning, eating out for lunch, clothing, etc. Even with a shitty milage vehicle, gas during the highest prices shouldn't be much more than $300/mo for one vehicle. Most people in the last year are probably $100/mo. Are people really that broke where $100-$300 is a big deal?
28   Tenpoundbass   ignore (16)   2020 May 29, 7:22am     ↓ dislike (0)   quote   flag        

WookieMan says
Are people really that broke where $100-$300 is a big deal?


That's really disconnected. I had a buddy that was working a call center job for Mercedes, he had to drive from Ft. Lauderdale all the way up to West Palm Beach a 45 minute ride each way.

$300 - Gas
$400 - Car Payment
$200 - Insurance Payment.

People are out $900 a month just for transportation. Car and Insurance payments probably got so out of hand, because sitting at the board meetings discussing how boost profits.
Probably thought the same as you. "Well if they can't afford $1200 a month just to drive to the store, then Fuck 'em! I mean do we really want these people driving around being a menace to society? Amerite!?!?! Amerite..."(Left hanging with Hi5's all around the table.)

He finally had to quit, because more than a 1/2 of what he made went to his car, and the train was $20 a day, $10 each way.
29   WookieMan   ignore (6)   2020 May 29, 7:43am     ↓ dislike (0)   quote   flag        

Tenpoundbass says
$400 - Car Payment
$200 - Insurance Payment.

$200/mo for an adult over the age of 25 is kind of high for insurance. My wife and I are $1,600/yr with full collision coverage and I think $500 deductible. Might be higher on the deductible, but we save a lot monthly and haven't had accidents, so deductible is a moot point and we have cash to cover it. That's like $66/mo/vehicle. Your buddy is getting fleeced there. Bigly.

$400 for a car payment is also nuts. Get a different car. Learn a new skill and fix your own car. We haven't had a car payment in two years and no major auto repairs with 2 cars. Unless you're doing sales and customers are going to see your car, getting an expensive car is pure stupidity. It's A to B and that's it. A call center job employee doesn't need or should want a nice car. It gets you nothing in return.

$300/mo for gas is also high, unless again, you bought a stupid car for the circumstances like an F-250, Suburban or other gas guzzler. Gas for the drive you mention would cost me $8/day in my car. Get a Prius or similar and it's even lower. Should be closer to $160-$200/mo even with high gas prices of say $3.50/gal.

I'm going to be blunt, your buddy is likely an idiot for dropping $900/mo on a vehicle. He's doing it wrong and is likely a status thing for him. Basically if you're in over $500/mo/vehicle, you're likely doing it wrong or you have the $$$$ to blow on it. Which is fine if people want to blow cash on a car, but it's likely the expense causing most Americans to be broke and most don't understand that.
30   ad   ignore (0)   2020 May 29, 11:26am     ↓ dislike (0)   quote   flag        

Tenpoundbass says
More frivolous trips, more domestic spending on other goods.


I agree as far as that since it is a matter of disposable income and cost to travel (ie.., gas prices).

Lower gas prices can encourage more car traveling.
31   Tenpoundbass   ignore (16)   2020 May 29, 1:17pm     ↓ dislike (0)   quote   flag        

WookieMan says
My wife and I are $1,600/yr with full collision coverage and I think $500 deductible.


It goes by credit score as well, my friends who don't have a good Credit Score or make good money, all have higher insurance rates than I do.
They pay about 600 every 6 months. $200 a month. They have to pay it in three monthly installments. While they don't pay $200 every month. the months, they have to they may as well.

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