US oil price goes below $1 a barrel as storage capacity runs out

[Mr. Sparkle]

Source: Irish Times

Benchmark US oil prices headed to negative territory after crashing to one cent a barrel as the collapse in demand caused by the coronavirus pandemic leaves the world awash with oil and not enough storage capacity - meaning producers may soon be paying for buyers to take it off their hands.

West Texas Intermediate, the US marker, lost 99 per cent on Monday, with the price of oil for delivery next month sinking to record lows on warnings that traders were struggling to access storage capacity at the refinery hub of Cushing, Oklahoma, which is expected to be full within weeks. CME Group, the operator of the exchange where WTI trades, took the extraordinary measure of saying prices could even turn negative for the current contract, which expires tomorrow. That means producers would be paying buyers to take their oil in order to delay the shutdown of their fields.

The price crash is the latest indication of the depth of the crisis hitting the oil sector. Lockdowns imposed in many of the world’s major economies have sent crude demand tumbling by as much as a third, leaving the industry facing what Jefferies analyst Jason Gammel called “the bleakest oil macro outlook” he had ever seen. The collapse will be a blow to US president Donald Trump, who has gone to extreme lengths to protect the US oil industry, including backing moves by Opec and Russia to cut production.

Read more: https://www.irishtimes.com/business/energy-and-resources/us-oil-price-goes-below-1-a-barrel-as-storage-capacity-runs-out-1.4233131

[bucolic_frolic]

1. COVID-19 or not, overcapacity from all the QE1-2-3-4+

Easy money creates investment. When you give most of it to the upper tax brackets, it doesn't create enough demand to buy all the output.

[getagrip_already]

2. Don't we have like a "National Oil Reserve" with billions of barrels of capacity?

And isn't it nearly empty after trump decided to sell off the reserves?

Why isn't the government just taking free oil? I suppose they will start dumping it before that happens though.

[killaphill]

4. Replenishing the Strategic Oil reserve was eliminated from the stimulus package

https://www.cnbc.com/2020/03/26/us-suspends-plans-to-buy-oil-after-funding-is-left-out-of-2-trillion-stimulus-package.html

"But funding to execute the plan was left out of the $2 trillion stimulus package which the White House and Senate agreed to Wednesday night, and which the House is expected to vote on on Friday. Initially $3 billion had been requested for the project.

Following the bill’s passage in the Senate, Senate Minority Leader Chuck Schumer said in an email to senators that the revised version of the bill “eliminated [a] $3 billion bailout for big oil."


And i agree. This is not the time to be bailing out oil companies. In fact, many of them will go under, which though painful, is a good thing as we transition to a green economy.

[getagrip_already]

6. I'm not talking about a bailout....

I'm talking about restocking the reserve with nearly free oil. If the oil companies have no place to put it, and they can't turn the spigots off, they will have to dump it, probably creating an environmental nightmare.

Just pump it into the nearly empty storage facilities. That's what its there for.

[former9thward]

15. It costs money to restock the reserve.

Congress has not allocated the money.

[Baked Potato]

11. The reserve will still get replenished. National Security thing.

The politicians did a little dance here, but the oil will flow.

[cstanleytech]

12. At the low price of the oil currently though they might want to revisit that not to bail the

companies out but rather to build up the supply while it is cheap so as to save some money.

[safeinOhio]

3. You know what this means?

Free houses, free cars, free everything in Texas, or less.

[getagrip_already]

8. yeah, but it won't be called socialism or even gov't support......

It will be termed something like the trump rescue fund and every white person in texas will get a bar of gold and $10k/month in payments.

[cstanleytech]

14. Not every one, I am sure Trump and the Republicans will find a way to fuck over the ones that are

disabled, poor or elderly because that is how they roll.

[Baked Potato]

5. Everybody watch out! Them cowboy boots hurt when they kick!

[Roy Rolling]

7. It means . . .

The U.S. was buying at the highs and selling at the low of the market. Trump brags about all the oil the U.S. exports to other countries—except those other countries aren’t buying anymore.

Law of supply and demand. To make money, buy low sell high, not what Trump does—buy at overvalued prices and unload at rock bottom prices.

[Drahthaardogs]

9. This is really not good in the long run.

I am kind of torn.

[stopbush]

10. We've gone from filling the car tanks as often as twice a week

to every 10-14 days. No need to drive more than 1.5 miles to the grocery a couple of times a week.

I would guess many people are in the same boat.

[IronLionZion]

13. Donny should boast of this

and act like his stable genius policies helped lower prices for Americans as a way to stimulate the economy.

[former9thward]

16. This will be an end to electric cars.

No need of E-cars when gas is $1 gallon.

[Steelrolled]

24. There is still a need to reduce emissions, and for the long term

But you are right that it makes no sense economically (and the economics were never great).

[yaesu]

17. Its the May futures which are now negative $35 do to lack of any place to put it, no storage

June is at about $20 a barrel, so the price of crude is actually around $20 a barrel though I have never seen a plunge like this on expired contracts.

[AtheistCrusader]

22. 22$ and this lowball stuff expires tomorrow, and you must physically take delivery of the oil

but most people don't read past the headline, so there's a small percentage of us that have any idea what any of this means.

[Lucky Luciano]

27. Ding ding!!

[DesertRat]

18. 2020: the year a roll of toilet paper is worth more than a barrel of oil

[Roy Rolling]

19. Perfect

I’m gonna steal this, unless you object. I’ll credit you.

[DesertRat]

20. Go right ahead

[soryang]

21. leveraged fracking debt cratered US debt markets

“Roughly speaking, you can make the argument that below $40 oil, most of these names, especially in the high-yield space, really can’t survive,” he said. “That drop in oil was perhaps the final straw for the U.S. credit markets.”

https://www.cnbc.com/2020/03/10/drop-in-oil-may-be-the-final-straw-for-us-credit-markets-strategas.html

this is why washington moved to save the big banks first.

[LudwigPastorius]

23. Here come the economic ripples.

From a CNN story:

https://www.cnn.com/2020/04/20/business/oil-price-crash-bankruptcy/index.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fcnn_topstories+%28RSS%3A+CNN+-+Top+Stories%29

Many oil companies took on too much debt during the good times. Some of them won't be able to survive this historic downturn.

In a $20 oil environment, 533 US oil exploration and production companies will file for bankruptcy by the end of 2021, according to Rystad Energy. At $10, there would be more than 1,100 bankruptcies, Rystad estimates.

"At $10, almost every US E&P company that has debt will have to file Chapter 11 or consider strategic opportunities," Abramov said.

[Steelrolled]

25. Another expert making bold predictions

[AtheistCrusader]

28. The old oil boom is going to have consequences.

When those companies start going down, over-leveraged oil workers with expensive toys are going to find themselves unemployable, and the repo man cometh.

Cars, houses, ski-doos, boats, snowmobiles, quads, you name it.

[The Mouth]

29. Any debt is too much

Sometimes utterly necessary, but debt is always bad and should be avoided.

[paleotn]

32. Wouldn't want to be holding any of their debt.

[Yeehah]

30. Those poor starving oil executives!

We better bail them out!

[paleotn]

31. Sounds like a buying opportunity to me

if you've got the storage capacity.

[Baclava]

33. Oh yeah, people filling up a dozen plastic gas cans and storing them in their garages

100 gallons of gas stored in every house in the neighborhood. What could go wrong

I saw a neighbor doing this

[Bengus81]

34. Watch the DOW today....TIMBERRRRRRR