Topic: Collapse of crude oil prices - page 5. (Read 1608 times)

Oil prices may not recover forever as world automobile industry slowly started adopting renewable energy resources wherever possible.

One day or other, crude oil producing countries must need to face the situation like this as all petroleum related resources are limited but unfortunately they might not be expecting this much drastic fall of crude prices due to a pandemic. I guess this covid19 outbreaks shows some trailer of what are things we may go facing in next decade or in 25 years if we keep ignoring destroying nature and not thinking about making use of renewable energy possibilities. Not sure how many governments will learn lessons from this pandemic.

The dump created due to oil trade war, if they acted early and reduced the production level then they are not in such situation as now.Anyway the country USA is going to get affected due to the crude oil price collapse but in reality no people in this world will get the benefit for the price decrease because they were forced to buy for higher prices even when the barrel price is in negative value.

lol yeah, I've seen some folks talking about where they can buy stock of oil as if there is a person who sells for free The oil price crash is not what it really looks like, the price did crash because there were no demands so as you guys can see there is a massive price dump from oil industry but it does not mean anything.

Well, no one expected this as the price drops massively after 20 years if I am not wrong, With the global economy in a complete stand there no demand for any new oil. So undoubtedly the price might drop this also collapse will be unforgettable for everyone, however let's believe things will get sorted out in few days!!!

I really don't know what caused the prices to dump like that and increased but I can only speculate on what could happened in between at the very least. You can have crude oil not only in physical format but also you can get some from the stock market type investment banks as well, not really that common but crude oil is a commodity that you could purchase there, you are not really the owner of physically a barrel for example but you do have digitally purchased one, can't cash it out, can't call it to your house for example, but they just assume there is a barrel out there which is owned by you.

If the prices dropped so low that one liter of WATER is more expensive than a liter of crude oil, that means a lot of people all around the world, a big huge global movement happened that bought oil right away yesterday which caused it to go back up a bit.

What a week ago OPEC (Oil producing and Exporting countries ) has agreed to cut the production of oil for about 10Million barrels per day in the month of May and June which is around 20% of their production level and literally the demand has seen a sharp fall because of the pandemic situation so things might improve a bit in the May and June but it will take few more months for the demand to return

Hihi, first you would have to realize that I'm not at all arguing at how robust the oil industry or the banking industry is or how invincible and unpenetrable and unfu$#$ it is, they can be hit they can bleed money but not just from this little blow.
I'm just pointing at the overreacting and exaggerations that have made ZH such garbage, and I'm also pointing at some flaws you have in your reasoning. Rather than trying to arrive at a conclusion based on the information, you are trying to pick bits of info so that you arrive at the point you want to!

Take for example your starting point, you've selected a troubled company (which cooked its books with a lot of sauce)  and you're trying to paint this situation all over the industry. At the same time, when I give you a good example, you dismissed it because one company out of 100 is not relevant, this is not analyzing facts, it's picking the facts that back up your analysis.


So it is a risk or a certitude? Because you were pretty certain things will happen! That's why we have this debate after all!


You know that's not true and you know that oil is just like bitcoin mining, You're not making money at 6 cents per kWh normally but if enough people drop out of mining you might make profits even at 8. If some of them shut off their production the supply and demand ration will take care of the rest.


Let me tell you something, I've been through a lot of far worse situations in my life, not family or personally related.
I've endured the communist regime, I saw the warsaw and caer pacts crumble, I saw inflation above 1000%, I saw a recovery period and another crash at the end of the '90, I lived through 2008 which was like a breeze compared to the previous ones and every time people were acting like it is the end of the world.

It wasn't! Nor were the hundreds of pandemics not the hundreds of crashes, life will go on, the economy will recover and we will be back consuming and producing and drilling for oil and burning it..... If AOC won't be elected president!
You're underestimating the recovery potential of this flawed (considered by some) economic model.

But as you've said, I'll have to add some tickers and let you know when WTI hits 30$ and 50$!  
And you own me a PM when the entire shale sector is dead for good!


Unfortunately, it won't work for most oil wells at the end of their life circle. Most of the late recovery oil is forced out through different methods from water to thermal heating, so trying to inject oil back it will be more costly from an energy consumption point of view than getting it out in the first place.
The simple solution would be oil pits, dig 5m deep pools over a 1km2 area and be careful not to let gas accumulation happen.
Venezuela actually used open-air oil pits to store a lot of oil when its infrastructure crumbled and they weren't able to move it from the exploration areas. But good luck dealing with the environmentalists.


There was no "oil price" during the world wars, nor were the same markets as we have now in place.
And if they were, the demand for oil would have pushed the price at insane levels, remember that Nazi Germany was trying to produce synthetic fuel at insane costs just because they didn't have any alternative. And,even by ww2, the Saudis couldn't flood the market with oil  
 

OPEC is a cartel, of course they manipulate the market!

I really do not know what happened to OIL prices, had experienced a terrible decline throughout history, and a very drastic increase up to 200000% in a day, that's a new record in my opinion, is this market manipulation?

Everyone now is asking how to buy some oil barrels lol.
Production >> demand, no place to store it as it is barely full, long term contracts are getting hard to be signed and the producers are paying you to do this. That's a nightmare for them!

Anything is better than -$40 I guess.

As far as "good levels" go, US producers need $50+ a barrel to get profitable again. That's 330% away from the current price. Everything in between just represents a sector operating with major losses, on high yield debt.

Everything's "fine" now, boys  


We're green!

But more importantly, June's future contracts, even though they took a big hit over the last 36hours or so, are still in somewhat good levels (price):


Brent Crude oil went down by A LOT as well so it's not like we're out of the danger zone.

Hmm, that sounds like the perfect way to get fined thousands of dollars  
I'm pretty sure the specs of oil future contracts have some specific rules about the price and procedures of physical delivery, so it's not like either party can work something outside of what's in the contract, plus everything it's well documented so if something looks odd, well, prepare for the consequences.

Again, you missed the point: the collapse of oil prices can act as a catalyst for shuttering already struggling oil companies. ~100 bankruptcies are expected, along with 30% of junk energy bonds expected to default. https://www.cnn.com/2020/04/02/business/oil-crash-bankruptcies-whiting/index.html

That's how economic crashes work. Troubled firms can survive during boom years but go bankrupt when the tide goes back out. When they all crash at the same time (like 2008) we have a financial crisis. If there were more firms like Hin Leong engaging in Enron-style fraud, it would only exacerbate the systemic risk already posed by the oil industry.

Your argument doesn't actually suggest the oil industry is in any way robust in the face of collapsing oil prices, or that banks would be unaffected. You're just saying, "hey look over there, fraud!"


Are you?

The point of this thread is that banks are heavily exposed to oil companies, who are unprofitable or collapsing due to low oil prices, which poses systemic risk to the banking system.

The point of this thread is not whether Hin Leong had fraudulent books. That is tertiary to the above question. If anything, the fact that Deloitte signed off on Hin Leong's books raises questions about how prevalent Enron-style fraud is at public companies audited by the Big Four, i.e. virtually the entire US oil industry.


+$32 billion in the oil field services sector.

What's $241 billion, in a high leverage and potentially low liquidity environment where bonds are securitized and sold? Not nothing. It's something like 1.13% of the country's 2019 GDP, and much more significant than that in terms of banking liquidity.

Certainly not comparable to $4 billion. EOS? Shaking my head at that comparison.

I'm talking about crude oil because there are banks like Goldman Sachs who have more than 11% of outstanding loans tied to the oil sector. And none of these numbers include unfunded Q4 commitments either. It is too large to wave away if the banks are "too big to fail."

I'm not saying the oil industry is the only sector banks will see defaults in either, the opposite in fact. This is one systemic risk among several to consider. Residential mortgage delinquencies pose another major risk. Then there is commercial real estate. The potential loss rate on consumer loans and credit cards is even worse. It seems worthy of speculation which of these factors, if any, might cause a tipping point for a banking crisis. Considering what happened in 2008, it would be silly to write off this possibility, especially when looking around at what's happening in the world.

Banks are bracing for the impact, because they are smart enough to see the collapse in Q2 will be epic. They've set aside ~$35 billion among themselves to cover anticipated defaults. Will it be enough? We'll see. In times of crisis, the markets always look liquid until all of a sudden they aren't anymore.

I would change my tune on the oil industry when WTI is trading above $50 a barrel again, because that's the minimum before even the most profitable US producers can get cash flow positive. That's a huge impediment to recovery. Surviving for a couple months is one thing, surviving longer term at these prices will prove challenging. Unfortunately there are strong signs of economic deflation now, so a swift V-shaped recovery in prices looks less likely every day.


That's one company, who managed to refinance its debt in February. Literally no bonds are being issued to energy companies anymore. Oil companies can't refinance their debt.

And let me know when WTI is trading in the $30 to $35 range again. It's trading at $15 and touched $11 a few hours ago.

I really don't know what's going to happen but it seems silly to assume oil prices are just going to skyrocket in the near future to bail out the oil industry. Most of the commodity markets I watch are standing on the edge of a cliff too. Anything can happen, even a miraculous recovery from here, but I'm not going to stick my head in the sand given the market conditions. 2008 is still fresh in my mind.

The sentiment I see when I look around also seems way too optimistic. So many analysts are like, "Crude oil just dumped below $0 for the first time ever? Nothing to see here, move along! Everything goes back to normal next month!" We'll see about that.

It's not a pump and dump because it dump for a reason, there's less demand of oil now so it's normal that the price will fall down, but it does not fall to zero, at this time, for countries that are not affected with covid or there is no lock down, they can enjoy the price of the crude oil now, and personally I got my car full tank and bought some reserve in my house as this is the first time I saw the price is this low.

Now I guess we all know that oil too is pump and dump  . Oil price hit zero while a bitcoin is still trading above $6k so who is the boss ? We will all see what will happen after this pandemic

It is strange. I believe that this is the first time something like this happened. Not two World Wars has crashed the Crude Oil market to negative prices.


It's not just about simple economics. It's the logisitcs. Storage capacity has run out! Oil buyers can't take the oil anymore.

New update about oil is that it crush below to negative territory the price is $0 per barrel the effects of corona virus really hit the oil industry. This will a trigger a much more major uncertainty and fear towards investors. Though the dow and S&P wasn't affected for now the stock market is safe. Im expecting the Fed to do more extreme actions and mass money printing in coming days of trillions of dollars.

It's quite amusing how most bankers and Institutional investors expected Bitcoin to drop to zero in this financial crisis but look at Oil in had a flash crash and immediately dump to negative value.

You can buy oil now at such a low price, but then you will face the problem of selling it. There are currently no available storage tanks for oil, so if you need to take a tanker, you will have nowhere to unload it. But at the same time, oil producers cannot stop the process of its production.

Then what? Store it in your garage?



Daily oil production is around 100 million barrels. The data in the graph is 2 weeks old by now, and I've seen estimates stating supply is currently close to 30 million barrels per day larger than demand. Even if I reduce the almost 10 million barrels per day OPEC+ production cuts, that leaves around 20 million barrels per day. That's 3.18 hm³ (cubic hectometer).
The volume of the Empire State Building is 37 million cubic feet, or 1.048 hm³.

In short, this is the volume of the oil you'll need to store every 8 hours to make up for the difference between supply and demand:

The price of oil is really unpredictable and no one is expecting that this will happen. Imagine the price of oil goes down and becomes zero, these collapses are really shocking. This is the time where people are overwhelmed about the volatility of bitcoin, they know that there's something more worst than the price of bitcoin if it crashes. No one is expecting it and no one is prepared as this pandemic really spread faster than we think. Market, Government, and people are really struggling to recover and fight this virus because of the lack of funds that's why people do panic selling of their coins. I think this collapse in crude oil's price is just the beginning and based on my prediction, there are more bad things that will come to us.