Along the same lines, I tripped over this:
That Time I Tried to Buy an Actual Barrel of Crude Oil
From my link:
So even aside from the obvious fire hazard issues, it’s pretty nasty stuff.
Why can’t they just make more barrels to store the oil in? In fact, now is probably a splendid time to invest in oil barrel manufacturing. Right?
…like, are those things made of steel or aluminum?
This might be the worst thing ever for some nations like Saudi Arabia, whose economies are based primarily on oil. But while the US might be a slight net exporter of oil, our economy is a lot more diverse than that.
Velocity, last time I was out, I was already seeing gas as low as 97 cents, at the cheaper stations. So 90 cents hardly seems out of the question.
It’s been mentioned above, but WTI, which is the oil that went negative, is only one particular oil index. The others have dropped, but not into negative territory.
We treat oil as fungible, and it mostly is. But mostly is not entirely. Several other US oil indices have remained positive. And pretty much all the international oil indices are still solidly positive.
Price of WTI does not (directly) affect the price of oil being extracted in Saudi Arabia, which has not gone negative.
And due to the rather abrupt drop at the last minute, some people are speculating there’s been a bit of market manipulation by groups shorting the price for May futures, especially as June futures is still ~$20.
So, this is good (?) news if you want to drive to Oklahoma to be paid to take oil, but not so good if you think it’ll affect OPEC nations to the same degree or think it will affect gas prices in California or Kentucky to the same degree as Texas.
Note the Cushing, OK storage, which is what is mainly affected, is mostly in large containers, not actual physical barrels. They measure in the millions of barrels, i.e. a ‘barrel’ is more a unit of measure than actual storage containers in this case.
For the most part, this is a short term need. And this quantity of oil isn’t stored in individual barrels.
Unlikely. WTI is mostly shipped to Cushing, OK, which is landlocked.
Brent (among other oil indices) is often stored on ships, and those oil indices don’t appear to be in any danger of going negative.
Actually, that tends to be why they don’t tend to go negative. There’s often some extra capacity available somewhere in the form of seagoing vessels.
Not in Pennsylvania!
Thanks. Makes sense.
A dozen other physical oil markets around the US closed negative yesterday. Many with no futures markets to speak of. There’s simply too much oil and no where to put it. This isn’t some rogue speculator shenanigans. June, the next contract for Cushing delivery, is down 50% to single digits on similar worries of a storage shortage.
Yes, and WTI May futures is current back to positive after yesterday. Those are really big swings. Maybe not market manipulation (and while I didn’t say it was for sure, it has been seriously suggested), but that kind of inelasticity is absolutely shocking. To some extent, we’d expect capacity limits would be priced in over at least more than a few hours on a Monday only to rebound sharply again Tuesday morning.
Guess I better not open it, then…
When the Cushing price went low 5~10 years ago, they were putting WTI onto tankers and sending it to Mexico.
The Trump administration hasn’t thought of that yet. You’re now qualified to be fired from your post as energy czar because your understanding of the energy markets doesn’t align with making war on Iran.
Oh wait, you aren’t the energy czar? Well, you shoulda been.
As the futures contracts unwind at terrible losses, things will start to be less negative, if buyers do not speculate badly. People should be calculating consumption versus supply realistically. Though it will be a tough calculation right now with all the lock downs. Consumption averages are right off the rails.
Storage capacity will soon be zero. But that oil was stored when it cost X dollars. If oil is offered at a low enough price going forward, then it is possible that the expensive oil stored at a loss will stay stored and the cheaper oil would be bought and consumed live. Maybe not physically, but financially. It gets weird.
You may see prices rise if supply goes down to match consumption rates. Meanwhile a bunch of higher priced oil may sit in storage, till consumption rises enough against supply to again make it worth more. But that is a lot of financial movement before actual stored oil movement. It is a fairly long term situation. But unlike milk and meat going bad. The oil is not dumped and wasted. It is not easy to shut in production. But it can be done.
China ‘the biggest winner’ of coronavirus-inspired oil plunge
Negative prices mean producers will pay consumers to take and store crude from their overstocks. What happens to trade deficits? And who has the largest remaining storage capacity?
More importantly, how are FCOJ futures?
Holding up very well!
Good to know - thanks!
Local city is closing swimming pools that summer-- maybe they can repurpose them for oil storage 
Brian
I thought you guys knew I was joking. Sorta the point of my “aluminum or steel” comment but I guess I missed the mark. 