Anyone watching oil today?

[kadee79]

money.cnn.com/data/commodities/

[haapai]

Holy S***!

[kadee79]

One fella said it was the first time in history that the futures went negative.

[kadee79]

-30.40 now for May 2020 contracts.

[djAdvocate]

went to -40. this can't go on.

USO LONG, $3.80

edit: I couldn't resist.  picked up a small position at $3.71, 5 mins before closing.

it might tank, but this looks like utter capitulation to me.

[Deleted]

Apr 20, 2020 14:49:54 GMT -5 djAdvocate said:

went to -40. this can't go on.

USO LONG, $3.80

edit: I couldn't resist.  picked up a small position at $3.71, 5 mins before closing.

it might tank, but this looks like utter capitulation to me.

Yikes

"Last week, traders put $1.6 billion into the United States Oil Fund LP, or USO, the best week of inflows on record for the exchange-traded fund since its inception in 2006, Bloomberg reported. On Monday, the ETF declined 11% to the lowest level since 2006 as prices of US West Texas Intermediate crude oil tanked, falling below zero for the first time ever."

markets.businessinsider.com/commodities/news/oil-price-traders-billions-etf-before-plunged-negative-first-time-2020-4-1029108901

[countrygirl2]

This is probably a dumb question but how can this go negative? I don't understand.  As hubs said so the service station is going to pay us to take it? LOL!

[djAdvocate]

Apr 20, 2020 16:41:50 GMT -5 countrygirl2 said:

This is probably a dumb question but how can this go negative? I don't understand.  As hubs said so the service station is going to pay us to take it? LOL!

well, first of all, it is not really a "price".

it is a FUTURES CONTRACT.

what this is basically saying is that there is no downward protection on oil contracts right now. they will have to sell it "at market". and obviously, they are not going to pay people to haul it away, so these contracts will expire worthless, as do most futures contracts.

think of these contracts as insurance. it is GENERALLY insurance against declines in price. for example, the Uranium futures are currently selling for about $35 for a six month contract. uranium is selling for about $32. so that is a 10% premium, which reflects a bull market for Uranium, and protects buyers against prices ABOVE $35.

the current futures contracts in oil offer no protection whatsoever. which means that they are just going to have to sell oil for what the market dictates. there is no "hedge" against decline. which means that oil producers really have no choice other than to produce at a loss or shut down. they will do the latter, if the price of shutting down is less than the price of producing, which it probably will be. this will create a shortage, which will drive prices back up.

that is why I like USO. it doesn't predict the inevitable outcome, only the current panic.

[countrygirl2]

Thank you for explaining that, I don't understand most of this stuff obviously. Just never got into any of it till old and sitting around. And now my mind is not agile anymore and have trouble learning. Oh well, all is well and thanks.

[thyme4change]

Futures are tricky. I had a college professor give a class and I left feeling like I really understood them. A year later, all I could remember was most futures contracts expire and no product changes hands. Now it is 30 years later, and at least I still know that. 🤪

[countrygirl2]

I surely had it in economics, but the main thing I remember from that is usurious interest rates. And also an economy cannot have both guns and butter. 

[djAdvocate]

the gold to oil ratio has never been higher than 33.

it is at 186 today.

[kadee79]

Taking a look at all the commodities....someone correct me if I'm wrong, but wasn't corn & soybeans higher back in the 70's?

I'm remembering corn at around or over 3.25 bu. & soy at 9.00+/- bu. back then