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Oil Prices
- Thread starter Smokerman
- Start date
brickweeder
Well-known member
it means that there is no storage capacity available, and long holders of expiring futures contracts must take delivery of the oil at expiration of the contract. Since there is no oil demand due to covid lockdowns, all the oil previously in the distribution system (i.e. tankers, tank farms and refineries etc) has nowhere to go and the system is now at full capacity.
But since the contract holders can't buy capacity to store the oil they will soon have to take delivery of, they are forced to pay someone else (who has private capacity) to take the delivery contract off their hands. These buyers might be tank haulers (truck or railroad) or other companies that have oil storage tanks that are not full.
The desperate sellers of the soon to expire futures contracts have to pay the big bucks to the buyers of those expiring futures contract, who are basically getting paid to take oil.
So when an owner of an expiring oil futures contract has to pay someone to take the contract off their hands, prices are said to be negative.
Not sure what it means for retail gasoline prices at the pump...I don't think that large scale negative prices have ever occurred in the past, so no way to predict what will happen at the pump. But don't expect free gas or to be paid to fill up your tank....for all the countries that have negative interest rates around the world, you will not find a case where the average joe gets paid to take money from a bank.
But since the contract holders can't buy capacity to store the oil they will soon have to take delivery of, they are forced to pay someone else (who has private capacity) to take the delivery contract off their hands. These buyers might be tank haulers (truck or railroad) or other companies that have oil storage tanks that are not full.
The desperate sellers of the soon to expire futures contracts have to pay the big bucks to the buyers of those expiring futures contract, who are basically getting paid to take oil.
So when an owner of an expiring oil futures contract has to pay someone to take the contract off their hands, prices are said to be negative.
Not sure what it means for retail gasoline prices at the pump...I don't think that large scale negative prices have ever occurred in the past, so no way to predict what will happen at the pump. But don't expect free gas or to be paid to fill up your tank....for all the countries that have negative interest rates around the world, you will not find a case where the average joe gets paid to take money from a bank.
Last edited:
St. Phatty
Active member
It means if you have a 1000 gallon storage container - near the oil spigots - you can be paid $35+ a barrel to store oil for a month, and then re-sell it in a month for $25 ish.
A quick $60K. Which everybody would be doing except ...
A quick $60K. Which everybody would be doing except ...
