US oil prices drop to 21-year low as demand dries up

[muriel_volestrangler]

Source: BBC

The price of US oil has fallen to a level not seen since 1999, as demand dries up and storage runs out.

The price of a barrel of West Texas Intermediate (WTI), the benchmark for US oil, dropped 14% to $15.65 in Asia trading on Monday.
...
Mr Innes said: "It's a dump at all cost as no one, and I mean no one, wants delivery of oil with Cushing storage facilities filling by the minute."

The drop was also driven by a technicality of the global oil market. Oil is traded on its future price and May futures contracts are due to expire on Tuesday. Traders will be keen to offload those holdings to avoid having to take delivery of the oil and incurring storage costs.


Read more: https://www.bbc.co.uk/news/business-52350082

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Note that the Brent benchmark, more relevant to Europe and Asia, hasn't fallen so much - at time of posting, that is $27.41 and WTI is $14.86. This is the collapse of US demand, and too much shale production, combining.

[Sherman A1]

1. When this first started in March with the stock market tumbling

My broker called about a week into the downslide and offered the usual "stay the course" encouragement. One point he was very specific upon was that the oil market looked as though it had bottomed out then and recovery would be coming in a bit. I don't think he really appreciated my response being, "don't think so, I expect a world wide depression."

[empedocles]

9. 'stay the course' was the mantra at djia 28,000. Still the mantra of brokers,

promoters, salespeople, 'cons, etc., etc.

Will still be the mantra at new lows.

[Not good advice]

[customerserviceguy]

19. That's what stock brokers do

bullshit so they can keep making commissions. My ex-wife was one of them.

[Aussie105]

2. "stay the course"

is always a bad sign, because it is an admission the situation isn't clear, and the best path forward is unknown.
'Do nothing' is always an option, but hindsight at some future date may make that look like a bad move.

A few years back, quite a few, I joked with my wife that I'd not buy any more petrol until the price dropped back to 'normal', ie 64.9c/L (Australian price), but it just kept creeping up over the years, highest most recent price being AU $ 1.75/L

It's now down to near that 'normal' figure.

Two cars, both filled up, with nowhere to go because we are in lockdown.

Marvelous how the skies have cleared over some of the more polluted cities around the world though.

I'm guessing some crude oil producers will just have to shut down for a while.

[modrepub]

3. And This Will Reverberate Through The Financial Market

Companies have operated under the assumption of oil prices being 2-3 times higher than they are now. Now their income from oil sales has been more than halved and they still have to make loan, bond and dividend payments.

The extraction businesses have constantly gone through this boom and bust cycle chewing up capital (but making some people very rich if they were in at the right time). Think of all the other renewable energy projects we could have completed in the last few decades if we had only directed capital towards them instead of more oil/gas development.

[beachbumbob]

4. unfortunately the price drop has not been fully reflected in gas prices, especially

where we live where its still $1.80/gal

[gab13by13]

5. Yes gas is up in Pa.also

but Pa. has the highest state tax on gasoline in the nation.

[ProfessorGAC]

10. Seems Regional

In Chicago, it's still up around what you see. In Kankakee, (70 or so miles south) it's 50¢ cheaper.
Somehow here on DU reported paying under a dollar. I think it was Oklahoma.

[Bengus81]

11. 1.33 right now in Wichita...........

[BadgerKid]

13. That's typical though.

Gas at the pump has generally been slow to fall but quick to rise.

[Miguelito Loveless]

15. $1.64 in central Carolina

[bucolic_frolic]

6. Thoughts, prayers, sympathies to the oil cult

[sanatanadharma]

7. What!? Can't be true

The supply side is fine *and as we all know, consumer demand is NOT the driving force in our trickle-down economy.

*If the supply side is suffering, then the free-hand of the market place is driving prices upward; or so say some. Have I been misinformed about capitalism?

[gab13by13]

8. We went from capitalism to crony capitalism.

The invisible hand of the market disappeared.

[IronLionZion]

21. Trump will give subsidies to bail out these oil companies

the private sector is super efficient like that

[Bengus81]

12. Amazing what happens when speculators buying gasoline contracts they can't take delivery on....

dry up and went away. Asshats like that is what took prices to about 4.00 per gallon here in the midwest all those years ago. It was NOT supply and demand.

[Maxheader]

14. When is cheetox going to start

Promoting big engines in cars...?

Oh, thats right, stumpy has its money in real-estate...

[Miguelito Loveless]

16. Actually he is promoting big cars

He rolled back EPA CAFE standards and is suspending air pollution regs.

[muriel_volestrangler]

17. Now down to $12.22 - a lot of that must be the traders without storage

offloading it in desperation. Which, as someone notes above, shows how much it's commodity trading that determines the price rather than actual demand.

[yaesu]

18. Down to $10.80 on the electronic market, gas here was .98 yesterday nt.

[Bayard]

20. tRump will no doubt

Want to subsidize the oil industry even more than we already do. It always been a scam.

No sympathy.

[yaesu]

22. Oil futures now at $5 a barrel nt

[Baclava]

23. Wouldn't this be a good time to expand our strategic oil reserve storages 10 fold?

[BumRushDaShow]

24. OMFG

How is this even possible?



(down to -$1.85/bbl at post time)

Snapshot as of 2:19 pm EDT -



And again @2:22 pm EDT -



and 5 minutes after -



and again -

[Massacure]

27. To answer your question about how it is possible -

Refiners and pipeline operators purchased futures contracts to take possession of crude oil deliveries in May. Significantly less gasoline, diesel, and aviation fuel is being sold though. Demand has fallen so much, so quickly that refiners and pipeline operators do not have enough space to store all of the crude oil that they are obligated to receive. These refiners and pipeline operators are probably finding it cheaper to pay someone to take the oil rather than incur the daily demurrage charges while they make room to take the tankers load.

[BumRushDaShow]

28. Yes...

They are paying people to take the excess off their hands.



(ETA - one of my sisters texted a pic of the price here in the Philly metro area at a nearby gas station and it was $2.40/gal and I drove by 2 big stations in a busy area not far from me that were closed and boarded up. )

[LiberalLovinLug]

25. Good for average car gas consumers. But they don't count

Forget for a minute that many cannot even take advantage of the lower gas prices being stuck at home, or the overall environmentalist argument of not burning any fossil fuels, as most of our personal transportation vehicles are still beholden to buying gas to get around, go to work, buy groceries etc.........Has anyone done a study on comparing the cost savings for average Americans on their gas bill, and other oil energy bills, versus how much of a kickback consumers get from the government corporate taxes on those companies, divided out across the country, and of course minus the corporate welfare subsidies also handed to them from your taxes, to top up their profits? As well as just the general tax evasion they engage in normally. How much of that percent of leftover tax revenue they squeeze out of them actually goes back into your pocket, by being spent on legislation and programs that actually benefit you or your family?


What is the cost savings differential?

[ehrnst]

26. Now is the time to raise the gas tax and get infrastructure projects funded.