Investing Thread

[forgetful]

Surprised this isn't hitting the stock market a bit harder.

Similarly, surprised that oil stocks aren't being hit harder today. All priced in?

[Chili]

I know it’s not literal because it’s speculative, but oil now at $2.17 (!!!!) a barrel.

I say this knowing it’s speculative, but in my wildest dreams I never imagined oil being literally worthless.

WTI is going negative. You will get paid to take oil right now.

[mu_hilltopper]

https://www.marketwatch.com/story/us-oils-may-contract-has-just-gone-negative-plunging-154-and-trading-at-negative-10-a-barrel-2020-04-20?mod=bnbh_mwarticle

-$37.63 a barrel.  Can't wait to gas up and the guy has to pay me.

[GB Warrior]

Nows the time to buy in bulk and stash those barrels in your basement for a rainy day

[DegenerateDish]

To be clear, the May contract price at negative $40 is people bailing left and right. The "true" price right now is the June contract, which is in the low $20's.

Still, to see any WTI contract at these ranges is unprecedented. Thinking back 12 years (or whatever) when oil was triple digits, it's unbelievable where we're at. Someone will literally pay you to take oil off their hands. Not just pay you, pay you well!

[TSmith34, Inc.]

The timing of this article--this morning at 8:45am--isn't so good.

https://thehill.com/opinion/energy-environment/493614-the-world-can-thank-president-trump-for-the-oil-deal

Insert Rick Wilson's quote re Trump here

[GB Warrior]

The timing of this article--this morning at 8:45am--isn't so good.

https://thehill.com/opinion/energy-environment/493614-the-world-can-thank-president-trump-for-the-oil-deal

Insert Rick Wilson's quote re Trump here

Man that read with the benefit of hindsight was a trip

[JWags85]

Of all the things to bang on Trump for, its not one of them.  He did what he needed to do, but all he could do was be an arbiter.  US isnt in OPEC and this really went further sideways when KSA and Russia undershot the agreed/hoped for cuts at the OPEC meeting 2 weeks back.  He essentially convinced the two sides to cease fire, but there were already catastrophic injuries on both and it wasn't in time to stop the inbound bombers with further ammo.

Its great that the US mitigated much of their need for foreign oil over the decades, but that adds an extra layer of complexity to the geopolitical chess match cause its beyond just a purchaser/consumer interest.

[DegenerateDish]

Of all the things to bang on Trump for, its not one of them.  He did what he needed to do, but all he could do was be an arbiter.  US isnt in OPEC and this really went further sideways when KSA and Russia undershot the agreed/hoped for cuts at the OPEC meeting 2 weeks back.  He essentially convinced the two sides to cease fire, but there were already catastrophic injuries on both and it wasn't in time to stop the inbound bombers with further ammo.

Its great that the US mitigated much of their need for foreign oil over the decades, but that adds an extra layer of complexity to the geopolitical chess match cause its beyond just a purchaser/consumer interest.

My take (highly under educated on the subject matter though) is that KSA and Russia are trying to put US shale production out of business. I think as you described nicely, there is a war going on here, and in this case for KSA/Russia, my enemy is my friend as long as our mutual enemy is US shale output.

[Lennys Tap]

Surprised this isn't hitting the stock market a bit harder.

Similarly, surprised that oil stocks aren't being hit harder today. All priced in?

That wasn’t the actual spot price of oil, it was a futures contract that (I think) expires tomorrow. If you’re long the contract you either have to sell or take delivery. Traders stuck long have no place to put the oil and are forced to sell at any price. This was an unprecedented situation but the oil stocks care about the true price of the commodity, not the price of expiring futures. Hence, XOM, Chevron, etc., down pretty big but not in total panic. If you’re waiting to buy gas for10c a gallon you’re in for a bit of a wait.

[Lennys Tap]

Of all the things to bang on Trump for, its not one of them.  He did what he needed to do, but all he could do was be an arbiter.  US isnt in OPEC and this really went further sideways when KSA and Russia undershot the agreed/hoped for cuts at the OPEC meeting 2 weeks back.  He essentially convinced the two sides to cease fire, but there were already catastrophic injuries on both and it wasn't in time to stop the inbound bombers with further ammo.

Its great that the US mitigated much of their need for foreign oil over the decades, but that adds an extra layer of complexity to the geopolitical chess match cause its beyond just a purchaser/consumer interest.

Nailed it.

[Lennys Tap]

My take (highly under educated on the subject matter though) is that KSA and Russia are trying to put US shale production out of business. I think as you described nicely, there is a war going on here, and in this case for KSA/Russia, my enemy is my friend as long as our mutual enemy is US shale output.

Your take is pretty much on target.

[mu03eng]

My take (highly under educated on the subject matter though) is that KSA and Russia are trying to put US shale production out of business. I think as you described nicely, there is a war going on here, and in this case for KSA/Russia, my enemy is my friend as long as our mutual enemy is US shale output.

Yeah, but the US shale industry is going to be somewhat shielded with government bailouts that wouldn't have otherwise happened. They are shutting down like the rest of the US and will have access to cheap capital when they start back up as demand starts to ramp back up

[DegenerateDish]

Yeah, but the US shale industry is going to be somewhat shielded with government bailouts that wouldn't have otherwise happened. They are shutting down like the rest of the US and will have access to cheap capital when they start back up as demand starts to ramp back up

Yes, agreed on all these points here.

[Golden Avalanche]

Yeah, but the US shale industry is going to be somewhat shielded with government bailouts that wouldn't have otherwise happened. They are shutting down like the rest of the US and will have access to cheap capital when they start back up as demand starts to ramp back up

It won't just be somewhat. It will be total based on the White House position released this morning. The industry as a whole will be bailed out. The socialist bent of the current administration continues afoot. Thus, investment should be strong knowing the USG will prop up those who may not make it on their own.

[The Hippie Satan of Hyperbole]

It won't just be somewhat. It will be total based on the White House position released this morning. The industry as a whole will be bailed out. The socialist bent of the current administration continues afoot. Thus, investment should be strong knowing the USG will prop up those who may not make it on their own.

It's not really socialist.  If the government actually owned the industry at least the people could benefit from this.  It's worse.  Bailing out the shale oil industry is exactly the problem with these bailouts.  Do you think the people who were running this industry last year would have supported higher taxes (personal or corporate) or higher rights fees?  Of course not.

But now that they need help?  Well of course!!! 

Allow them to go bankrupt and sell off their assets.  Someone will come in to take their place.  The oil isn't going anywhere.  And if that doesn't work, have the federal government take partial ownership as an investor so we can also reap the benefits.

But we are going to do what we have become conditioned to do.  Privatize the benefits and socialize the risk. 

[forgetful]

That wasn’t the actual spot price of oil, it was a futures contract that (I think) expires tomorrow. If you’re long the contract you either have to sell or take delivery. Traders stuck long have no place to put the oil and are forced to sell at any price. This was an unprecedented situation but the oil stocks care about the true price of the commodity, not the price of expiring futures. Hence, XOM, Chevron, etc., down pretty big but not in total panic. If you’re waiting to buy gas for10c a gallon you’re in for a bit of a wait.

I understand. But this occurring tells what the sentiment for long-term prospects for the economy is looking like. June contracts are also now declining, because there is no expectation this is resolved any time soon. We continue to pump substantially more oil than there is demand.

That is a big part of why we are seeing significant declines again today. I'm just surprised that there wasn't a bigger hit yesterday.

[The Hippie Satan of Hyperbole]

Is it hard to stop pumping oil?  I don't understand why producers just don't restrict their output.

[DegenerateDish]

Is it hard to stop pumping oil?  I don't understand why producers just don't restrict their output.

I believe I read a good article (can't find it right now) that said it was actually more expensive to stop pumping, than it is to pay someone to take the barrels.

There's people much more educated on this than I am that can probably explain the rationale here, but I know I saw that in a couple of articles yesterday.

[forgetful]

I believe I read a good article (can't find it right now) that said it was actually more expensive to stop pumping, than it is to pay someone to take the barrels.

There's people much more educated on this than I am that can probably explain the rationale here, but I know I saw that in a couple of articles yesterday.

There is also the debt/cash flow problem. Yes they are losing money on each barrel. But they are still selling them for $20 a barrel. That generates the cashflow needed to stay open and not go bankrupt.

Essentially hemorrhaging money slower is better.

[tower912]

Running out of storage space

[MU Fan in Connecticut]

It's not really socialist.  If the government actually owned the industry at least the people could benefit from this.  It's worse.  Bailing out the shale oil industry is exactly the problem with these bailouts.  Do you think the people who were running this industry last year would have supported higher taxes (personal or corporate) or higher rights fees?  Of course not.

But now that they need help?  Well of course!!! 

Allow them to go bankrupt and sell off their assets.  Someone will come in to take their place.  The oil isn't going anywhere.  And if that doesn't work, have the federal government take partial ownership as an investor so we can also reap the benefits.

But we are going to do what we have become conditioned to do.  Privatize the benefits and socialize the risk.

If oil is this cheap wouldn't it be better for the government to buy low and then put in the Strategic Oil Reserve?

[tower912]

That has already been announced.    Again, there is a limited amount of available storage space.   

[The Hippie Satan of Hyperbole]

And the strategic oil reserve is kind of a relic anyway.  We produce plenty of oil domestically now.

[jesmu84]

It's not really socialist.  If the government actually owned the industry at least the people could benefit from this.  It's worse.  Bailing out the shale oil industry is exactly the problem with these bailouts.  Do you think the people who were running this industry last year would have supported higher taxes (personal or corporate) or higher rights fees?  Of course not.

But now that they need help?  Well of course!!! 

Allow them to go bankrupt and sell off their assets.  Someone will come in to take their place.  The oil isn't going anywhere.  And if that doesn't work, have the federal government take partial ownership as an investor so we can also reap the benefits.

But we are going to do what we have become conditioned to do.  Privatize the benefits and socialize the risk.

Bingo.

This country is currently centered around corporate socialism. And it's a freaking scam