U.S. crude futures suffered a historic selloff on Monday as WTI turned negative for the first time ever

[churchboy234]

U.S. crude futures suffered a historic selloff on Monday as WTI turned negative for the first time ever.

The May futures price bottomed at -$40.32 after closing at $18.27 on Friday.

Brent crude, the international futures benchmark, is trading at its lowest in almost two decades.

https://www.ccn.com/oil-price-crashes-below-zero-as-u-s-crude-suffers-historic-meltdown/

 

[robotclock]

@churchboy234 Before people go haywire on this. It is because May contracts are expiring today. People who hold these heave to take physical delivery of oil, which isn't possible for them. So they are selling it at whatever price they can get. Too many sellers, no buyers

 

[lewisofthenorth]

@robotclock

Before people go haywire on this. It is because May contracts are expiring today. People who hold these heave to take physical delivery of oil, which isn't possible for them. So they are selling it at whatever price they can get. Too many sellers, no buyers

Yes, look at the June contract.

 

[resjudicata]

@robotclock Exactly ! This was inventible. Nothing that surprising.

 

[auntynet]

@churchboy234 Very well explained piece here on how it's not as bad as it seems. https://medium.com/@nitiksh2020/the-negative-oil-is-oil-valueless-now-e87c217a3109

 

[satan_loves_you]

@churchboy234 Noob here. How can one invest in this??

Commodities?

 

[wanderedhome]

@satan_loves_you These are already expired futures now

 

[farmert]

@wanderedhome So will this bounce tomorrow? (noob again)

 

[restored_one]

@farmert It settled at -37$ today. So no more on those prices

Basically seller will pay the buyer -37$ to buy the stockpile and get it off his storage..Which usually means massive shipping tankers

 

[farmert]

@restored_one So what will be tomorrow's price?
Can you share some more info (if you have) what is there for normal investors in this?
Is there any benefit for Indian Government in this?

 

[restored_one]

@farmert You cannot trade on WTI futures from India

Tomorrow's price would be based on June Contracts which is currently trading at $22 / barrell

Simple explanation is here

https://seekingalpha.com/article/4338551-why-wti-crude-is-crashing-much-today

Benefit for Indian Govt is that Crude futures are now priced lower, this in turn should bring down the prices of Petrol/Diesel in the coming days but given The State Government's cash crunch, I don't think they would be willing to bring down the taxes on Oil or bring down its prices at the moment

India largely imports Brent, which is trading at $27 /barrel. We should see some rally in ONGC, IOC, HPCL because of this. India historically have benefited from lower crude prices but a Crash in Oil prices can have adverse impacts as well.

 

[yuliza]

@restored_one

Benefit for Indian Govt is that Crude futures are now priced lower, this in turn should bring down the prices of Petrol/Diesel

Ghanta. All strategic reserves were topped off last month.

 

[breaf123]

@restored_one Hey you seem to know more about oil... why doesnt India have an index like brent or wti? You keep reading news about ONGC finding reserves, reliance aramco deal , reliance is such a big player too but there is always shortage of oil in India

 

[restored_one]

@breaf123 Because India is the second largest importer of oil in the world and the oil market in India is strictly regulated. We do not have enough Oil reserves inside our sovereign borders.

India has Crude oil traded on MCX but I'm not sure which variety it is. Brent, WTI, Arab light, Russian, Iranian. I'm guessing its all.

India does have a big commodities futures market on MCX.

 

[rebornkid]

@farmert Tomorrow it will be next futures price i.e. futures expiring in June. As of now they are above USD 20.
For normal investors its better to stay out of it as these are highly risky futures plus these are not traded in India. Government of India won't have much benefit as we import very less from US and our retail prices are not linked to US prices but to Brent Crude which is also above USD 20. Plus even if Brent Crude when down to this level, we won't be able to take advantage as there is no demand in the country and storage capacities have a limit.

 

[wanderedhome]

@farmert Not really. We have enough stock with a low demand. Plus India isn't solely dependent on US for oil. In most likelihood it's not going to affect either the prices or our markets tomorrow by a lot.

 

[oracle999]

@satan_loves_you These are traded in lots of 1000 each. And if you are holding the futures at expiry you are legally bound to take physical delivery otherwise you will be exposed to a hefty lawsuit. You need huge tankers, ships or railroad to take delivery. There are also anti dumping laws, you cant just take delivery and dump them somewhere.

Oil futures is definitely not for retail investor messing around. They are for oil producers/shippers and people who know what they are doing (most of the latter are the ones selling it at negative price because they didnt see this coming)

 

[satan_loves_you]

@oracle999 Any idea how IOCL, ONGC etc will react to this?