Oil plunges below zero for first time with May contract ending

Re:Oil plunges below zero for first time with May contract e... by selectodude on Monday April 20, 2020 @01:31PM (#22926153)

It's only a paper loss until you sell. Everybody was hoping and praying things would change and now that it's abundantly clear that it's not changing, they're desperately trying to unwind their positions.

[ Parent | on HN ]

Re:Oil plunges below zero for first time with May contract e... by tempsy on Monday April 20, 2020 @01:33PM (#22926181)

Not really. If you hold contracts at expiration (May expires tomorrow) then you are forced to take physical delivery of oil. No one wants oil right now, and if you take physical delivery you’re going to have to pay big premiums to store oil at Cushing. The discount reflects the premium storage costs.

Most oil traders just want to profit off price movements and not actually own physical oil. There’s no volume on May contracts now they’ve all moved on to June.

[ Parent | on HN ]

Re:Oil plunges below zero for first time with May contract e... by SilasX on Monday April 20, 2020 @04:25PM (#22928103)

Do you know what happens if you can’t take physical delivery? As in the financial consequences including penalties assigned by the exchange?

[ Parent | on HN ]

Re:Oil plunges below zero for first time with May contract e... by VLM on Monday April 20, 2020 @06:14PM (#22929334)

Chapter 200 doesn't go into much detail but chapter 7 (for metals) explains how the exchange will facilitate an independent middleman to store until arrangements are made and they will bill you for that service.

I have not been involved in chapter 200 operations but I've heard socially this occasionally happens relating to substandard product. "We agreed on light sweet crude in the contract but you tried to deliver sour tar". The exchange knows its all going to get dragged into court eventually, so they try to be fair and transparent and well documented. There are plenty of people renting tank space as a normal business operation.

I don't think you're going to get Force Majeure protection. That's for something neutral to all parties like a hurricane, not one side of the contract didn't feel like closing out and doesn't have tank space lined up.

[ Parent | on HN ]

Re:Oil plunges below zero for first time with May contract e... by hermitdev on Monday April 20, 2020 @05:57PM (#22929124)

My understanding is you still take delivery. It might be in the form of a fleet of tankers or barges arriving at your office. But, you will take delivery, whether you like it or not. Any responsible trading firm that deals in futures should have mechanisms in place to deal with physical delivery.

[ Parent | on HN ]

Re:Oil plunges below zero for first time with May contract e... by pbhowmic on Monday April 20, 2020 @03:48PM (#22927702)

Futures contracts are daily settled. So the difference between starting price and ending price has to be paid at end-of-day settlement.

[ Parent | on HN ]

Re:Oil plunges below zero for first time with May contract e... by selectodude on Monday April 20, 2020 @03:57PM (#22927819)

https://finance.yahoo.com/quote/CL=F?p=CL=F

Prices didn't crash until this morning. Nobody was taking much of a loss before then.

[ Parent | on HN ]