Holy WTF Moly: WTI May Contract Collapses to Negative -$37

This is a moment for historic reflection and head-shaking.

By Wolf Richter for WOLF STREET.

It’s not often that we’re served up a WTF moment like this. Just about a couple of hours ago, I published my article about US crude-oil benchmark grade West Texas Intermediate (WTI) and how the May futures contract for it collapsed by 45% to $10 a barrel — US Crude Oil Gets Annihilated Under Targeted Saudi Attack — and I pointed at some of the dynamics. But WTI kept plunging.

This is the near-month May futures contract, which expires tomorrow. It should normally trade close to the spot market price, but has now divorced from it. It has continued to collapse in a breath-taking pace to $8 a barrel, then $4, then $2, then $0, then below zero, then at -$10 and then… and now settled at negative -$37.63 a barrel:

This is obviously completely nuts. Futures contracts that expire the next day should be close to the spot market cash price.

But the WTI spot cash price “only” collapsed by 35% today to $11.70 at the moment. And in terms of prices further out, the June futures contract has plunged by 17% to $20.75. So this is a WTI massacre all around, but those prices are still well into positive territory.

So the disconnect between the May contract (-$37.63), and the cash spot price ($11.80), and the June contract ($21.77) point at some serious forced selling and a complete blowup in the May contracts.

It seems some oil trading firms and hedge funds were caught on the wrong side of heavily leveraged bets, and couldn’t roll over their contracts due to a liquidity crunch and horrible market conditions in that space. But if they can’t sell the contracts by tomorrow, they’ll have to take delivery of the physical oil at the delivery point for NYMEX futures, namely in Cushing, Oklahoma.

The delivery time is in May. But storage in Cushing for May seems to have been spoken for, and now these traders see that they have no place to go with this oil that they might have to take delivery of in May.

But the market for the May contract today essentially collapsed, as potential buyers faced the same problem. And so in their desperate efforts to get rid of the contracts so they wouldn’t end up with the oil that they couldn’t physically handle, these speculators paid a heavy price.

Over the next couple of days, we’ll probably learn who some of those exploded-imploded players might have been. Meanwhile this is a moment for historic reflection and head-shaking.

“I don’t think we’ll have a long-lasting Great Depression…. But we may have a different kind of a mess. All this money-printing may start bothering us.” Read... Munger: “Nobody Knows What’s Going to Happen.” And This Time, Berkshire Is Not Piling into Stocks & Companies

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  259 comments for “Holy WTF Moly: WTI May Contract Collapses to Negative -$37

  1. c1ue says:

    I talked to a guy I know in the industry.
    He noted that the spread is unprecedented in his experience, but the May contract expires tomorrow so is less interesting than what happens for June, July etc.
    The tanker thing definitely is worth looking more into.

    • Scott Bischoff says:

      I don’t get the tanker thing. If 20 tankers get here and all the storage in the gulf is full and there is no demand for the oil, what are they going to do with it. I know the Saudis own a chemical plant and maybe a refinery or two….. Is it possible that in order to not to shut don’t there own wells which I heard is expensive to do, they are simply dumping the oil, or is this part of some part of the plan to take the rest of the frackers out? Doesn’t seem possible to do that in the long term

    • nick kelly says:

      There are so many oil varieties but I’m not familiar with WTF. Is that a new listing of West Texas Fine?

      • Eric Patton says:

        WTF = What the fuck?

        • VintageVNvet says:

          C’mon Eric,,, nick is long time on here, and clearly making a pun, on words or otherwise,,
          on this site where, usually, Wolf does not condone any kind of swear/cuss words, argumentum ad hominem, etc., ,,
          but, in spite of saying that to help you be one of the wolfers paying a lot of ”tension” etc,
          in this case I can readily understand why Wolf would let your F word go to Heck, along with all the rest of the commodities, SMs, RE mkts, etc…
          hope you saw my post quoting Oliver Hardy???

        • nick kelly says:

          Eric: I got caught yesterday when Wolf said maybe the Fed would provide storage for oil.

    • DawnsEarlyLight says:

      Allowing this to go negative is criminal. All bets are off, and all risks are on!

    • Mike says:

      There are still many small farmers and even small family owned corporations and they should be helped to survive for their and Americans’ sake. Their food production is essential, particularly if the dollar were to lose purchasing power due to the “Federal” Reserve bank cartel’s increases in money printing to funnel US taxpayers’ wealth to their banksters and their cronies.

      Corrupt, large corporations that often are owned by banksters have tried to take over US farming and those large corporations should be allowed to fail.

    • nick kelly says:

      There may be a reverse, mirror image of the oil trade in the gold trade. The pros, a much smaller group (five majors) have milked the suckers for a decade running the price up and then down in a pump, dump and repeat. Legalish, but one time player Deutschbank got kicked out for manipulating a bit too brazenly. But in January 2020 the sheer number of bullish lemmings began to push the price higher and steps began to thwart the rally, led by the Bank of England and its gold leasing facility. Note: I do not think there is anything especially unusual, evil or occult about this. 90% of retail guys lose money trying to trade commodities.
      The game is run by the pros. Why would gold be different?

      But this time the pros may be massively on the wrong side. The virus found the oil pros long and the gold pros short, just as central banks really cranked up the presses.
      Of course, gold has not been a good investment in the past but with Bank of America ( not your usual gold bugs) predicting $3000 gold quite soon, this may be a very unusual White Swan in a flock of black ones.

    • nick kelly says:

      Lost it all

      Retweet on ‘Mortimer’ Vancouver Real Estate Twitter Site

      Guy,28, bet his inheritance 175 K. Went long Friday on an oil ETF. Lost it all.

  2. Rick Forest says:

    Wolf, you might need to rethink that “Nothing goes to heck in a straight line” slogan…

    • Wisdom Seeker says:

      You’re right – nowadays, they’re not just going to heck in a straight line, they’re driving straight thru without stopping!

      • Jeremy says:

        I think that means they’re going past heck. Getting back to heck will require some zigzagging.

    • noname says:

      Hold onto your mugs. Now collectors’ items. Like cash that has a printing error on it.

      • 91B20 1stCav (AUS) says:

        Nah, Wolf’s mug is right, it’s just that the jagged line dates back to the post-VietNam years. Much like Wile E., we now find the lack of firmament beneath our feet unavoidably unavoidable…(or alternatively, going broke gradually, then all at once…). Adjusting one’s vision and planning well beyond next quarter might have been a better strategy.

        May we all find a better day.

      • nick kelly says:

        Speaking of mugs, UK pubs report they will have to pour down the drain millions of pints of beer in kegs if they can’t open in about a month or two. I’ve tried to think of a way to retail a keg (take it home) but the weight of those things would require pro delivery, deposit on keg. And then what? Ice it down for the tap and have the party you aren’t supposed to have?

    • VintageVNvet says:

      And the size, RF and Wolf!!
      Definitely need much larger mugs for the much larger doses of liquidity that are needed NOW!, and most likely going to be needed sooner AND later…
      Certainly wishing I still had the place with the Hugely cave running a thousand yards underneath it to fill up with some oil, likely at least a couple tankers worth…
      Otherwise just ”jonesing” for a larger mug or two.

    • Trinacria says:

      Regarding this oil mess and other messes ongoing as they are all interrelated and, as I posted back in late summer if I recall, a certain candidate said two things:
      1. “everyone knows this is a big fat ugly bubble”
      2. I will drain the swamp
      (full disclosure – I am not registered with any party and believe all to be hazardous to the health of honest and productive citizens)

      So, what did he do:
      1. He added much more air to the bubble instead of popping it day one – I believe we all would be better off today – instead pushing the Fed to go where no bankster has ever gone before.
      2. He added fresh water to the swamp complete with with a pump and biological filtration system that would be the envy of the most elaborate koi ponds in the world !!!

      With that said, more than ever “gird your loins”….!!!!

      • Root Farmer says:

        Trinacria,

        Just a simple problem of definition. By “drain”, he meant “brand”. It always looks better in gold letters.

    • raxadian says:

      Nothing goes to heck in a straight line… until it does.

  3. Harrold says:

    Why is Trump not buying the excess for the Strategic National Oil Reserve?

    And by buy, I mean getting paid $37/barrel to take oil?

    • Massbytes says:

      Congress has, so far, refused to fund buying the oil.

    • Picomanning says:

      There’s probably a shortage of tankers already!

    • Cowpill says:

      The house has strictly forbid oil purchases for the national reserve

    • TXRancher says:

      But as Harrold said the oil market is paying the US government to take the oil if it is valued at -$37/barrel.

    • Thor's Hammer says:

      Wait a minute!
      Didn’t the Orange Tweeter establish by decree that there is no such thing as pollution and the Environment?

      Since that is the case why is the Government not buying all that spare oil and pocketing the $37+ per barrel bonus? There are plenty of places to dispose of it— just use it for fracking fluid in place of all that chemicalized water. Or use it to form artificial lakes in the basins left over from mountain top removal coal mining? And what about the Bears Ears national monument? I’m pretty sure that wasteland could accommodate an endless supply of oil, because any overflow would run into the Colorado River and flow down into the basin behind Hoover Dam that drastically needs refilling.

      • interesting says:

        “Didn’t the Orange Tweeter establish by decree that there is no such thing as pollution and the Environment”

        Sometime the trolls can be funny but the fact that you have to go this far over the top is very telling. It’s only you who can’t see that. Trolls work better with a kernel of truth.

      • Mic J Palazzolo says:

        I doubt that President Trump said that”there is no such thing
        as pollution and the environment”. Did you mean in the environ-
        ment? It sounds like you are unsure. Please locate and post
        proof of this.

  4. Joe says:

    Will that mean gas stations pay us for taking fuel?
    I hope….

    • DawnsEarlyLight says:

      or banks pay us for holding our money? I’ll take gas stations pay us please.

    • Iamafan says:

      Joe stop dreaming. Our road tax and other sales and excise tax on gas will never turn non-positive.

    • Jon says:

      In CA atleast, the taxes amount for ~$1.25 for each gallon of gas we pump. So, even if price is zero, we need to pay these taxes

      • David G LA says:

        The state should take this moment to raise the gas taxes even higher. They can use the revenue to bail out the pension funds and build high speed rail and other green projects.

  5. Bobber says:

    Perhaps there are oil speculators who have no way to take delivery, so they have to sell the contracts at any price.

    • Lance Manly says:

      Where are they going to put the oil from June’s contract? There is going to be resistance to bailing them out and putting it into the SPR.

      • polecat says:

        Why are some desperate oil traders NOT cutting deals to cash-poor municipalities, and filling all those unused million $$$ sports stadiums, with that Texas Tea ????

        Come On !! Do the handshake, Weld the gates shut, and get to pumpin !

    • Nat says:

      I beleive that was most of them at least by # of contracts. Anyone who had any place to stick oil would just take delivery especially if they were being paid to do so. Forced selling far into the negative as contract settlement becomes eminent can only happen in a market dominated by speculators who have no ability to handle delivery of the underlying physical asset.

  6. Pete Stubben says:

    First it was negative interest rates in Frankfurt, now crude’s expiration contract in Houston…Incredible!!!…PJS

  7. Just Some Random Guy says:

    The spread between $11 spot and $21 June is the interesting thing here. Means traders expect the shutdown nonsense to go away by June or at least start going away.

    • Wolf Richter says:

      Just Some Random Guy,

      hahahahaha… That’s hilarious – I mean what you said about traders. Traders’ ability to see the future was proven by the May contract which ran about $40 a barrel in early March — which was where traders saw WTI to be when the contract expires — only to be at negative -$37 on April 20. You need to understand this: When it comes to seeing the future, markets are complete dumb-f**ks.

      • Just Some Random Guy says:

        I said expect, not predict with 100% certainty.

        Besides who could have predicted the insanity in early March? Traders wrongly assumed we live in a free society where the govt can’t force its citizenry to close their businesses and lay off 20 million people. I assumed that too. How wrong I was.

        • Harrold says:

          Well, traders did see China close an entire region and then Iran close an entire region and then Italy close an entire region…

        • intosh says:

          Well, I guess the lesson about what “free society” really means was lost to you. “Free” never meant doing whatever you want.

        • Read the article on Sweden at reason.com. The citizenry have handled it perfectly well, no prison lockdown needed.

        • fajensen says:

          The Official Sweden has taken an eugenicists approach to the Covid-19, it is believed that the disease is Mostly killing the old or the sick (useless and weak people) and also mostly killing the zero-hour contract service workers, who are mostly immigrants and from the ghettoes (therefore not-Swedish and impure so that loss is quite acceptable to “society”, which in Sweden is the 5% with all the money).

          Happened with the gang-shootings too. It was all fine, although ‘regrettable’, with ‘Sweden’ and ‘The Swedish Model’ when they had one small ghetto, Rosengården, Malmö, where the gang-banger’s business would exceed all of Denmark’s murder rate in about March every year.

          Then in 2018 someone got capped inside Trangeln in Malmö, where proper people go shopping, there were a few bombings in wealthy suburbs, where proper people live, and THEN there was A Big Problem, lots of police suddenly started working and ‘Swedish Values’ of calm dialogue and understanding became so much bullshit!

          Give it a few more doublings.

          Sweden will panic when the more-or-less unchecked Covid-19 spreading deviates from the central planning assumptions and surprises ‘everyone’ by killing some of the ‘proper people’ too!

        • intosh says:

          @ChangeMachine

          “But in the past few days, there’s been a dramatic spike in deaths. Reuters reported Monday that Sweden has had 477 coronavirus-related deaths (an increase of 76 deaths from Sunday) and 7,206 cases (up by 376 from Sunday).

          Per capita, that’s more than three times as many as next door in Norway, which has enforced much stricter quarantine measures.”

          Source: https://www.cbc.ca/news/world/sweden-coronavirus-change-1.5522852

          Your cherry picking failed.

      • The market is for buyers and sellers who aren’t sure what the future price will be. If $40 a bbl made your well profitable in March, you could have locked in the price by selling the contract. You even got a $37 bonus?

        • QE says:

          All I can think about this was a blowback on Trump deal with Mexico to buy the millions barrel proposal and keep pumping oil, increasing his market share, The storage capacity issue is to be argued upon.

      • DawnsEarlyLight says:

        Operator! Give me the number for 911!

        -Homer Simpson

        • DR DOOM says:

          Homer was smart enough to make his neighbor Flanders leave his credit card as security when Flanders wanted his lawnmower back. Homer would be a super star in the oil futures market. Homer and Earley Kyler could launch a hedge fund.

        • Lance Manly says:

          You met “Operator! Give me the number for Jerome Powell”

          -Shale Operators

        • The Original Colorado Kid says:

          Homer stole that line from the Little Rascals – just sayin’.

      • Rcohn says:

        I will add for those in Northern Ca. , the Martinez CA refinery run by Marathon oil will shut down temporarily because of lack of storage.

        • Wolf Richter says:

          Lack of storage for gasoline and distillate I assume? So they don’t know where to send it to. Interesting. I used to see the tankers head out the Bay all the time… haven’t seen many recently. They go to Mexico and South America, loaded with gasoline and distillate.

  8. doug says:

    This is an epic time for an econ blogger.
    Thanks for all you do, Mr. R.
    Much appreciated, along with the intelligent comments.

  9. Phoenix_Ikki says:

    Does this mean they will give me money for buying oil? If so, I have a big backyard to store some of these barrels? haha

    Truly a WTF moment….and more WTF is that gasoline in southern California is still over $3 a gallon. I understand the time lag and also California being more expensive to refine, summer blend…etc but still at $-37 for May contract, these gas prices better start falling in line soon.

  10. Stephen says:

    Will someone explain to me how you get a negative price? I mean, is someone going to pay someone to take a contract? I am afraid I don’t understand the index here. Perhaps an oil industry expert could explain how this could happen. I appreciate your education on this subject!!

    • thephathalo says:

      I think that’s exactly what it means. But you have to keep in mind, as Wolf explained, that this is for May futures contract price (and not spot or other future futures contracts.) Spot prices are already super low. Land and sea storage are already full to the brim. No demand and it costs money to stock oil for months. If you are a fund caught on the wrong side of this trade (i.e long May futures) you might be ready to make a loss on the position than taking delivery or rolling the contract.

    • andy says:

      It’s when backwardation gets jammed by the contango and no one’s there to restart the AI trading server.

    • Nat says:

      Yes it means you have to pay someone to take the contract and thus the delivery of oil. This occured because most of the contracts going into settlement were being held by speculators not people who actually have any space or equipment to accept oil. As it goes into settlement you have to accept delivery or sell the contract to someone who can. But as it turns out, every one who can actually accept physical delivery of oil is full-up so suddenly the speculators were forced to sell their contracts to avoid delivery at any price when no one who could actully take delivery could buy it.

  11. Rowen says:

    To anyone with the balls to sell the april oil contracts naked last week, take a victory lap…

  12. Phoenix_Ikki says:

    “Over the next couple of days, we’ll probably learn who some of those exploded-imploded players might have been. Meanwhile this is a moment for historic reflection and head-shaking.”

    So will these people have FED on speed dial asking for some kind of a bail out soon?

  13. Iamafan says:

    OK so these oil traders will just join the pizza parlor guys who lost a living.
    Horrible but that’s today’s reality. Who is next?

    If you live around NYC like I do, expect a ghost town.

  14. Prairies says:

    You need a new mug, now everything seems to go the hell in a straight line.

    • MC01 says:

      The new design should be based around that time-honored maxim “When it rains, it pours”.

    • Erich says:

      I Think the first line of this blog post should be on the next large shot glass …er, mug.

      “It’s not often that we’re served up a WTF moment like this.”

      Might be a little long for a mug but I’m sure Wolf can make it work. Besides, that line pretty much sums up the entire year so far.

    • economicminor says:

      Nothing Matters until it matters and when it Matters it matters a lot!

  15. NewOnThisBlock says:

    I can remember when the eco folks were bleating “prepare your bodies for the oilpocalpse, when you will have to bicycle and farm organically with an artisinal iron hoe!!”

    Oil’s gonna bee ‘spensive in about 9 months, which was KSA/Russia’s goal.

    • char says:

      Not 9 months. Way to much storage and wells that can be turned on. But 5 years from now? It wouldn’t surprise me if it was $500 a barrel, but it could also be $5. The next few years will be interesting

      • CrazyCooter says:

        Oil is – and always has been – cyclical.

        High prices encourage new exploration/production, which eventually leads to oversupply, which eventually leads to low prices, which eventually clears out the weak producers, which eventually leads to undersupply, which eventually leads to high prices.

        This is the root of the maxim, “the cure for high prices, is high prices.”

        Had this same conversation with a sibling recently – my two bits on are three years minimum before we see any kind of meaningful price recovery – ex some crazy SHTF type stuff where MENA starts slinging nukes or similar.

        Five years would not surprise me.

        Regards,

        Cooter

    • MC01 says:

      At this rate in nine months there won’t be many countries around with clean drinking water, let alone refine crude oil, and then OPEC+ can pat themselves on the back for a job well done.

      Joking (but not so much) aside what OPEC+ is failing to see is that the US energy industry is not going away. Yes, there will bankruptcies and layoffs, but the fracking equipment will still be there. The advanced technology will still be there. And much more critically the highly trained and experienced people will still be there.
      Can OPEC+ afford to depress oil prices for so long as to completely cripple US energy companies, say for a couple of years? Because the moment oil prices start raising again US energy companies will be back in business.

      Perhaps Saudi Arabia can take pointers from the present Italian government on how to run a modern country indefinetely with next to no revenues.

      • SnotFroth says:

        I don’t understand how the Saudis get away with what they do.

        The US could withhold economic and military assistance to them, put tariffs on their oil, provide financial protection or bailouts to US fracking, etc.

        Maybe the real goal is to harm Russia and that’s why the US tolerates what they do.

  16. Rowen says:

    Once again, this shows how divorced Wall Street is from the real economy, when speculators are buying symbols on a computer screen, instead of the underlying product.

    Same thing with AMZN. Most speculators aren’t buying a piece of the company. They’re buying a symbol that they can sell to someone else at a higher price. No different from a Beanie Baby

    • Memento mori says:

      Exactly, people who dont need commodities for their business should not have any business trading contracts. They probably have never see a real barrel of oil and have no clue what barrel mean.
      When you financialize the economy, you get all kind of absurdities, negative interest rates, negative oil price, the endless QEs will show up in unintended ways.

      1929. “Sooner or later a crash is coming,” Babson said. “And it may be terrific.”

    • Bet says:

      Buying stocks had always been. You pay for a piece of paper that you hope to sell for a higher price to a greater fool

      • Rowen says:

        I remember playing “Wall Street Kid” on the Nintendo. P/E were single digits, and people actually bought stocks for the dividends! Crazy!

      • Happy1 says:

        I but stocks to own companies and earn dividends. Some people play this like a casino but many do not.

    • polecat says:

      The Priests of High Finance have totally fucked up ! They’ll soon to be $@rifice, and thrown off the high skyscrapin cliffs !

  17. DawnsEarlyLight says:

    We should return the favor with 20 fully fueled airliners.

    • NewGuy says:

      Naaaaah, Just pull all troops from the ME and watch the jihad destroy the House of Saud.

  18. RD Blakeslee says:

    My mug has wrinkled lines all over it but the Fed’s writ don’t run there.

  19. James Naylor says:

    Gird your loins!
    What’s next?
    WTI @ 12:35 pm 4/20/2020 DOWN NEGATIVE 297%
    MINUS $36 a barrel WTI.
    WHOA!

  20. andy says:

    Who was it that smelled inflation yesterday..

    • burn says:

      who was that lady that said we’ll never taste that in our life times again?

    • economicminor says:

      The only way to deal with this large Pyramid Ponzi pile of debt is to let it wipe itself out in defaults and Bankruptcies.. Just because you have never seen a Deflationary Debt collapse before, doesn’t mean it can’t or won’t happen. This economic Pyramid Ponzi only worked when there were more and more, exponentially more worker bees to borrow more and more and pay more and more..

      Does anyone really think we are going back there soon enough to keep this POS economy from spiraling down the rabbit hole?

  21. Joe says:

    With this lockdown, their must be such a massive build up of fuel supplies everywhere and no place to dump it.
    Emergency shutdown whether you like it or not.

  22. Iamafan says:

    Actually what is more interesting is where the Jun 20 price will be in the coming weeks. Will it be similar or not? Just like the virus no one knows,
    By the way, the way that new site “rt.live” is displaying Rt is easy to understand. Take a look from the founders of instagram.

    My state (CT) seems to be doing a bang up job with the virus.

    • Anthony . says:

      Neat, Thanks!!

    • Wes says:

      Iamafan:
      According to the talking head on Bloomberg some were able to roll the May contracts into June which he states will be in the single digits shortly.

    • roddy6667 says:

      I lived 65 years in CT. My brother is still there, retired and in a big empty house. My hipster nephew lives in a bad section of Brooklyn, near a large community of Hasidic Jews who don’t seem to believe in germs. The neighborhood is one of the worst in the nation for the virus. Weeks ago, he bailed out of NYC with his wife and two kids for a while and is living back home in CT.
      I’m in Qingdao, China now. Things are about 90% back to normal. As I type this, I can see the morning rush hour traffic is back to normal. Everybody has been back to work for 2-3 weeks, and all the businesses are open. Except for the masks, you wouldn’t know there had been a virus outbreak.
      This is a major port for incoming crude oil. A pipeline transports it inland to refineries. The tankers are lined up just offshore, waiting to unload, but everything is full.

      • VintageVNvet says:

        Thanks for the ‘boots on the dirt’ reporting once againR2/3. Please continue to keep us wolfers informed of the sitrep there.
        Meanwhile, we can hope that sooner rather than later, Science prevails everywhere, and communication protocols are enacted for all of We the Peons around the entire globe, now so thoroughly interdependent that not to have such communications instantly and honestly is IMO the really really bad crime with re this virus and any such events going forward.
        And, please folks everywhere, do not think for one second that this virus is the last such, no matter what preventative measures are taken.

      • Iamafan says:

        Howdy Roddy.

        Now that you mentioned Brooklyn (where my son and daughter in law lives), I’d like to bring up the current controversy about the ventilator ARDS protocol for use in covid-19. Social media (including the New York Times) have been busy interviewing the likes of E.R, and ICU doctors who claim ventilators may be dangerous for some cases. One of these doctors is Dr. Kyle-Sidell of Maimonides hospital in Brooklyn. Small world that my daughter in law works in that same hospital.

        I have a feeling that China has had a chance to develop herd immunity much earlier than the USA. Now that you have doctors questioning our official policies, it may be a good time to start thinking. I remember there was a lady so-called expert who came out in the blogs yelling that out hospitals will be extremely overwhelmed but that did not happen in most cases. Sure Elmhurst and Brooklyn were probably outliers but those tents and Javits weren’t full.

        Nice to hear that you seem to be enjoying there in Qingdao, China where things are back to normal. Do you have endless parades of politicians with daily briefings? I had to reject some alert robocalls from my mayor and governor. They are irritating already.

        This is just another (health) crisis not put to waste by political parties and some bloggers.

  23. Michael Engel says:

    1) Verticals vertigo. There is no room to go. Panic takeover.
    2) Gravity will pull the next paper oil contracts down.
    3) Storage is sold out. Speculator pay for transportation of wet oil and investing in new storage.
    4) Layoffs will follow.
    5) Suppose oil co A have a lab with great scientists that can test covid-19.
    6) A co CEO will sell the 5% of the lab, as a separate co B, in a public offering.
    7) B frenzy send its value of B to the moon, but since WTI is negative, A suck, A price in distress territory.
    8) Since A own 95% of B, and the portion of B is so high, the value of A as a separate co is negative.
    9) Munger will buy A, because its for free.
    10) He doesn’t care about a small lab that will do testing for the next
    few months and die, because with so much printing, the elite will fall
    in love with oil after few more years.

    • Rowen says:

      I like the idea of using the infrastructure portion of the Covid stimulus on underground oil storage caverns. Pump it out of the ground, just so speculators can pump it right back into the ground.

      /s

      • Anthony A. says:

        Maybe someone can seal up a lot of the empty malls around the country and use them for oil storage too!

      • Joe says:

        Like Aluminum places did…move to one side of the factory as sold and made a fake supply/demand shortage to Jack up prices…

      • polecat says:

        So, it’s ‘They pretend to pay up .. while we pretend to pump’.

    • Shiloh1 says:

      Michael, in your point 8 example, wasn’t that like the 3Com / Palm spin-off debacle 20 years ago?

    • exiter says:

      OTOH, how about the Invisible Hands that are front-running delivery to Cushing? They are their own fly-on-the- wall, as natural-born insiders know the estimated MT bbl. s remaining and, a deal was struck…arrange/take that MT# off the books, add in the always-present fudge-factors [if u think the insiders wouldn’t have fudge-factors and wouldn’t know precisely how to adjust them…what with scheduled and unscheduled maintenance and repairs and “pay-to-play” inspectors/auditors and other “wrinkles” us outsiders know nothing about, then u don’t understand “insider”]…Them insiders just got a whole lot richer and powerfuller .

      It is their business to be insiders. It’s how insiders do business. Risk is for the outsiders.

  24. Suricatta says:

    So is Brent front month expiring in 9 days the next to be killed off?
    Or do those producers/longs still have sufficient storage?

    • Prof. Emeritus says:

      No, unless European oil traders were similarly bullish – which I doubt.

    • Rcohn says:

      The Brent terminal is 1/2 mile from the water; thus oil tankers can be filled up rather easily. Although there are large oil terminals along the Gulf Coast and on the NY and CA. coasts , these are primarily for import/export.Much of the oil produced in the Permian must be stored and shipped to landlocked storage terminals.It is these terminals which are close to being full.

  25. Scott says:

    Oil, oil everywhere and only so many places to store it until demand picks up. So when do oil storage prices skyrocket?

    • Rcohn says:

      As long as demand is constrained , supply will exceed demand and storage facilities will move towards capacity. As this is happening there will be more and more wells that will be shut down.

      • Roger says:

        Problem being is wells aren’t always able to be brought back online.

        When the steam and rock cools you can’t always easily restart wells.

      • polecat says:

        Demand destruction, coinciding with oil infrastructure obliteration .. what a great combo !

        …. for someones else.

    • burn says:

      your a little late to the party there Scott! Those big storage tankers are holding alot of oil. Rates went from 30,000 a day to 300,000/day

  26. Suricatta says:

    So is Brent front month expiring in 9 days the next to be in deep trouble?
    Or do those producers/longs still have sufficient storage?

  27. Dan Romig says:

    Just five days ago I commented on reports of the North Dakota oil rig count dropping from 52 to 35 in a month.

    Lynn Helms of the ND Department of Mineral Resources predicted the rig count would soon be in the teens. Perhaps single digits is next???

    • Unamused says:

      Perhaps single digits is next???

      Just don’t bet on a negative rig count.

      At least not with your own money.

  28. Pro-Establishment says:

    Dear traders- please do this to silver next!

    You can pay me $50/Oz to take delivery!

    • fajensen says:

      In an emergency, You can make 4 cups of pot noodles using one beanie baby as fuel.

      With AMZN stock… not.

  29. NARmageddon says:

    Simplified question: Who gets to set the oil futures delivery date, the seller/producer or the buyer/consumer? I could not find an explcit answer anywhere.

    Unsatisfactory answer: The CME rules says that delivery can be May 1 to May 31, but I wonder who gets to decide on the completion date?

    My guess is that the seller gets to decide, more or less because that is the reasonable way to do it. Think of it this way, once a supertanker arrives, the buyer should not be able to hold up the supertanker (at seller’s expense) from May 1 to May 30 just because that’s profitable for the buyer.

    Why did I ask? Well, when May oil was trading at $-40 today for a moment. If a buyer had 40 days (Apr20 to May30) to get an empty supertanker in position as storage, such a buyer might be able to profit a bundle on the $-40 price. But if the seller decides the delivery date, there could be as little as 10 days (Apr20-May1) to get an empty tanker into position).

    https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_contractSpecs_futures.html

    Hmm, I dug deeper. It seems the seller must have the oil available in Cushing, OK (tank farm) on May 1. There was nothing about when the buyer would have to start accepting, apart from being finished by month end. This stuff uis complicated, not sure I understand it all.

    • exiter says:

      …understand it all….

      By definition, insiders understand it all, or they are not truly insiders.
      When the news publisher knows the exact time, place and content of the future story/announcement he is going to run…he might qualify as true “insider”…and benefit by front-running HIS news.

    • Mark says:

      EDQ clause is standard in all crude sales contracts. EDQ means Equal Daily Quantities. So the crude is deemed to be delivered 1/31 of the total each day regardless of the actoal day

  30. Some hedge funds will close? Corporate debt will blow up? I am just not sure how the equities market which was trying to go green after a drop at the open was so slow to begin to price this in. The stock market truly must be mark to myth.

  31. B Dinn says:

    On the other side of the trade a lot of the tanker stocks are up a lot. Look at STNG, TK, DHT. The cost of storing the oil in the tankers has shot up.

  32. Prof. Emeritus says:

    Tip: While storage is super pricy right now, crude oil can actually be easily processed to coat and re-coat roads and industrial surfaces in a few days (much like bitumen, but with even less refining). Environmental agencies don’t really fancy the idea, but hey – with getting paid 10…20…wait, up to 38 $ per barrel to handle the stuff paying green fines seems like a tiny price to pay.

    • Gandalf says:

      WTI, and especially fracked shale oil, is all light and sweet, with a high percentage of the volatile hydrocarbon fractions that make up gasoline, and has very little if any bitumen for asphalt. If you pour gasoline onto a road it just all evaporates and turns into smog

      Bitumen grade heavy and sour crude oil originating in North America has also crashed in price. Nobody needs tar for building or surfacing anything right now because nothing is being built or surfaced

      There’s a SEVERE supply and demand dislocation here also, and decades of US oil dependency on imported crude – much of it of the heavy sour type.

      Many US refineries in the East and West coasts are still designed to process heavy sour crude, which has to be imported by tanker ships. Pipelines that COULD pump North American sourced heavy sour crude or the excess WTI shake oil were never built to these refineries and will never get built with all this NIMBY environmentalism.

      Plus there’s the Jones Act, but that’s another story

      • char says:

        We are talking about the USA, were corruption doesn’t rule> NIMBY is the excuse. Real reason is the long payback time to long to not fear Tesla, or will we all be driving electric in 10 years. CO2, we need to do something about it and Shale, always unprofitable and will they be out of suckers or plays. Tesla, CO2 and Shale’s future are three very good reasons why they are bad investments.

        • Canadian says:

          Tesla?

          Get back to me when they can generate cash flow and profit consistently, and release a quality car at an accessible price.

          $80,000 toys for the rapidly shrinking yuppie class who buys one as a status symbol aren’t going to move the needle… nor sell en masse in the post-virus economy.

        • Happy1 says:

          Tesla is a sham and will never pay a dividend. They will never be 10% of the US market and are no threat whatsoever to oil.

        • where corruption is institutionalized.

  33. DawnsEarlyLight says:

    Maybe now I’ll be able to afford Premium gas.

    • California Bob says:

      Unless your car requires premium or can modify valve and ignition timing dynamically, based on fuel’s anti-detonation capacity (octane rating), you’ll be wasting money putting premium gas in the tank. Most cars not considered high performance–i.e. sports and ‘muscle’ cars–will not benefit from premium gas.

  34. cesqy says:

    I’m trying to find a wealthy fracker that will pay me in the future to fill up my truck. It hasn’t been used much in the last month anyway. I’m willing to siphon the gas and give it back in a month minus a storage fee, of course.

  35. Wolf Richter says:

    UPDATE: I have now added this explanation to the article:

    It seems some oil trading firms and hedge funds were caught on the wrong side of heavily leveraged bets, and couldn’t roll over their contracts due to a liquidity crunch and horrible market conditions in that space. But if they can’t sell the contracts by tomorrow, they’ll have to take delivery of the physical oil at the delivery point for NYMEX futures, namely in Cushing, Oklahoma.

    The delivery time is in May. But storage in Cushing for May seems to have been spoken for, and now these traders see that they have no place to go with this oil that they might have to take delivery of in May.

    But the market for the May contract today essentially collapsed, as potential buyers faced the same problem. And so in their desperate efforts to get rid of the contracts so they wouldn’t end up with the oil that they couldn’t physically handle, these speculators paid a heavy price.

    • DanR says:

      A quick question: do you think in future months this selling will occur a bit sooner than the day before one commits to delivery?

      • Wolf Richter says:

        DanR ,

        The entire industry is now frazzled. The June contract is the next to watch.

        The hope is that this blow-out of the May contract may have destroyed some of the most naive risk-takers in the space, and going forward, there might be a little more prudence, if that’s the right word.

        But the underlying dynamics — including full storage facilities — might still be worse in June and July, and liquidity might even be worse, and it might be tough to roll the June contract.

        But who knows. Maybe the Fed will be taking delivery of the oil that these hedge funds can’t handle, or something.

        • DanR says:

          That makes sense! I have an account with Interactive Brokers and if I trade futures I get all sorts of nasty grams and even forced liquidation well in advance of days like today.

          I’m sure next month it might be more once bitten twice shy.

        • MCH says:

          Basically, this is a supply and demand problem then?

          Because there is no demand, all the supply has to go to storage, but now we’ve run out of storage, so, there is no place to put the physical stuff.

          Too much supply. That part I got. What I’m curious is how all of these contracts will work out in real life.

          Let’s say I’m XYZ shale company, and I am contracted to deliver some amount of oil by tomorrow to Cushing. Does that mean that said shale company now has to pay the buyer to deliver that oil? Or is it some 3rd party that bought the oil already at a fixed price and that’s where the contract is, to now make physical delivery of oil, they have to pay the buyer?

          Just trying to understand the physical side of all of this.

          I don’t feel too badly for the hedge funds, they knew there was some degree of risk, if they didn’t want their face ripped off, they could’ve put their money in nice and safe CDs.

        • nick kelly says:

          ‘Maybe the Fed will be taking delivery of the oil that these hedge funds can’t handle, or something.’

          Were u making a joke or sarc? I can see Fed supplying pay-offs to whoever but storage?

          With a wave of Saudi tankers heading to the US refineries, will there be talk of turning them away?

        • Wolf Richter says:

          nick kelly,

          I HOPE I was joking.

        • polecat says:

          So what we hominids have, is our speculative paws in a petroleum-based monkey trap .. courtesy of a novel virus.

          Right ?

        • The demand for global storage, national strategic reserves, is still pretty low. As the EM rises up economically, these nations need storage. A few years ago global demand was projected to rise several fold by 2050. Covid is just a bump in the road, and nations like China need to add reserves. Even the US reserve has capacity. Just a question of sending those tankers where they are needed. Nations with above ground storage adds several dollars to the price of a barrel, and globally in the aggregate. Buying and storing oil adds value. Global monetary policy has suppressed real economic growth, after the system collapses a release of pent up demand will spike oil demand. Fortunately this added storage will mitigate price volatility. Does this Saudi oil need to be priced in US dollars (off the charts here?) Maybe no one wants to pay the premium.

        • Pete in Toronto says:

          DanR,

          Interactive Brokers made the news today.

          “Interactive Brokers Stuck With $88 Million Loss After Oil-Trading Clients Bust”:

    • Wes says:

      Mr. Richter, the financial elites will probably go begging to the SEC for a mulligan since they have no place to put the oil they just inadvertently bought.

    • former says:

      I saw solution somewhere and will copy/paraphrase it here:

      1 – fed steps in and loads up on futures
      2 – they take the delivery (into their building)
      3 – then someone light up the matches

      … at least one problem solved lol

    • cb says:

      Wolf said: “and couldn’t roll over their contracts due to a liquidity crunch and horrible market conditions in that space.”
      ______________________________

      Isn’t it just that there is no storage space to receive the oil. When it became known that there was no storage to receive the oil, and the buyer was responsible for having that storage, then there was no bid. That is the summation of the horrible market conditions and the lack of bid is not because there is no liquidity (money), but no storage.

      So it’s really seems to be a physical problem, not a financial problem other than the financial traders overlooked the need for physical space.

  36. I’ve been watching this all morning wondering what was happening. Stupid me thought why would anyone sell at a negative. Why wouldn’t they just shut down the wells or even the refinery. It never dawned on me that speculators had just gotten caught with their shorts down!! Thank you, Wolf. This is why I read your blog at every posting..

  37. Shadow Boxer Rebellion says:

    Err, Wolf, it looks like your NOTHING GOES TO HECK IN A STRAIGHT LINE beer mug is hopelessly broken. Lots of things, NOW, apparently go straight to heck without stopping at any floors on the away down.

  38. cesqy says:

    Negative oil just has to be followed by negative gold, negative stocks, and bitcoin. Europe and Japan unleashed the negative financial world. Watching Netflix is the only thing left real. sarcasm and the square root of negative 1 off

    • Brant Lee says:

      I’m not far from Cushing,OK. If you have to take delivery you can find em on Route 66. Bring your buckets and garbage cans, oil is coming out the water faucets.

    • Shiloh1 says:

      Speaking of gold, Schiff did a YT after close today with his take on oil, idiot shale lenders, etc. Regarding gold, he says the COMEX will have to cough up gold for physical devilry that they don’t have, opposite as oil thing today.

      • cesqy says:

        All those poor gold devils are going to need to massively upgrade their backpacks, guns, and cardio.

  39. Michael Engel says:

    Can used car prices be negative : Yes !!!
    When auctions will start.

  40. DO says:

    On the plus side, I think this event will spike demand in underwear and pants, particularly in the oil trading sector.

  41. GotCollateral says:

    The beatings will continue until O & G producers get slaughtered… taking out the anyone (and any securities) 10 to 1 on long HY market bets.

    Still some people here think the bottom was in for HY bonds… lolololol

  42. Bobber says:

    What happens to a speculator who fails to close an oil contract and cannot take delivery? Maybe this has never been tested before.

    • Prof. Emeritus says:

      I think there is an option for cash settlement on oil futures. Otherwise the clearing house shall force the buyer to open a physical deposit (practically rent space at a designated oil tanking company), but it’s been a while since I’ve gone through the fine print of standard commodity contracts, so don’t take that for granted.

      • Shiloh1 says:

        Are the likes of Kinder Morgan with terminals or GATX will rail cars making money off this?

  43. Satya Mardelli says:

    If 40M Americans are unemployed this summer my guess is that the demand for gasoline will be way down. Way, way down.
    Used car and truck market will probably tank as well. Car repossessions off the charts. Auto auctions will have plenty of inventory and no bidders.
    Who needs oil in this environment?

    • char says:

      You forgot the millions that now work from home. Or can’t go to the mall because the stores you want to visit have gone tits up.

      • Tim says:

        Or take a taxi home from whichever bar they would like to drain their sorrows in, ‘cuz they’re shut too.

  44. Mike G says:

    As a followup from the anti-social distancing protests, I expect to see people now showing up at gas stations expecting to be paid to fill up.

  45. Iamafan says:

    Listen to the 4th episode of Dr. JOHN IONNIDIS talk on Perspective on Pandemics. It will really make you think. Specially during these crazy times.

    • DO says:

      Iamafan,

      I have been listening to alternative news regarding the pandemic since the beginning of the lock-downs, especially to people who have the credentials and some of them were quite critical of the actions being taken by the various governments.

      Dr Ionnidis is one of those who have from the beginning said that we needed more data before we took drastic actions that could end up causing more harm than good. I have to say it has been painful to watch how these actions have put us in a very precarious financial position.

      But hey, this doesn’t matter because the propaganda machine can fix any mistakes the govt makes, by deploying, as they have been doing, all their experts.

      • Lance Manly says:

        Sure, far superior to the man that has run the premier infectious disease center in the world. Has successfully managed the AIDS epidemic and Ebola. God, why are we listening to him

        • DO says:

          Well, you are free to keep listening to him, I bet he has your best interest in mind, as are all govt drones. Ignore what Dr. Ionnidis says on freshly published research. Some of what he mentions was previously mentioned by Dr Fauci in March on a commentary he wrote in the NEJM. You must also have no financial worries and/or are older (and maybe sick), so you can keep “sheltering in place” for another 2-3 months, no worries. As for the plebs, they do need to work at some point to be able to eat cake.

        • Shiloh1 says:

          Observation during my Church Of The Sunday Long Run Services this past weekend: The trails and groves in the Crook County Forest Preserves were loaded with families as if it was Fourth Of July Holiday. A good time was had by all.

        • Lance Manly says:

          I looked at his work on “COVID-19 Antibody Seroprevalence in Santa Clara County, California”.

          1. He did not account for the false positives that would occur with the serum test given as provided by the manufacturer.
          2. The recruiting scheme through Facebook could well have enriched the study with positives.

          Not impressed.

      • Iamafan says:

        I doubt Stanford University would hire an unqualified person.
        I like the questions he is asking. Makes a freer, more democratic nation to be proud of.

        • It’s a matter of position. Past Fed chiefs are always critical of policy, while present Fed chiefs are always supportive. Change Fauci with Ionnidis and you probably have the same response. Its role playing and reality TV. As for truth, there is no there, there.

      • Gandalf says:

        DO,

        So right!

        We should have put the MSM under military censorship, allowing not a peep of the ongoing pandemic into the news, run our factories, er, service/consumer economy at full blast, packed hundreds of thousands of people into giant MAGA political rallies in all the major cities, and let herd immunity take care of itself!

        That would be just like the US response to the Spanish flu pandemic over a hundred years ago!. A mere inconvenience it was – through our determined resolve, we helped those tea sippers and frogs across the Pond win the War To End All Wars.

        Boy, was winning THAT war ever worth it!

        A mere 675,000 Americans died of the Spanish flu, more than were killed fighting in WWI. Eh, Americans proliferated like rabbits back then, with huge families, you could always make more Americans!

        Ask not what an Inconvenient Flu can do to You. Ask what You can do to spread the Flu

      • char says:

        Big business always hides behind the “we need more data” if they don’t want to loose money. Sadly there is no choice for everything normal on the table. A lock down is the cheapest way to respond to the crisis and it has the benefit of fewest death,

      • MC01 says:

        Just a quick thing to add.
        Here in Italy the failure of the full lockdown to stop the spread of the disease is a huge political issue.
        Ironically enough despite the end of the emergency the government is trying in every possible way to extend the lockdown because they know with the end of the emergency their own heads would start rolling.

        Anyway here is what we know: the decision to lock down the country was taken solely on the base of data and advice the Chinese government and the OMS/WHO supplied us. In short we took advice from the Stone marten on how to secure the henhouse.
        It’s now beyond doubt China witheld, and maybe even doctored, vital epidemiological and genetic data, and did so on purpose.
        In short we took crucial decisions based on incomplete and/or manipulated data we were fed with the explicit purpose of misleading our decision-making process.
        This is why the virus behaved against all theoretical models and why it was seemingly impossible to stop.
        Once we had enough data of our own and started using it, surprise, the virus was quickly put under control and is now dying down faster than anybody expected. There are still some things we don’t understand (widely different hospitalization and mortality rates to say one) but we’ll get there shortly. For example our epidemiologists are pretty sure there won’t be the much feared “second wave” later this year, but a long tail of isolated case and highly localized clusters until the disease becomes “background noise”, perhaps even before a vaccine is available in quantity. This can be dealt with vigilance, common sense and, much more critical, putting aside dedicated wards to be used exclusively for Covid-19 patients in this post-emergency phase.

        The breadth and scope of the China/OMS disinformation campaign has been simply stunning. A typical example is how the OMS was still insisting on longer and longer lockdowns in the West while China was reopening for business after, what?, 6-7 weeks at most without the OMS objecting in the very least. Perhaps somebody at the OMS needed more time to dispose of incriminating evidence, or perhaps China was cynically trying to get an even bigger lead in the recover phase on the rest of the world.
        I am also waiting for genetic data to see how and how fast this thing mutates: at this point even the early genetic data we got from China is suspicious to say the very least. I am just a humble chemist, but my biochemistry textbook has a nice virology section. ;-)

        And this is just the stuff we know that’s out in the open. There’s enough to be mad without believing in a manmade virus or whatever.

        • Gandalf says:

          Early medical reports coming out about studies of antibody testing of local populations done by some highly reputable medical institutions – Massachusetts General, Stanford, and Colombia – some 30% of people tested in local areas heavily hit by corona virus are testing positive for antibodies!

          If the numbers are that high, and IF the antibodies mean that these people are now immune to the virus, it could mean that herd immunity is rapidly developing in populations exposed to the virus.

          Or, it could mean that huge numbers of people are unknowingly infected and asymptomatic, and could still infect others and lead to more deaths.

          And, it’s still unclear about that business with re-infection with the virus, whether you have antibodies or not

          Lots of unknowns, but the antibody testing results show a light at the end of the tunnel. Incoming train? Or the end of this long dark tunnel?

        • Gandalf says:

          MC01.
          The worldwide genetic codes of various strains of corona virus are now open source and posted online. It mutates at about two mutations per month, half the rate of influenza.

          Some reading for you:

          https://www.livescience.com/coronavirus-mutation-rate.html

          https://nextstrain.org/ncov/global?l=clock
          https://nextstrain.org/ncov/global
          https://nextstrain.org/narratives/ncov/sit-rep/2020-03-13

          https://www.gisaid.org/

          https://www.biorxiv.org/content/10.1101/2020.04.14.040782v1

        • MC01 says:

          Gandalf: the thing that has our attention here is how over the past two weeks new cases have becoming not merely fewer and fewer but milder and milder, to the point the first Covid-19 wards were shut down on Sunday in my region (Lombardy) for lack of patients.
          Part of the reason is now everybody knows what the first symptom is (loss of taste and smell), so people get tested quicker but since there’s no cure and recently infected patients appear to rapidly improve and not to require hospitalization there may be more to it.

          The big problem is, of course, the massive difference in virulence.
          We still have no clue why this thing was so lethal here but was much less dangerous than a standard seasonal flu down South. Or why Germany has heaps of cases but such low hospitalization and mortality rates.

          Antibody-serum tests are words I am learning to hate because they have been throughly politicized. According to our politicians here they are panacea. Who knows, they may even cure baldness at this rate!
          But healthcare experts have given exactly the same warnings you did: perhaps people with antibodies are now immune to the virus, but there’s no guarantee they won’t infect others.

          In the meantime Germany and India are preparing to reopen for business, while our politicians won’t even allow us to go for a walk and seem dead set to keep the country locked down forever for fear of being sent packing or in jail.
          At this rate in a few weeks we won’t have to worry about Covid-19 but about cholera and typhoid fever.

        • Gandalf says:

          MC01,
          First off, the bit about this corona virus picking up two mutations a month means that every month the number of different strains TRIPLES, as each strain develops two different strains. So the number of different strains is growing exponentially.

          The nextstrain.org’s executive summary of 4/17/2020 reports some 1,347 different strains of this virus now (following their weekly reports, their reported numbers of different strains do triple roughly every month).

          This is after only a half a year of spread and mutation! Doing a quick math estimate, by the end of the next six months, October, 2020, there will easily be over 300,000 different strains.

          Although mutating slower than influenza, that’s still a frighteningly fast rate of mutation!

          The odds of a mutant strain appearing that is not countered by whatever antibody herd immunity has developed by October is pretty darn high, I would say.

          The evolutionary selection pressure would be to favor those strains that have the highest success in replicating – this generally means the strains that are more infectious and less likely to kill their hosts immediately will win this genetic race, which would mean that the coronavirus should eventually mutate into a chronic mild endemic disease worldwide.

          At the same time, the constant exponential rate of mutation ALSO means that new strains will inevitably appear that will not be countered by the established antibody herd immunity, and these new strains may prove to be highly infectious and just lethal enough in a small subset of the population to kill large numbers of people.

          That would follow the history of the Spanish flu, which appeared in early 1918, seemed to abate, and then reappeared later that year, deadlier than the first wave before mysteriously disappearing in early 1919.

          I do expect that coronavirus will be a persistent, endemic problem, just like influenza is today.

        • Gandalf says:

          Also, a few comments about why some cities and parts of the country, and why entire countries seem to be less affected than others:

          1. There is clearly luck or bad luck and timing involved here. All it takes is for ONE super spreader, carrying the virus, getting into close contact with lots of people, to start a mass pandemic in a local area. If that local area then DELAYS starting social isolation and canceling events with mass gatherings of people, the pandemic really gets going.

          Milan and New York City both had all of that in spades. Both are international cities with lots of connections to China and the rest of the world. Both delayed starting social isolation until the pandemic had started to overwhelm their hospital systems. Remember the #MilanWillNotStop campaign? Sheer idiocy

          Iran had a similar pattern – the pandemic started in the major religious and governmental city of Qom, social isolation was resisted by the mullahs in control, and the pandemic raged like wildfire into the rest of the country. China is one of the major countries that continues to trade with Iran, against the US imposed sanctions, Wuhan is a major industrial center that produces a lot of the stuff that nobody else will sell to Iran, and almost certainly, that Qom-Wuhan connection was the point of contact for the start of the pandemic in Iran.

          New Orleans had the Mardi Gras as its super spreader ground zero. Boston had an international Biotech conference.

          Some cities got lucky and dodged the bullet. San Francisco may have avoided a major early super spreader event when the 49ers lost the Super Bowl. A massive crowd of hundreds of thousands of people in the streets of San Francisco a day or so after February 2 could have become a very early super spreader event.

          2. Once the pandemic overwhelms the local hospitals, to the point that doctors and nurses are getting infected and dying, then clearly, the hospitals become major super spreaders of the pandemic rather than helping control the pandemic. An overwhelmed hospital quickly uses up all the masks and other PPE for the healthcare workers there, and EVERYBODY there becomes at risk for getting the virus and taking it home and spreading it to their family and around the city as they go about their daily lives. I believe that is what happened in Wuhan, Milan, New York City, and Qom.

          It appears that this overwhelming of hospitals is happening in Japan right now. It is likely to happen to Sweden very soon.

          3. The structure and social fabric of particular cities vary, and this also affects spread of the disease. Places where the housing has high population density and high usage of crowded public transportation will spread the virus far faster and to more people than other locations with widely space individual homes, and very little public transportation.

          4. Why is India not overwhelmed by the corona virus? There are theories – heat and humidity, malaria and widespread use of hydroxychloroquine, widespread use of the BCG vaccine, etc.
          But, of note, Modi did take swift action in response to the coronavirus, to limit travel from China and other places, impose quarantines, and cancel sporting events and other large gatherings.

          So, early action to avoid superspreader events is key.

          Brazil is getting hit hard, largely because of Bolsonaro’s #BrazilWillNotStop campaign. So much for the heat and humidity factor.

          I think social isolation is crucial here in stopping or slowing this pandemic, no doubt about it.

          As much as you hate it, MC01, because Northern Italy still appears to be in the early stages of recovering from being overwhelmed, I do believe that it is too early to relax the restrictions there.

  46. SocalJim says:

    Just got off the phone with someone trying to purchase a cheap single family in the Boston suburbs. He was in a bidding war and did not get the property … mid 700s. Said he is having a heck of a time getting into a property. I also heard of a cheap property in inland Orange County go under agreement in several days for 900K. But, not all is rosey. The multi-million dollar market is slow.

    • Wolf Richter says:

      SocalJim,

      Clinging by your fingernails to cherry-picked anecdotes, hoping that home prices won’t decline as 30 million US workers are losing their jobs?

      • GotCollateral says:

        I was talking to a ETF manager for overnight repurchase agreements all this weekend, who couldn’t tell me what kind of collateral was backing their lending, except for that its all just US Treasuries, Agency and Agency Derivatives… (because the bank decides what collateral they get, and what haircut they get on the collateral daily, they just put the money up and get paid their secondary credit rate)

        Gee I wonder what those “Agency Derivatives” can be…

        Guy worked for bear stearns… lol

        • Shiloh1 says:

          Kyle Bass was saying in January caution about the GLD ETF, since HSBC is involved? Got phyzz?

        • GotCollateral says:

          @Shiloh1

          Paper cash gold market is fueled by rehypothicated gold ( collateral) like everything else… but as long as you pay off the “auditors” to take some pictures of some *cough* lead *cough* bars twice a year… all is well lol

      • WES says:

        Wolfe:

        Up here in Toronto, I have been getting real estate flyers attached to my front door knob nearly every third day!

        You know the long narrow flyers especially designed with hole and side cut to fit snugly onto the neck of doorknobs.

        Before Covid-19 all real estate flyers came as junk mail.

        Obviously, real estate agents now have more time and less money!

        A sure sign of tougher times ahead.

      • polecat says:

        Cue Jim’s impending Wilhelm scream …

      • Tom Stone says:

        Wolf, these folks just need to learn how to code and they will be guaranteed a bright future!

  47. thatsit says:

    @ Prof. Emeritus:

    There’s obviously increasing oversupply in all regions. Almost all alternatives to store crude incl. floating storage on VLCCs/ULCCs are taken. OPEC+ production cuts (if any…) will kick in 10-20 days. Meanwhile negative demand effects of worldwide lockdowns are becoming increasingly felt. After seeing what happened today with WTI front month, why would anyone take the risk being long front month Brent? Even if OPEC+ et al come up with usual jaw boning – what effect can that have on a contract expiring in 1 week? And still trading around 25.90. Of course the delivery mechanism is more complicated than WTI/Cushing, but all considered it seems shorting it might be a low risk/high potential return bet.

  48. David says:

    It is interesting to read the comments but I would suggest that no one may have figured it out.
    You got this part of it right. Speculators got killed because they had to pay $37 per contract to have someone take oil that was set to be delivered in May because the speculator had no place to store it.
    Here is the question that no one seems to be asking. Who were the buyers who were willing to take possession of the oil? Maybe some commercial firms that have storage space or a tanker owner who can store the oil at sea and use the $37 to offset the cost.
    But my guess is that today’s buyers will never take possession of the oil. You see the buyers were short sellers who shorted oil back in Feb to commercial interests who are capable of refining the oil. Here is what really happened today. You have heard of a short squeeze. Today you just saw the opposite–a bull squeeze engineered by the shorts who kept selling until the longs had no choice but to sell to the shorts who offset their position and are celebrating tonight.

  49. SocalJim says:

    After this, my bet is the oil futures are restructured to be cash settled.

    • Iamafan says:

      didn’t gold just have something similar when the price of paper gold disconnected with the real thing delivered. I doubt gold has a storage problem. Maybe it has an honesty problem, but I don’t follow gold so I don’t know.

      • Tinky says:

        It is/was the opposite, i.e. Contango: gold futures much higher than the “spot” price.

        • Tinky says:

          Sorry – both technically contango, but for opposite reasons. There is a glut of oil and low demand, expected to change a few months out, while gold is in low supply and high current demand, which the spot price does not accurately reflect.

      • Wes says:

        Iamafan:
        A few weeks ago gold did the exact opposite. There were 100 ounce contract holders waiting to take physical delivery and the LBMA couldn’t fill them (Diverted to the COMEX). They were transporting physical gold by commercial jet airliners to cover. A big disconnect between paper and the real stuff. You can’t even buy a gold coin right now. It looks like the Wall Street elite bankster paper traders may have lost control. Not to worry they will just swap paper with the Federal Reserve while the real economy goes underground.

        It also looks like the petro dollar may be history.

        • RD Blakeslee says:

          “You can’t even buy a gold coin right now.”

          ?

          Run “gold coins” on the APMEX website search engine.

        • Kitcos trader said this in an interview. Gold has supply chain problems like anything else. He said that the normal cost per oz to ship is 3 cents, but lately it was 1.40. Mines close, mints close, shipping constraints. All things consider Gold is acting pretty rationally.

  50. S says:

    That is great news because lower oil prices will help the airlines! LOL

    So I reckon the airlines should get less bailout money.

    • Wolf Richter says:

      Watch their losses on their fuel hedges if aviation fuel follows this spectacle here. Delta has its own refinery, but I assume it hedged a big part of its crude oil purchases at much higher prices. And the airlines can’t even burn the fuel that they have agreed to buy at what is now a higher price.

      • Augusto says:

        Wolf, I used to work in the Upstream and audit oil and gas marketing departments and strategies. A lot of producers forward sell their crude as a hedge against their capital program costs. The question ultimately is, “who bought those barrels, and did they cover themselves?” Most trading shops cover only a portion of the downside, using sophisticated trading programs with bounds based on past market performance. The problem with those programs is none of them are set for catastrophic risk, such as a total melt down like -$39 a barrel. Catastrophic risk is essentially, the same always, and it means there is “no market”, totally contrary to the construction of all trading thinking/programs, like in this case: there is no place to put your oil and therefore no one to sell it to. The last question is “who” holds these barrels on paper? They are the losers.

    • MC01 says:

      I am actually surprised so far fuel hedging hasn’t completely blown up.

      Fuel prices are ridiculously low, and right now besides China the only countries increasing flight frequencies are Australia and Korea. Fuel is just piling up and going unused… and airlines are paying it far more than it’s worth.

  51. Ed Kennedy says:

    A question for those who know where the information is hidden.
    What is the VOLUME of future contracts which the speculators sold at a negative price? A small volume is like bursting a party balloon. A very large volume is like the Hindenburg crashing.

    • polecat says:

      Hummm, zepplins ….

      You’ll need a whole lotta Gov

      DUMP! ‘De dumb De dumb, de Dumb de Dumb

      DUMP! ‘De dumb De dumb, de Dumb de Dumb

      DUMP! ‘De dumb De dumb, de Dumb de Dumb

      DUMP! ‘De dumb De dumb, de Dumb de Dumb

      You’re Contracts be lit .. now they’re sorely burnin ..
      And you’ve been caught pants-down while things are turnin ..
      But what you really need is some highly speculative churnin ..

      Way-way, down-insiiiide – Trader! in that humongous salt dome, You-uuu need in- Ahhhhhhhhhhhhhhhh…….

      You gonna have to settle every liter of that crude ..

      You’re gonna settle that crude !

      DUMP! De dumb De dumb, de Dumb de Dumb
      DUMP! De dumb De dumb, de Dumb de Dumb

      I’m gonna give ya every cu. ft. of my DOME – I’m gonna give you my Gov ..

      Gotta whole lotta gov – sczroooom !
      Gotta whole lotta gov – sczroooooommm !
      Ya Gotta A Whole Lotta Gov – sczrooooooooommmmmm !

      Gotta whole lotta Govvvvvvvvv

  52. Oil says:

    Hi all,
    What will be the rollover price if any?

  53. Oil says:

    Will Trump force oil producers to stop production?
    Will it be the end of the fracking industry?
    Will it be the end of speculation on wti future?

    • KPL says:

      “Will Trump force oil producers to stop production?”

      Read at mishtalk that Trump is looking at paying oil producer for NOT producing oil. Capitalism at work.

  54. Michael Engel says:

    1) There is no demand for oil. Oil tank cars for sale.
    2) Munger own R/R. R/R have tank cars. Since demand plunge,
    Munger cars don’t move.
    3) Paper oil panic today.
    4) Munger strong hand, or someone like him, can fill his idle cars
    for a juicy fee, from the weak paper hands.

    • GotCollateral says:

      Thermite… meet Munger geotagged Oil cars… cheap DJI drones Johnny on the Spot ready to put his melted out cars in boneyard

      He better have protection lol

    • Shiloh1 says:

      Michael, I think Wells Fargo had a rail car leasing business, seriously.

  55. Michael Engel says:

    1) Extremely volatile oil market. Today SPX produced another small bar on low volume.
    4) Divergence with the oil market. The last SPX 4 bars are the smallest in the last 39 trading days. Oil future dived vertically into deep water, but SPX stayed detached.
    5) Institution don’t participate in the market.
    6) Market makers might change their behavior and start market capitulation. Oil volatility is contagious. large volatile red selling bars might soon show up on the contaminated SPX.

  56. WES says:

    Bobber:

    I suspect the oil pirates make you walk the plank until you fall into a big tank of oil!

  57. roddy6667 says:

    An investment in oil (and a lot of other things) now, is an investment in gravity.

    • andy says:

      There is no gravity, there is only distortion in space-time continium, clearly. But nice try.

  58. Kasadour says:

    Too bad they can’t frack the oil back into the rock. /s –

    this is going to bring the entire energy sector to a stand still. Hope June prices hold up. Many sectors are failing at once. Retail is a nightmare. The bond market is heading for massive repricing.

  59. The Original Colorado Kid says:

    I live in Colorado’s oilpatch. Long family tradition, though nobody’s in it anymore, except a once-wealthy friend who owns a ton of oil/gas leases and a distant relative who runs a nice museum that gets a lot of its revenue from leases and is on shaky ground financially. I was here when Black Monday hit in 1982 and was able to buy real estate for pennies on the dollar. Lots of pain then, and more now, but memories are faulty and people will dive right back in when given the chance. My uncle was one of the first drillers on Alaska’s North Slope and he’s talked plenty about oil being a business for fools.

    • The Original Colorado Kid says:

      Correction, it was actually Black Sunday, though most of us didn’t know about it until Monday, so we call it that. On Sunday, May 2, 1982, Exxon’s board of directors frowned at the declining price of oil and pulled the plug, after spending a fortune developing oil shale infrastructure. Second verse, same as the first, but now it’s worldwide.

      From an article in High Country News:
      https://www.hcn.org/wotr/black-sunday-30-years-later

      Exxon spent a million dollars a day in an area 60 miles long and 20 miles wide. It was a lot like driving a dump truck full of $100 bills through small towns with the tailgate open. It was boomtown euphoria.

      There was a free-for-all rush to build new schools, pave streets, erect town halls, hire police and plat subdivisions for an estimated 1.5 million people. On 2,300 acres across the Colorado River from Parachute, an entirely new town was built, called Battlement Mesa. It would sport a golf course, shopping mall and housing, with executive homes on the 18th hole. Exxon promised its workers years of employment as company executives arrived from Texas in tailored jeans, hand-tooled boots and big smiles. “We’re from Houston and we’re here to help you,” they said.

    • TXRancher says:

      1987 perhaps?

  60. California Bob says:

    Sooooooo … when do the gas stations start paying us to “Fill ‘Er Up?”

  61. FinePrintGuy says:

    Trump still has some aces to play. Just tell MBS that the troops are being pulled out and he can deal with the Iranians on his own. I wonder how much peace of mind he’ll get from those “Made in China” missile defense systems…

  62. Paul says:

    So what happens if the trader keeps the contract and just doesn’t show up in Cushing, OK to take delivery? Get sued?

  63. cd says:

    I see cheap oil for years but more taxation on the gas from that oil to pay for this implosion and debt buying insanity….so oil cheap, gas the same as today…..

  64. George W says:

    Oil futures collapse and yet King dollar goes up.
    Did the Petrodollar just die?
    Long live the King!

  65. KPL says:

    How come our Feddie boy Powell did not come out with his printing press? After all no hedge fund or speculator can be allowed to be blown up.

  66. Augusto says:

    Goldman is out claiming its the little guys….inexperienced retail speculators, who blew up the paper-physical balance and price. I doubt it. Of course, we may never know which hedge funds or bank trading desks goofed up…the Fed will probably bail them out, so we never know. Just a big bill in a few months from now. More carnage coming tomorrow in the oil markets, even less storage left, and a lot more oil looking for storage that ain’t there….its literally coming down the Pipe..with no place to go….

  67. Augusto says:

    Up here is Alberta, the heavy oil and oil sands guys, have to keep pumping or they damage either their plants or the reservoirs, or both. About $10 cost to produce and even before today’s debacle, the Western Canadian price was trading well below that (forgetting royalty, transportation, and differentials with Saudi’s killing us at the Texas refineries, etc….) at about $5, today, -$3….

  68. Yancey Ward says:

    I was thinking all afternoon to myself:

    “Sell, sell, sell,” and “Turn those machines back on!”

  69. Willy Winky says:

    It’s just a recession – in a couple of months (well in another month based on previous comments) everything will be fine.

    The sky is absolutely not falling.

    Seems Willy Winky was right – yet again.

    • Wolf Richter says:

      It’s just the WTI May contract that expires on Tuesday.

      • Counterpointer says:

        Exactly what I was going to say before being dragged away to make pizza… It’s future oil, not today oil. When future oil becomes today oil the price will change to today money for today oil. June future oil has June future money attached to it. That will change as June future oil and June future money come closer in time to today oil and today money.

        The only difference will be the convoy of flatbed trucks hauling away hedgies with their faces ripped off by being so colossally stupid as to be long May oil, stacked like cords of wood and dumped in a long pit in NYC.

        In other news Virgin Australia went under today, as the Treasurer declined to shell out $1,3b for an airline with no effective demand for the forseeable future, and Richard Branson put up his Caribbean island as collateral for a UK Gov bailout of the Virgin parent. Whether the Brits fall for that is tbc, but again, why bail out an industry that’s had it fat for quite long enough and where the single most obvious and workable solution to preserve capital is to go BK and start again at some point later when there’s a functioning market.

        Ya can’t fix a solvency problem by hosing liquidity at it…

        C

  70. Martin Sjogren says:

    How about this trade idea:
    Long WTI spot (trading at 11.7), short WTI June futures contract (trading at 20.6)

    If same thing happens again, the June futures drop to negative, while spot stays up – great.
    If things go back to normal spot will equal the June contract – also great

    Am I missing something?

  71. John says:

    Wolf,
    I hope it wasn’t an oil major! Is the pound ever going up? Wtf! Stay calm! LoL

  72. Michael Engel says:

    1) Exxon most important business in the late 70’s was the RE business. The oil glut that lasted 20 years until the mid 90’s hurt XOM.
    2) MCD most important business is the RE business.
    3) R/R in the 1870’s – 1890’s most important business was selling land they got for free from the gov.
    4) SLB own a lot of Houston land. When u buy SLB u get Houston RE for free.
    5) Gold, oil and commodities and RE are great businesses during inflation.
    6) India 1.3B people are locked up. India demand for physical gold is very low, but paper gold reached $1,789 few days ago.
    7) Chinese + HK don’t buy gold since the start of new year of the rat break.
    8) You cannot buy tp with gold.

  73. Anthony says:

    With so many people shaking heads at the news…maybe time for a Wolf (shaking) nodding head doll.

  74. Bead says:

    U.S. could tell Saudis to stop it or fix the weapons they bought without U.S. help. But it appears there is no settled policy on anything.

  75. saylor says:

    This ‘oil storage problem’….ya know, there are a lot of cruise ships that aren’t busy at the moment.

    They could get a twofer on this. Weld the windows shut, fill the thing with oil, virus dies in a petroleum bath.

    What’s not to like?

  76. Iamafan says:

    So, what the heck just happened to the OIL etf (or etn)?

    Does someone have an easy to understand explanation.
    Last time when volmaggedon happened it gave me a headache.

  77. Mr. Knoss says:

    Sounds like the risk curve for shorting is not longer asymmetric.

  78. JR says:

    CME allows negative prices? CME traders now are required to contemplate unlimited position risk? Should end well….

  79. Patrick says:

    1 contract = 1000 barrels of oil

    At that -$37 barrel, what’s to keep someone from renting a tanker, getting paid $37K to fill up in Cushing, OK and then just illegally dumping the oil? Seems like some pretty nefarious activities would be encouraged in a sustained negatively priced oil. But then again I don’t believe for one moment that anyone will be getting paid to take ‘physical’ delivery so these are all paper games.

  80. FDR Liberal says:

    This is what happens when a derivative based upon another derivative is speculated against a physical real commodity that is purchased by a debt instrument that is created out of thin air.

    https://www.macrotrends.net/1380/gold-to-oil-ratio-historical-chart

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