Will Canada ever have an oil industry? WCS is now negative.

[Jan van Eck + 7,558]

The collapse of WCS today is historic as I write, now sitting at minus one cent per barrel.  It has apparently been swinging in negative territory as low as  $ -2.76, which is just unreal.  There is no point in attempting to pump at these prices, and it presages the total collapse of the Canadian oil-sands enterprises.  Those places need steam injection to move the oil in semi-solid "bitumen" form out of the sand, and once you shut that process down, it gets very tough to near impossib le to re-start it.  How now? 

[El Nikko + 2,145]

Is WTI really -17 dollars??

 

[Jan van Eck + 7,558]

Juatin Trudeau, Prime Minister of Canada, had the Canadian Federal Government purchase the old Kinder Morgan pipeline running from Alberta to Vancouver harbor, British Columbia, for $4.5 billion, in order to "twin" that line with more federal dollars and be able to move Canadian oil-sands oil to port and to offshore markets.  Well, right now that oil is collapsed, with prices in below-zero territory.  How can you go mine and sell oil when nobody wants it and nobody is prepared to pay you for it?  

It starts to look like the oil-sands extraction operations are all done.  The world is flooded with oil and demand destruction is at an epic level.  There is no market for somewhere around 1/3 of the oil that is customarily pumped.  Oil mined from sand under arduous and expensive conditions has no customer. It looks like Canada is getting shut in, and the Canadian treasury is going to take the hit. 

The Province of Alberta, made swarthy by the sale of oil, is headed for beggar status, in a country with no money and no hope of any money, the politicians having wrecked everything else that they do up there.  Car industry?  Shattered.  Tomato soup canning?  Shuttered.  Railway locomotive building?  All gone, history, bye-bye, sayonara.  Timber?  Facing a US tariff and quota barrier.  OK, how about some lobster?  Yup, lobstering is still going strong.  Try running a socialist nanny-state on the tax revenues from the lobster catch.  That should be interesting. 

[Jan van Eck + 7,558]

5 hours ago, El Nikko said:

Is WTI really -17 dollars??

 

WTI, not to be confused with WCS, is now plunged to somewhere around $1.70/bbl, but it looks like it might hit zero by the end of the trading day.  Big problems in the oil patch, there is no storage, and the refineries have no demand for the refined product, nobody wants gasoline or jetfuel.   Diesel still has a market, although trucking in the USA is way down also.  Huge problems ahead. 

Edited April 21, 2020 by Jan van Eck
typing error

[Jan van Eck + 7,558]

WTI just sank to $1.50 AT 3:00 P.M. Eastern time, in the USA.   I think it was at about $17 or thereabouts in the morning.  That is a gigantic drop, figure 90% drop in one trading session, and we are not done yet.  Unreal.  Total demand destruction. 

[El Nikko + 2,145]

1 minute ago, Jan van Eck said:

WTI just sank to $1.50 AT 3:00 P.M. Eastern time, in the USA.   I think it was at about $17 or thereabouts in the morning.  That is a gigantic drop, figure 90% drop in one trading session, and we are not done yet.  Unreal.  Total demand destruction. 

Maybe the website is broke, it was reading negative 17.

[T2h68 + 1]

6 minutes ago, El Nikko said:

Maybe the website is broke, it was reading negative 17.

Not broken checked Bloomberg oil and it was at -37 not too long ago

[Jan van Eck + 7,558]

Today at 3:45 p.m. Eastern time, the price of West Texas Intermediate crude oil  ["WTI"] has utterly collapsed, from  $ +1.50/bbl to $ -37.71.

Yup, you read that right:  you have to pay someone $37 a ballel to haul off your oil that you just pumped out of the ground.  Here is a screen-shot, to memorialize this epic crash:

[Jan van Eck + 7,558]

34 minutes ago, El Nikko said:

Maybe the website is broke, it was reading negative 17.

Nikko, you are looking at an epic rout in the markets, as various holders of contracts are attempting to beat each other to the exits.   This is a short-seller paradise, although there might not be any shorts in the market, just a lot of leveraged, margin buyers for product that they cannot take physical delivery of, as there is no warehouse tank to hold it  (and issue a delivery receipt).  This is what happens when thousnads of sellers pile on in a very short, time squeeze.   

Now minus 37 bucks, and sinking like a stone.

[Jan van Eck + 7,558]

Just sank below MINUS $38.00 at 3:53 p.m.  And we are not done yet!   Unreal. 

Edited April 20, 2020 by Jan van Eck

[El Nikko + 2,145]

4 minutes ago, T2h68 said:

Not broken checked Bloomberg oil and it was at -37 not too long ago

I don't even know what to say

[BillKidd + 139]

What am I missing. All of this is relative to the short month futures contract. It has little to do with what a producer gets for oil... that's my take. Platt's has it at $24 spot?

[Jan van Eck + 7,558]

Three minutes later, and another 50 cents off the price.

 

[Jan van Eck + 7,558]

Just now, BillKidd said:

What am I missing. All of this is relative to the short month futures contract. It has little to do with what a producer gets for oil... that's my take. Platt's has it at $24 spot?

You are looking at a trading-desk market with all the participants stampeding for the exits.  They are attempting to unload contracts that have a delivery date of tomorrow.  Nobody wants the oil, nobody can take delivery of the oil, the tanks are full, there are no customers, so....now what? 

[Jan van Eck + 7,558]

It is 4:07 p.m. and the buyers are sharks smelling the vast pools of blood on the trading floor, and are moving in.  WTI just climbed five bucks in five minutes, up to   minus$33.89.  

I would love to see the volume numbers on these trades, right now it might be on very thin volume.  My guess is that the big buyers will stay out, as without certainty of storage anyone buying is in a pickle of hurt. 

[surrept33 + 609]

4 minutes ago, Jan van Eck said:

It is 4:07 p.m. and the buyers are sharks smelling the vast pools of blood on the trading floor, and are moving in.  WTI just climbed five bucks in five minutes, up to   minus$33.89.  

I would love to see the volume numbers on these trades, right now it might be on very thin volume.  My guess is that the big buyers will stay out, as without certainty of storage anyone buying is in a pickle of hurt. 

Most of the open interest is in June now:

https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_quotes_volume_voi.html#tradeDate=20200417

Looks like a lot of contracts were rolled from May to Jul today. Makes sense since tomorrow is expiration.

[surrept33 + 609]

I think a positive outcome of today's events is the CME looking into making the WTI contract more flexible in where it's physically settled - not just in Cushing. How the Brent futures are settled appears to be more resilient to this type of overcapacity squeeze happening.

[Enthalpic + 1,496]

Yes, all the US companies will go bankrupt faster.  #ShaleFail

Enjoy making money at your WTI of 0.60 and MARS US at -30.

Yes, you can pay us to take your less than worthless oil.  We can reverse flow on the pipelines, store it in old mines,  and send it back later!

Edited April 21, 2020 by Enthalpic

[Ward Smith + 6,615]

There's no real oil being "sold" at negative dollars. This is all because of a futures squeeze with traders who never had any intention of receiving the oil getting stuck in positions they couldn't unwind. Had something like this happened in normal times, the worst thing that might have happened is them having to pay a storage fee in Cushing. But yeah, right now that storage is full full full. 

[Enthalpic + 1,496]

Tank farms as far as the eye can see...  Giant tankers full of oil anchored and mothballed at sea.

Some tanker company that doesn't even fly a Canadian flag asked our government for huge subsidies.  Yeah hard no, go pound sand.

[Enthalpic + 1,496]

I'm almost certain it is easier to shut down, and later reopen, an open-pit oil sands mining facility than other forms of oil production.

[Enthalpic + 1,496]

Bankrupt shipping companies will get more for scrap from their ships than paying to maintain a boat that is only an expense. 

https://en.wikipedia.org/wiki/Ship_breaking

 

 

[ronwagn + 6,290]

23 hours ago, Jan van Eck said:

Juatin Trudeau, Prime Minister of Canada, had the Canadian Federal Government purchase the old Kinder Morgan pipeline running from Alberta to Vancouver harbor, British Columbia, for $4.5 billion, in order to "twin" that line with more federal dollars and be able to move Canadian oil-sands oil to port and to offshore markets.  Well, right now that oil is collapsed, with prices in below-zero territory.  How can you go mine and sell oil when nobody wants it and nobody is prepared to pay you for it?  

It starts to look like the oil-sands extraction operations are all done.  The world is flooded with oil and demand destruction is at an epic level.  There is no market for somewhere around 1/3 of the oil that is customarily pumped.  Oil mined from sand under arduous and expensive conditions has no customer. It looks like Canada is getting shut in, and the Canadian treasury is going to take the hit. 

The Province of Alberta, made swarthy by the sale of oil, is headed for beggar status, in a country with no money and no hope of any money, the politicians having wrecked everything else that they do up there.  Car industry?  Shattered.  Tomato soup canning?  Shuttered.  Railway locomotive building?  All gone, history, bye-bye, sayonara.  Timber?  Facing a US tariff and quota barrier.  OK, how about some lobster?  Yup, lobstering is still going strong.  Try running a socialist nanny-state on the tax revenues from the lobster catch.  That should be interesting. 

You forgot tourism destroyed.