Archives of “April 20, 2020” day

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Physical oil prices go negative at several US delivery points and grades

  
Analysis, Crude

The latest numbers are up

If you’re new to oil, there are delivery points for crude all over the world and in the US. They often trade on spreads to WTI but those can vary and disconnect.
These were updated a few minutes ago:
  • Alaska north slope -$3.47/barrel
  • Bakken UHC -$2.97/barrel
  • Bakken Guernsey -$1.97/barrel
The high in the continent is Heavy Louisiana Sweet at $13.53, down $7.74 today.
On March 17 with oil at $28 I wrote: There is a very real possibility that oil goes to zero …they were laughing then.
The latest numbers are up

CME says oil futures can trade negative as May prices hit $5.50/barrel -Anirudh Sethi (Our Target of $ 6 is too done )

  
Analysis, Crude

Open interest is still 108,000 contracts

Open interest is still 108,000 contracts
The CME says oil futures can trade in negative territory. We’re not too far away now with the May contract hitting $5.56 now in an absolutely catastrophic rout.
To be sure, there is more volume in the June contract but I’d also point out that this is the real volume because it’s crude for delivery. If you’re holding an oil contract tomorrow at the close, you’re taking delivery of that oil.
This drop right now says that no one wants that oil.
I don’t understand how June can be at $22.40. That’s a testament to suspension of critical thinking.

WTI extends decline to 40%, Canadian physical oil goes negative -Anirudh Sethi

  
Analysis, Crude

The physical damage is even worse than futures

May WTI crude is now down $7.42 to $10.85 — a drop of 40.6% on the day. It’s the worst day ever for a crude contract. The June contract is also now down $3.28, or 13.1%, to $21.76.
Both of these numbers flatter what’s happening in the North American physical market. There are various delivery points that are cushioned by non-nonsensical retail buying in oil futures. Some of those delivery points are also in spots where it’s difficult to move crude. Here’s a sampling of current prices:
  • Bakken UHC $2.36/barrel
  • Alaska North Slope $1.86/barrel
  • WTI Midland $14.11/barrel
  • Edmonton mixed sweet -$0.43/barrel
  • Edmonton C5 condensate -$4.68/barrel
It’s all about that May contract today and tomorrow as we find out what the market for physical delivery looks like but the June contract is also increasingly ugly as it approaches the cycle low. So far retail keeps buying the dip but I think there’s a rising chance they puke it in the days ahead:
The physical damage is even worse than futures

The US-China relationship is headed towards a true breakdown

  
  Analysis

Anger is brewing

People want a scapegoat for the pain of COVID-19 and in the US at least, it’s going to be China.
I’m not even weighing in on who is responsible for anything. There’s not going to be anything rational about the blame game. There’s nothing rational about racism either, but it’s coming. I’m sure of it.
Listen to this rant:

Quoth the Raven@QTRResearch

Holy fucking shit

Embedded video

Retail traders are getting slaughtered in oil

  
Analysis, Crude

Retail money continues to pile into the trade

Hedge funds see a chart like this and absolutely lick their chops. It shows shares outstanding in USO, which is the main oil ETF.
Retail money continues to pile into the trade
Retail traders have absolutely piled into longs in crude oil, betting on a steeper curve while misunderstanding negative roll yield.
That alone is usually enough for a trade, because of retail’s abysmal track record. What makes it particularly alluring is that the ETF now owns 146,542 contracts for the June expiration. That’s 27.2% of the open interest in the contract, compared to less than 5% normally and they have another few % in pending trades.
Ultimately, these positions need to be sold, not just on the retail side but they will need to be rolled to July. Moreover, the ETF late on Thursday realized that it had a problem and changed its mandate to put 20% of open interest in the second-month contract (which is currently July). They appear to be doing that now and that’s going to place additional pressure on the June contract.

China says expresses grave concerns on Australia questioning its handling of the coronavirus

  
  Analysis

One to be mindful about in case it impacts the relationship between the two countries, which haven’t been the best recently

Australia China

The Chinese foreign ministry says that it expresses grave concerns on Australia’s foreign minister, Marise Payne, having insisted to call for an investigation into China’s handling and transparency of the coronavirus pandemic.

It’s nothing too harmful for now, but strained relations could lead to economic impact and that won’t be good news for the aussie currency if that happens.
AUD/USD is keeping a little lower on the day at 0.6353 currently, off lows of 0.6336 earlier.

Eurostoxx futures +1.0% in early European trading

  
Analysis, Global Indices
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A slightly more positive tone but it belies the underlying risk tone risk

  • German DAX futures +1.0%
  • French CAC 40 futures +0.6%
  • UK FTSE futures +0.9%
Despite some positive elements to kick start the morning, it doesn’t quite tell the whole story in the market as we see the dollar keep slightly firmer to start the session.
US futures are also down by 0.5% currently while the bond market is hinting at more tepid tones as well. As such, be mindful of stock gains ahead of the cash market open.
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