nikol
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LNG seems to be stable. Yet.
There are diverging signals, which is strange and funny.
"All is bad"
https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/042220-infographic-lng-demand-shock-coronavirus-covid-19
"Market is resilient"
https://www.naturalgasintel.com/articles/121735-global-lng-production-remains-resilient-despite-coronavirus-falling-prices |
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TonyC
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| Nuclear Energy Trader |
| Total Posts: 1352 |
| Joined: May 2004 |
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That second article isn't saying that "the market" is resilient it is saying that "production" is resilie nt.
Just like Crude "production" is resilient, Crude production is so resilient that prices turned negative a few days ago.
"Production" and "the market" just aren't the same thing |
flaneur/boulevardier/remittance man/energy trader |
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Kitno
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| Total Posts: 497 |
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I've thought about the current situation and I am willing to do a PA bilateral trade (bet) for a -USD 50 or less WTI intraday trade up to and including June IMM May.
Up to USD 10,000, binary. if someone can point me to a spreadbetter/exchange I'd gladly take it.
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On a laager on a hill. A long way from Avondale. |
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Alfa
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| Joined: Jun 2018 |
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| Yes but cost of not having cashflow rn might be a lot great greater than -5.8 B$? |
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> @Kitno I've thought about the current situation and I am willing to do a PA bilateral trade (bet) for a -USD 50 or less WTI intraday trade up to and including June IMM May.
What kind of odds/payoff would you look for on something like this? Even money? |
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smt1
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| Total Posts: 5 |
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> LNG seems to be stable. Yet.
My understanding is that it is easier to shut in NG wells, versus oill wells. Producers are hesitant to shut in oil wells because it may cause long term irreparable damage to the reservoir itself (I don't understand the geomechanics myself), so storage must be used up first. Hence spike in tanker prices, and a bidding down of front month futures that need to be physically settled. It would be much simpler if they could just shut down production without long term damage.
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| @kitno: Jun’20 1 Puts on WTI trade around $1, so a -50 print would be a 50 bagger. How about that? |
"Earth: some bacteria and basic life forms, no sign of intelligent life" (Message from a type III civilization probe sent to the solar system circa 2016) |
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Maggette
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" It would be much simpler if they could just shut down production without long term damage.
"
At least in europe you can add the flexibility of the electricity market to it. The is quite some capacity in natgas and multi fuel turbines available. If the clean spark spread moves that much that it pushes more plants in the money it will push natgas demand to a certain extend. |
Ich kam hierher und sah dich und deine Leute lächeln,
und sagte mir: Maggette, scheiss auf den small talk,
lass lieber deine Fäuste sprechen...
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HitmanH
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| Total Posts: 498 |
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| smt1 - the US wells are particularly troubled with this stop / start friction costs. In the Middle East, and some remaining European fields - they can indeed switch on/off easy without damage risks |
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@kitno: Can you share a bit of your analysis? Do you have any insights on the storage situation? USO's position? Spec positions? Can the same thing happen with the June contract as with the May contract? You'd think everybody is now aware of the unlimited downside on long future positions.
Wanted to DM you to chat but you don't have an email in your profile. |
"Earth: some bacteria and basic life forms, no sign of intelligent life" (Message from a type III civilization probe sent to the solar system circa 2016) |
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Kitno
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| Total Posts: 497 |
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| @NeroTulip, I'm a bond guy. I know some heads of oil dealing. They are now with GS and see upside. All of that said, I am a bond guy and I see horrific real economy problems in the next few months. The technicals of the oil market may have waned (although shutting wells is still limited to at least waiting 2m). My point: I don't see the real economy demand the oil guys do. That may be $10 oil for me rather than their $30. |
On a laager on a hill. A long way from Avondale. |
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Mistro
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| Total Posts: 32 |
| Joined: Aug 2018 |
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Hey TonyC, you were way ahead of the curve on this trade. I am still relatively new to trading, especially on fundamentals. Could you elaborate as to why this information was not already being priced in at the time you posted?
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men lie, women lie, numbers don't |
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TonyC
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| Nuclear Energy Trader |
| Total Posts: 1352 |
| Joined: May 2004 |
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| Duplicate post |
flaneur/boulevardier/remittance man/energy trader |
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TonyC
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| Nuclear Energy Trader |
| Total Posts: 1352 |
| Joined: May 2004 |
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>Could you elaborate as to why this information was not
> already being priced in at the time you posted?
Was I really that head of the curve? That contangoes were going to get really severe,I thought that was going to be in the physical market ..... But I didn't anticipate negative prices.
... I would have thought it would have been more nuanced. That the exchange would have bound prices at zero, and said if you can't take delivery negotiate under the alternative delivery clause of the futures contract (when a long and short go off the board, they (effectivly though not formally) get paired off if they can't make/take good delivery in Cushing.
They then use the alternative delivery clause to negotiate between themselves bilaterally as to where they can make or accept delivery, and how much extra premium (or greater discount) the performing party wishes to extract from the non-performing party for the convenience of the non-performing counterparty not being required to execute in Cushing
... But I do have an interesting prediction! Some crude producer that can't or won't shut in his wells will remember Continental Illinois.
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flaneur/boulevardier/remittance man/energy trader |
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nikol
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| Total Posts: 1230 |
| Joined: Jun 2005 |
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Wiki about Continental Illinois has link to "The Prize: The Epic Quest for Oil, Money, and Power".
Never have read it. They call it "must read classics about the subject". Curious |
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TonyC
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| Nuclear Energy Trader |
| Total Posts: 1352 |
| Joined: May 2004 |
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| Not what I was thinking, I was thinking that there used to be these things called futures on certificates of deposit |
flaneur/boulevardier/remittance man/energy trader |
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nikol
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| Total Posts: 1230 |
| Joined: Jun 2005 |
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Banks boycott oil rigs
https://www.wsj.com/amp/articles/banks-energy-boycott-is-an-antitrust-problem-11594746486 |
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Strange
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"Banks boycott oil rigs"
Meh. Banks don't want to lend to oil exploration, especially shale because of the high risks. The author himself points out the main risk, too: "even while the Covid-19 crisis has reduced global oil demand and a price war between Russia and Saudi Arabia has flooded global markets with crude." Reputation risks and risk of spill cleanup is there, but its secondary to the risks presented by the price. These guys are leveraged to the gills and have blown up twice in the last 5 years, why would anyone want to lend them money. |
'Progress just means
bad things happen faster.’
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nikol
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| Total Posts: 1230 |
| Joined: Jun 2005 |
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It reminds the old tale about shepherd saying "wolf" too often.
Why anyone was (printing and) lending them money in the first place? |
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nikol
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| Total Posts: 1230 |
| Joined: Jun 2005 |
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On plot hydrocarbons (oil, coal, gas) are still the winners, but it is interesting to see the 2020 update.
https://ourworldindata.org/grapher/primary-energy-consumption-by-source?time=1965..latest
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