Oil futures

Originally Posted by IamTheGreatest

It's been claimed we have a 2 month storage, and other countries like China have 6 months. I'm not sure I believe it.

This may be true, but what I think is happening is everyones storage reserves are full, and there is nobody buying. So there are companies still pumping out oil from the ground, and no one to buy it and nowhere to store it. The people pumping also have nowhere else to store it. So the companies literally are paying to get rid of it because they have to get rid of it and have no where to store it. They may have since stopped pumping but still have a bunch to get rid of that has already been pumped, is in transit, etc.Thats how it can and did go negative.... from what I heard. I didnt look into it that much. But basically there is so much supply and so little demand, that the may crude barrel price (via futures contracts) went negative, essentially the oil sellers paying companies to store it/take it from them. That wont translate into free gas for consumers (as there is a lot that goes into getting it from crude oil to gasoline and into our gas tanks), but it certainly indicates that gas prices should be headed south, at least into may.



Edit: saw this on another site


"Some futures contracts "settle to cash" which means we determine the price when I bought the contract and the actual real world price on the day of expiration, then one of us pays the other person on the contract the cash difference. Easy.But oil and most commodity contracts actually settle for the actual product. If you don't close out your soybean contract, you get a call from the exchange telling you that your soybeans are waiting for you in Kansas City and what would you like to do with them?!
Same with oil. Tankers are showing up in houston with millions of gallons of oil and somebody needs to take delivery. Nobody can because all the storage facilities are already full. So people are literally paying you over $30 a barrel for you to take possession of oil. Crazy times."