The Limited Times

Now you can see non-English news...

The expert who predicted the negative price believes that oil may drop to -100 dollars

2020-04-23T00:22:24.141Z


Analysts see it as a matter of weeks that space to store crude oil runs out.


Hundreds of thousands of kilometers from Earth, Sentinel-1 satellites are like eyes in the sky showing why US oil prices fell below zero this week and why much of the oil is likely to other parts of the world follow the same path.

The satellite transmits radar signals to the huge metal tanks that store oil and collects data that is used to calculate the amount of crude that is inside. The message is alarming: Oil storage is running low.

It is something that has never happened before, and the market is just beginning to guess what it will mean. Experts say it could be a matter of weeks before space runs out for storing crude. The result would be oil prices close to zero in many parts of the world, and in some cases they could be negative.

"We are approaching the tank limit worldwide by the end of May or the beginning of June," says Florian Thaler of Oilx, an analytics firm that uses satellite data.

MORE INFORMATION

  • Brent erases the strong falls that dragged it this morning to the lowest level of the century

The chaos in the US oil market on Monday could foreshadow what is happening globally, if other tanks start to fill up. It also shows that the market is likely to anticipate maximum storage, rather than waiting for a crash when the limit is exceeded. Some oil producers have redrafted their contracts to prevent prices from turning negative.

On Wednesday, the sales rush caused Brent futures for June delivery to trade at times below $ 16 a barrel, the lowest price in nearly 21 years. The main European and African crudes, which trade at a discount to the reference Brent, will sell for less than $ 10 and even less than $ 5 in some cases.

"We have clearly moved into a daily large-scale market management crisis," said Paul Sankey, a veteran oil analyst at Mizuho Bank, who was correct in warning negative prices for crude oil in March. On Tuesday he went one step further and said: "Will we see $ 100 negative per barrel next month? Very possibly ”.

The world of negative prices does not have a bottom, and after this week, anything is possible. One certainty is that the latest satellite data shows a massive surplus. Every week 50 million barrels of crude oil are stored, enough to supply Germany, France, Italy, Spain and the United Kingdom together.

In India, refineries have filled 95% of fuel storage capacity, according to employees of three state processors. Nigeria will cut production because it has no place to store crude, Mele Kyari, head of state oil company NNPC, told a country's newspaper.

Oil refineries do not buy crude because there is no demand for gasoline. Some producers are reducing production, but others have continued to extract crude. A few dollars is better than nothing for indebted companies. Oil cannot go elsewhere, only to storage.

Satellite data may even be underestimating the lack of available space. Operators have already rented a lot of empty space.

"We can have negative prices and very negative prices," says Pierre Andurand, founder of the free investment fund of the same name, adding that oil is a "dangerous market in which to trade at this time."

From above, the oil market appears to be a highly interconnected world system. But the reality is that the market is a collection of small and large islands, all connected via thin links. What matters is not when the world's total storage will be at full capacity, but when each of those islands, or regional centers, reaches or approaches maximum capacity.

Source: elparis

All news articles on 2020-04-23

You may like

Trends 24h

News/Politics 2024-03-27T16:45:54.081Z
News/Politics 2024-03-28T06:04:53.137Z

Latest

© Communities 2019 - Privacy

The information on this site is from external sources that are not under our control.
The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them.