Monday, June 1, 2020

Video on Oil: Supply, Demand, Contango, Sustainability, Future

Elmer Hall produced a video June 1 2020 related to the Oil Contago in April of 2020: Conundrum Of Oil Contango: Supply n Demand, Sustainability and the Future.

Much like a race with a distinct start and finish, you can look at oil and the future the same way. Although it might take a little longer than 20+ minutes, and not have a definitive finish-line, the oil play has a future that can not be good for the oil producers. By definition, things that are non-sustainable must end -- sooner or later. Gracefully or ungracefully. Elmer Hall does a video about oil. The tragic shutdown of economies has also produced a magical moment for people to observe what the air (and water) might look like if we stopped burning coal and oil. Clean air for cities across the world; for some people, the first time in their life when the air was safely breathable.
So what did the shutdown do for oil demand, and consequently for the oil supply and demand? Oil, at 100M Barrels per day represents about 4.4% (or $4.5T) of the worlds 2019 GDP. With the collapse of demand and price, that represents only about $1T.
But the true cost of oil and coal is massively higher than we pay at the meter or the pump. This video discusses the likelihood that things will be different post-COVID. The genie is out of the bottle related to telework; workers who can work remotely will not want to go back to grid traffic commutes. People who have breathed clean air will not want to go back to smog and air quality warnings.
The Oil contango in the 3rd week of April was a once-in-a-lifetime event where owners of the futures contract (in May) would have to take possession of the oil at the close of the contract that week. But, with the world swimming in oil, there was no place to put the oil. So owners who had to get out of the contract -- and no place to store it if they kept the contract -- were willing to PAY buyers to take the oil. At the worst point they were willing to pay almost $40 per barrel for anyone who would take the oil off of their hands. The price went from about $60pb in 2019 to a low of -$37 in April 2020.

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