tyb's
Oil Plunges To 17 Year Low As One Bank Predicts Negative Prices
Late on Tuesday, WTI plunged as low as $26.20 taking out the lows from the 2015/2016 oil recession, and sending it to a level last seen when US president was George W. Bush, people were listening to Get Busy by Sean Paul and Dogville was one of the most popular movies: May 2003. While there was no immediately clear catalyst, earlier in the day, Goldman's commodities team published a report in which they discuss the need for commodity prices to drop below cash costs to generate supply curtailments as demand losses across the complex are now unprecedented, as Goldman now believes oil use is down an unprecedented 8 million b/d:
Large commitments from core-OPEC for April/May deliveries pushes the net supply increase near c.3m b/d, which, when combined with the demand losses, results in an April/May surplus of 7mb/d, which will likely breach system capacity during 2Q20.
As Goldman's Jeffrey Currie wrote, "the system strain creates a physical end, even though when COVID-19 will end is unknown, pushing our forecasts to shut-in economics. We now forecast 3m GSCI -25%." As a result of price wars in oil and gas and uncertain policy responses in bulks and base metals, all a direct result of the sharp fall in demand resulting from the COVID-19 containment measures, Goldman has cut its 2Q Brent price target to just $20/bbl from $30/bbl.
But that was not the worst of it for what little is left of oil bulls.
Outdoing not only Goldman, but virtually every single bearish oil analyst in existence, Mizuho’s Paul Sankey not only estimated that Goldman is too optimistic by half, calculating a whopping 15MM b/d in oversupply currently, but that crude prices could go negative - yes, as in you would be paid to take delivery - as Saudi and Russian barrels enter the market.
According to Sankey, much of the US 4MM bpd in crude exports will be curtailed as prices fall and tanker rates soar. And with US storage roughly 50% full, and able to take another 135MM bbl more, assuming a build rate of 2MM b/d, the US can add 14MM bbl/week for 10 weeks until full. As a result, there is a now race between filling storage and negative pricing "unless U.S. decline rates can outpace inventory builds, which we very much doubt."
Said otherwise, absent dramatic changes, in roughly 3 months, energy merchants will be paying you if you generously take a couple million barrels of crude off their hands.
https://www.zerohedge.com/markets/oil-plunges-17-year-low-one-bank-predicts-negative-oil-prices
https://www.macrotrends.net/2566/crude-oil-prices-today-live-chart
They play both sides. The are the holder of the legacy short position, having taken it on when Bear Stearns was carved up and the bad shit was put into the FRB's Maiden Lane LLC's to get it out of the system.
Moar here
https://www.newyorkfed.org/markets/maidenlane.html
By getting good assets( and BS did not have much of those) they also became the next big bank or firm to play hot potato with the need for the system to manage the silver spot price. That short position has been at Salomon Bro's, Drexel Burnham Lambert, Merrill Lynch, and smaller parts of it at HSBC, Deutsche Bank, CitiCorp. , now group. Someone always had to manage it, overall and that one is/has been JP Morgan since 2008. I think some of it was thrown off to CitiGroup in Oct 2018. A few blips and some shuffling around of the inventory's COT #'s then suggest some big paper parts were moved somewhere.
https://ycharts.com/indicators/comex_silver_futures_open_interest
trips chek't
>The Fed isn’t talking about going to negative rates?
The FRB does not set rates the bond market does. So they would never give any indication of it coming or not.
making that call is not much of a stretch-they have no where else to go. They may go negative for a bit in order to make China feel the pinch of owning all that debt. Someone is going to pay for the impact this virus-bullshit has on our economy. Drive up the price of Treasury's so that when POTUS hands a bill to the chinese for all this all that debt becomes the "payment".
They do very little. They are told what to set it at(and at this point it's still tbd by who now although I think we know who is telling them to do what now) and apparently Jamie didn't like what he was offered so he pulled his funds..hence the need for the repo's.