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Tuesday, 21 April 2020

I surely didn't expect this - negative oil prices!?


I was in the last geographic batch when it came to the Open Electricity Market. 

Finally made the switch March 2019 to enjoy the discount in my monthly electricity bills.



Occupational hazard meant I chose the variable plan. I've a bearish bias on energy prices going forward.

But I never expected negative oil prices!!!



When Brent was threatening USD100 per barrel several years back, I was involved in a project to test shipping one container from Guangzhou and another container from Shanghai to Dortmund, Germany via the Trans-Siberian Railway!?

I mean if shipping rates were going through the roof, we had to find an alternative cheaper land solution - short of moving production back to Europe...



If I were still with my old employer, I wonder what projects I'll be working on to take advantage of the unprecedented crash in energy prices! 








10 comments:

  1. Hi SMOL,

    Contango on steroids! Goes to show there's MUCH more speculation going on than actual hedging purposes! LOL!

    I wonder if SIA hedgers had guts to buy last night --- over 100% gains in a few hours .... get paid to buy & get paid to sell, shiok! SIA is looking at well over US$1.5B in losses just from oil & jet fuel hedging ALONE. It hedged for 2021 @ $58 for Brent and $74 for jet fuel. (Even higher prices for 2020 yikes!)

    Maybe your prev company would be buying crude like it's the fountain of eternal youth??!? ? ��

    Then again storing it won't be cheap as every tom, dick & harry has the same idea, and sellers / providers of storage tanks & oil tankers have been cashing in & jacking up their prices for many months liao.

    Unfortunately contracts are in 1,000 barrel size. Otherwise can just pay the current US$1.38 for 1 barrel of oil to sit in your living room as decoration or paperweight Hahaha!!! But probably they'll smack you terok terok with freight, storage, taxes & insurance charges.

    ReplyDelete
    Replies
    1. Spur,

      Hedging would not be possible (at reasonable prices) without speculators to take the other side of the trade ;)


      My previous company would probably be squeezing the shipping carriers for low low shipping rates and locking them for 21/22 ;)


      I wonder whether the underground oil storage in Singapore is ready. Great timing to buildup our strategic oil supply for a song ;)




      Delete
    2. SMOL,

      BDI freight index has bounced +88% from its Feb lows... maybe from all those tong-panging for floating oil storages??

      But still damn cheap compared to the crazy days of late-2007 and early-2008. Or even back in mid-2019 when exporters / importers were busy taking advantage of the Phase 1 trade deal & trying to front run the next Phase 2 trade war.

      Ohhhh .... I bet large portions of SG underground strategic oil reserves have been operating for years already. It's just a matter of making them even bigger! Kekeke!!

      This -ve oil future is just a anomaly blip due to sudden imbalance between number of speculators versus hedgers. Apart from May WTI futures, the other months futures for both WTI & Brent are acting pretty much normal.

      I think govt is more concerned about the longterm picture for Jurong Island & the petrochemical industry as SG and the world transitions to more alternative energy. Low oil prices will slow this transition however.

      Probably by 2100, Jurong Island will become Sentosa v2.0 or new HDB town with highways & MRT to the main island.

      Delete
    3. Spur,

      2100? I'll be long gone by then ;)


      I'm quite impressed when people say they're investing for the long term!?

      Either they have no clue what talking them, or they really have an edge over "idiots" like me ;)


      I must humbly admit I have no clue what the future will bring...


      Delete
    4. Hi SMOL,

      Ahem. Don't smoke people. Though you rarely mention it, your long-term portfolio has been doing exceedingly well! ;)

      Delete
    5. Unintelligent Nerd,

      That's because I don't practice buy-and-hold ;)

      There is a season for planting, there is a season for harvesting, and there is a season for doing nothing...





      Delete
    6. Hi SMOL,

      If not buy-and-hold then pillow stock strategy like Uncle8888? ;)

      Are you planting again now?

      Delete
    7. Rainbow girl,

      CW and I are polar opposites ;)

      I'm the cheerleader of finding our own shoes to fit our own feet.

      Nouns matter less than adjectives.


      I'm at the do nothing phase now ;)

      Delete
  2. Negative applies to WTI, Brent is still hover $20. Will electricity bill be reflected? My bill is too ex >300, and looking for discount!

    2008 when oil >$100, I was too busy signing contracts flying all over the world. Still remember my purchasing manager asked if I can stop or delay getting order!

    By the SG Jurong Island is mainly refinery. When oil is cheap, input cost is low, it is actually good for SG but of course the Oil industry will suffer even more, which already taken hit in 2016. And sg do have sufficient storage as we are not producer of oil.

    And to think if I am still in having most revenue from this industry, I will be dead meat!Can full time invest. Luckily nowadays my SG office only have less than 10% from O&G. But still, group in Europe is suffering like hell!

    ReplyDelete
    Replies
    1. Rolf,

      I've learnt the hard way that everything is cyclical.

      That's when I threw out the buy-and-hold bullshit peddled by snake oil vested interests...

      There was a time (before internet startups) when the brightest and smartest of our engineers would go for big oil like BP or Shell.

      Who knew even chosing the industry to enter for our career is no different than a bet like the China, water, Myanmar, O&G plays of the decade ;)


      The day when Singapore has become "ordinary" or "mediocre", I hope I'm oredi in my 80s.

      It don't matter anymore to me; but it matters to those who are voluntarily comtributing to CPF in their 20s now ;)

      Delete

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