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| Tony Branco |
"Monday’s oil news that near-term oil contracts had fallen below zero was frightening. Essentially, the markets told those holding short-term oil contracts they would have to pay someone to take their oil. It’s not even worth transportation and storage costs.
It’s what oil traders call “contango.” That’s a fancy term for when a good’s near-term price is lower than the market price expected down the road.
"As of Tuesday, the May contract price for a barrel of oil on the New York Mercantile Exchange was $9.06, after briefly going negative on Monday. But the picture changes when flashing forward to look at monthly futures prices: investors expect the price to rise to $13.12 a barrel in June, $20.15 in July, $23.15 in August, and $24.87 in September.,
"Right now, contango is a serious problem. No oil company, with its enormous capital and labor costs, can make money with oil prices in the low double digits. Many small- and mid-sized firms will just go under.
"It’s tempting, given the current bailout environment, to add the oil industry to the list of those getting aid. But apart from extending help to oil workers who may lose jobs and hit hard times, it would be unwise and economically unsound to bail out big producers.
"No, we’re not anti-oil. Far from it. Oil producers, by creating the basic energy source for the industrial revolution to today’s information economy, and by heating our homes and fueling our cars, have given the West the greatest standard of living in history." . . .
"As of Tuesday, the May contract price for a barrel of oil on the New York Mercantile Exchange was $9.06, after briefly going negative on Monday. But the picture changes when flashing forward to look at monthly futures prices: investors expect the price to rise to $13.12 a barrel in June, $20.15 in July, $23.15 in August, and $24.87 in September.,
"Right now, contango is a serious problem. No oil company, with its enormous capital and labor costs, can make money with oil prices in the low double digits. Many small- and mid-sized firms will just go under.
"It’s tempting, given the current bailout environment, to add the oil industry to the list of those getting aid. But apart from extending help to oil workers who may lose jobs and hit hard times, it would be unwise and economically unsound to bail out big producers.
"No, we’re not anti-oil. Far from it. Oil producers, by creating the basic energy source for the industrial revolution to today’s information economy, and by heating our homes and fueling our cars, have given the West the greatest standard of living in history." . . .
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