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Like COVID 19, this whole thing is unprecedented. I've read through blogs, "experts" on Twitter (this lady is quite good: https://x.com/chigrl) - no one has a clue.
Saudis are loading up tankers again headed for the U.S.
Trump is going to have to step in to rescue the U.S. industry at least. Texas is pulling back on their commitment to decrease production.
Also interesting is that gold hasn't skyrocketed during this whole thing - KITCO interviews are all suggesting $2000 gold or higher but the futures sure don't reflect that possibility.
In the meantime, wouldn't touch CL futures with a 10 foot pole.
May contract expires today. There's a lot of gnashing of teeth - wonder how many liquidity providers, hedge funds were caught holding the bag - and out of business.
Someone mentioned yesterday that there were only 3 computers on the planet trading the May contract - and no one was buying.
I cannot be sure how airlines are hedged. My guess is that everyone with storage capacity (not just airlines) have accumulated hedging losses since this demand destruction started. But I dont think everyone is using the same number, product/instrument or strategy for hedging. Some may hedge against Dec, others may do it against next Jun or even next Dec using different products/instruments depending upon how strong their balance sheet is. Again, this is all just a guess.
My point was only that yesterdays losses in WTI probably did not translate to Jet since Jet is well off the lows so unless airlines are storing WTI, they were not as impacted due to yesterday's print in May WTI.
Was wondering about the exposure in USO - since I understand it is based 25% on future contracts ? - could price reach ZERO - or NEGATIVE numbers like yesterday’s futures contract (5-20) ?
I thought USO was based on the actual underlying aggregated assets of actual oil companies.
My friend has invested in USO when it was at $5 or $6 I think and is afraid if USO could be “ERASED” totally - is that even an option ? (I believe NON LEVERaGED ETF’s - should never reach ZERO - right ?)
My friend is considering selling his positions in USO and buying XOP as it is based on natural gas as well - and took a hit.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals, U308 and Crypto.
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Really good question. USO invests in Crude Oil Futures contracts and NOT Oil Companies. As Futures go down USO does down as well. What happens if futures go negative. Great Question. Guessing USO goes bankrupt and that there is a massive problem with the exchange. USO down 36% today!
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals, U308 and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,059 since Dec 2013
Thanks Given: 4,410
Thanks Received: 10,226
** USO **
Been thinking about this. Isn't it even worse than that. With margin at $7500 for June starting tomorrow if June trades below $7.5 isn't USO unable to meet initial margin calls and hence insolvent?
Interesting article below...
The fund held 23.5% of June West Texas Intermediate crude futures contracts on the New York Mercantile Exchange as of Monday.
June OI is 581K. 23.5% is 136K. So USO is long 136k June Futures? This could get worse!
Bloomberg :- Oil Collapse Hits ETFs With Biggest Fund Running Out of Shares