[HN Gopher] I Tried to Buy an Actual Barrel of Crude Oil (2015)
___________________________________________________________________
I Tried to Buy an Actual Barrel of Crude Oil (2015)
Author : niklasbuschmann
Score : 183 points
Date : 2025-04-22 12:58 UTC (2 days ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| niklasbuschmann wrote:
| https://archive.is/SKAKk
| ahazred8ta wrote:
| This is right up there with the futures trader who accidentally
| ordered a barge full of coal delivered to his manhattan office.
| speedylight wrote:
| I would love a link to that article lol
| beaviskhan wrote:
| This is where I read it:
| https://thedailywtf.com/articles/Special-Delivery
| emchammer wrote:
| That writeup seems exaggerated. When I read the story, it
| was a newbie at a Bloomberg Terminal who pressed the wrong
| button.
| rkagerer wrote:
| Have you got a link to a different account? This one
| describes it as an XML parsing error (expecting
| true/false instead of 0/1) combined with some hubris on
| the part of the the trading exec ( _" what part of
| 'execute my f*ing trade' don't you understand!"_)
| Animats wrote:
| Right. That one is probably fake.
|
| It's not at all uncommon to trade a tanker load of oil,
| and this may result in the tanker being re-directed mid-
| trip, or being anchored somewhere for a while. Those are
| normal shipping events. (Yes, there are parking spaces
| for oil tankers. Here are the ones in the San Francisco
| Bay.[1])
|
| I have read of an oil trader who bought a trainload of
| railroad tank cars of oil as a similar deal. That was a
| bigger hassle, because finding and paying for a storage
| track to park the tank cars became his problem. There is
| a market in railroad siding for storage, but there are
| not that many available spaces. Most of them are in Outer
| Nowhere, someplace where there used to be something that
| needed track but no longer does.[2] Managing this tied up
| a lot of high-priced broker time. Supposedly worked out
| OK, but nobody wanted to do it again.
|
| [1] https://www.sfmx.org/wp-
| content/uploads/2017/01/Anchorage-9-...
|
| [2] https://sidings.ca/collections/sidings
| sgarland wrote:
| This is like a friendlier version of r/wsb's stories.
| colechristensen wrote:
| Yes many futures are not "cash settled" but settled in the
| actual commodity.
|
| This is why in rare occasions the price of a thing goes
| negative because trading in that thing you are _contractually
| obligated_ to take delivery and people trying to unload that
| obligation sometimes can 't find buyers until they are paid to
| take delivery. It happens when nobody really wants to buy a
| thing and there is no capacity left to store or ship. When you
| buy a futures contract and you don't want delivery you have to
| sell it to close your position, and rarely you have to give
| people large sums of money so you can close.
| tialaramex wrote:
| In 2020 some Oil futures were negative at close, which has
| one obvious effect (if you're stuck holding the bag you're
| paying to store all this oil despite it being, at least
| temporarily, worthless) but also messes up the ETFs.
|
| Suppose my actual oil futures go from $800k to $900k, the
| ideal ETF is trying to ensure that $800k also turns into
| $900k just as if its investors were in actual oil futures.
| But these aren't futures and don't result in delivery - so
| critically when real oil futures blow up and that $900k turns
| into -$1M because the global economy had a heart attack the
| ETF cannot be worth -$1M as it's just paper and I don't have
| to pay you one cent.
|
| For the ETFs this means a negative exposure for the operator
| - they're eating unlimited downside but can't pass that on to
| their customers, and for a blip like 2020 that's survivable
| (if you're well capitalised) but longer term it would be
| fatal.
| chii wrote:
| i figured these ETF providers have to have sufficient
| capital in reserve to allow for it perhaps? I mean, how
| does it work if they defaulted on those options by not
| being able to take delivery? Who pays?
| tialaramex wrote:
| Some ETFs can't go negative because they're moving say,
| stock in oil refiners, oil research, etc. and they've got
| a model to try to follow the motion of oil futures based
| on investments in those stocks. So for them this sort of
| chaos is not _good_ of course, but they don 't have scary
| red numbers everywhere and people who might jump out of a
| window.
|
| In some cases there is basically a bucket shop (hopefully
| not literally, those are illegal) and so you're betting
| against somebody with lots of capital, but in that
| scenario it can definitely go very bad and it's important
| to read your fine print. I believe in 2020 some funds
| pointed out that in their fine print it said they get to
| _choose_ not to follow a month 's oil delivery if they
| need to, so, you expected $15M for the June oil because
| it went negative as you'd hoped, but too bad we've
| decided to roll that over to July oil, and that's going
| to lose you money as you have to wait a month longer and
| get worse results.
|
| That sort of thing is obviously infuriating for an
| investor, but as with gambling firms who won't pay (and
| this happens a _lot_ if you win serious money gambling,
| e.g. Oops, when you gave us $100 we forgot to ask for
| valid ID, but now that we owe you $150 000 because you
| got lucky we 've remembered - without ID actually the bet
| was illegal, so here's the $100 back and no hard
| feelings) they get a reputation for not paying and that
| does eventually hurt them.
| detaro wrote:
| > _which has one obvious effect (if you 're stuck holding
| the bag you're paying to store all this oil despite it
| being, at least temporarily, worthless)_
|
| Isn't it the other way around? Because you would be stuck
| holding the bag the prices went negative?
| tialaramex wrote:
| I guess it depends how you look at it, the two things are
| intertwined.
| LittleTimothy wrote:
| It's also a head-ache for options traders because some
| options models (black scholes) have log-normal pricing
| baked in which don't actually allow for the underlying
| asset to go negative. So nevermind worrying about taking
| delivery, your HFT options desk just had their algo blow
| up.
| wbl wrote:
| Nah your desk closed out as the model was starting to
| choke.
| heavenlyblue wrote:
| Looks like they just need to use complex numbers in their
| calculations?
| Marazan wrote:
| > Yes many futures are not "cash settled" but settled in the
| actual commodity.
|
| This, in many ways is a ridiculous sentence which shows what
| is wrong with the futures market. Futures are contracts for
| the supply of commodities. All futures should be settled by
| the actual commodity! That we have got to a situation where
| the vast majority of futures contracts are just 2nd order
| bets on the price of thing rather than delivery of the thing
| is non optimal.
| frontfor wrote:
| I'm not sure about "vast majority". Barring some exceptions
| (e.g. lean hogs), many of the commodities futures are
| physically delivered (e.g. gold, silver, copper, corn,
| wheat, soybean, natural gas, live cattle). Financial
| futures like S&P 500, 3-month SOFRs are obvious financially
| settled as they don't correspond to anything physical.
| kqr wrote:
| This comment shows what is wrong with people's
| understanding of futures markets. Commodity futures are not
| for the supply of commodities. If you need a supply of
| commodities, cash contracts are your thing.
|
| Futures, specifically, are useful for _implicitly
| borrowing_ commodities to control inventory levels across
| time. An airline needs continuous access to jet fuel, so to
| be safe, they buy more jet fuel than they need in the cash
| market. But they don 't want to pay for owning all this jet
| fuel, so they simultaneously sell it off in the futures
| market. Thus, they have created a loan of jet fuel, making
| sure they have spare fuel available when they need it
| without outright having to own it.
|
| In order to have a loan, one needs a speculator willing to
| buy the credit risk. More speculators usually leads to more
| liquidity and more accurate deals on loans. There's nothing
| wrong with this at all.
|
| See _The Economic Function of Futures Markets_ by Williams
| (1986) if you are curious.
| keepamovin wrote:
| It would be good if you could do this with cloud
| capacity.
| kqr wrote:
| Doesn't make sense for e.g. compute because compute
| resources are infinitely perishable. Maybe could work for
| storage.
| keepamovin wrote:
| I guess I was thinking more like: you pay for a contract
| for bundle of resources now, to insure you against
| capacity overruns, and to sell it back at a future date.
| You can probably arbitrage the difference due to on-
| demand/reserved-capacity pricing ratio.
|
| But also i don't really understand what you mean by
| infinitely perishable? Can you explain more?
| kqr wrote:
| What I mean is that 5 bushels of wheat purchased now and
| stored properly can be used just the same now as three
| months from now. On the other hand, at a fundamental
| level, 5 minutes of compute purchased now are gone
| forever if not used.
|
| When a clould provider pretends to sell you five minutes
| of compute they are not really selling you five minutes
| of compute, but promising to split off five minutes of
| partial compute from other tenants to make room for you.
| It gets a little complicated...
| formercoder wrote:
| Pretty much the Reserved Instance Marketplace
| keepamovin wrote:
| Did not know about that! Can you recommend an approach,
| any cautionary tales? Do clouds beyond AWS have similar?
| watwut wrote:
| There is no loan necessary in the plane example. Future
| is an agreement that you will buy/sell a thing for set
| price in a set date. No one needs to borrow anything for
| it to work. To manage the repository, the plane company
| will have contract to by x barrels at 1 of March for some
| price. That is it, that is what future is - contractual
| obligation to with a set date.
|
| Also, while origin stories are nice, most future trades
| are pure speculations on price. There is no reason to
| pretend these original stories are how securities are
| actually used.
|
| Your story may make a bit more sense with options where
| one party can choose to exercises their right to sell or
| buy. Then you can use it to manage actual amounts of
| commodity. But futures do not carry any such option with
| it. It is strict agreement with no choices. The plane
| company can use futures to guarantee certain fuel price
| in the future, so that some short term market swing wont
| make fuel too expensive for them.
| kqr wrote:
| > There is no loan necessary ...
|
| That is also not what Williams says. He says a
| simultaneous long cash--short future position is
| practically the same as a loan of the corresponding
| commodity. (With the lending side being short cash--long
| future.) This activity accounts for many of the patterns
| we see in futures markets.
| watwut wrote:
| That position has zero to do with managing fuel
| inventory. He was trying to argue this is supposed to
| help managing inventory in practical world.
|
| These patterns are about speculation, not about managing
| inventories.
| seanhunter wrote:
| A futures trade always involves variation margin, and if
| you read a margin agreement you'll see it is a credit
| agreement. That's so people don't just run away from
| trades which are underwater and screw the other side
| over.
| watwut wrote:
| That is something you have to do when you do speculative
| trades. That has zero to do with managing inventory.
|
| You are not required to take loan to buy futures. You can
| do so, because then you can bet more then you have. But
| you dont have to.
| potato3732842 wrote:
| Man, it's hilarious how you managed to go full circle
| around the point while missing it.
|
| If the airline wants to ensure future supply at a given
| prices they can simply buy futures settled in actual
| product.
|
| Hedging against future volatility by agreeing on a deal
| "now" is the entire point. Sure, sometimes you lose when
| there's a price drop but the other guy won. At the end of
| the day everyone benefits from smoothing out the
| volatility.
|
| Buying and selling cash settled futures is just how small
| time buyers and sellers access the market since they
| can't take delivery of entire train loads of goods but
| still need to hedge.
|
| Finance professionals trading them around to wring out an
| extra percent here and there it beside the point.
| kqr wrote:
| No, this is a common misconception. If hedging was the
| point, futures markets would show more evidence of risk
| aversion than they do. Again, I recommend that Williams'
| book if you're curious!
| seanhunter wrote:
| Hedging can't be the only point, which is something we
| have known since the ancient Babylonians invented
| futures.
|
| For every person who is trying to hedge future
| volatility, there has to be a person on the other side of
| that contract who is speculating on the possibility that
| the hedge guy is more frightened that they should be.
|
| You need hedgers and speculators to have a two-way
| market, and in markets where you have predominantly
| hedgers they get completely fleeced by the few
| speculators brave/dumb enough to take the other side of
| their trades. This is because many markets are
| structurally unbalanced such that the people who need to
| hedge long (producers) and people who need to hedge short
| (consumers) operate on different timeframes etc. So if
| I'm a farmer growing some crop I might want to sell the
| 1yr future, but the guy trying to hedge the price for
| purchase (wholesale grocer or whatever) will be hedging
| the front future like 1m out. So someone has to carry the
| risk in the forward curve between 1m and 1 year or noone
| gets the hedge they need and the market doesn't work.
|
| Quite aside from that, there are all sorts of things
| which are cash-settled because you literally can't do a
| physical settlement but people need to hedge (yes and
| speculate) anyway. Take an index future on an equity
| index. How are you going to physically settle a future on
| the SPX or (god forbid) the Russell? The liquidity
| consequences would be devastating to markets.
| potato3732842 wrote:
| That's just not the case though.
|
| Buyers and sellers both want to hedge and they're both
| happy to give up some potential upside of getting one
| over on the other guy in exchange for stability.
|
| As you mentioned, timeframes and volumes often don't
| match up perfectly. So enter the speculators. They
| provide a lot of the liquidity. And they get paid for it.
| Like they make a 1yr bet and 12 1mo counter bets and do
| that enough that the wins and losses smooth out and they
| make a few pennies on the dollar.
|
| The futures market is basically a cyclone of
| financialization whipping around an eye of "actual
| business doing actual things" that needs to smooth out
| volatility (because you can't make a huge investment in a
| volatile market or you might get screwed into not being
| able to make payroll some quarter even though what you're
| up to is solvent any given year).
|
| You can apply the same model to financial goods (and you
| often want to because the solvency of all sorts of
| banking activities is predicated on market conditions the
| same way that industrial activity is dependent upon
| commodity prices and you can't have good stuff going tits
| up because of a bad quarter)
|
| But at the end of the day you need some core of
| participants who at the limit are willing to pay to
| limit/cap/reduce risk and volatility otherwise there's no
| market because the whole market is bets and counter bets
| about how that core activity will turn out.
|
| At the end of the day there is a legitimate business need
| to hedge against future uncertainty. Everything else in
| the futures market derives from this, though sometimes
| the paths are nonsensical.
| colechristensen wrote:
| >Commodity futures are not for the supply of commodities.
|
| This is a silly statement. Commodity producers absolutely
| do use futures markets to sell their product.
|
| >More speculators usually leads to more liquidity and
| more accurate deals on loans.
|
| More speculators also leads to more speculation which can
| lead to anywhere up to a complete disconnect of the price
| from anything to do with supply or demand.
|
| Case in point: onion futures are illegal in the US
| https://en.wikipedia.org/wiki/Onion_Futures_Act
| Majromax wrote:
| > All futures should be settled by the actual commodity!
|
| Why? The legitimate hedging role of futures and options is
| often financial in nature, even for physically-settled
| contracts.
|
| Take West Texas Intermediate as an example. That's a
| physically-settled contract, with delivery in Cushing,
| Oklahoma.
|
| What if I want to lock in a future price of oil but I'm not
| _in_ Cushing, Oklahoma? Nobody 's going to create a liquid
| futures market with delivery to my loading dock, but most
| of the time I can get oil on the spot market from a local
| supplier that already includes/amortizes the transportation
| cost.
|
| It's far better for me to use the liquid futures market for
| hedging and still buy on the spot market, closing out the
| futures contract before delivery. For me, it's as if the
| futures market is cash-settled, even with a completely non-
| speculative transaction.
| hbsbsbsndk wrote:
| Contrary to people's expectations, it's not actually
| possible for "number go up" to continue forever. Privileged
| people have extracted value from marginalized people, the
| global south, the environment, and increasingly just
| domestic wealth inequality. There are fewer and fewer
| externalities you can profit from.
|
| Not to sound Malthusian, but it was never going to happen
| that 9 billion people on the planet could live with a North
| American standard of life, and we stop global warming, and
| deforestation. It would be a sort of heat death for
| capitalism with no gradient of inequality left to extract
| value from.
|
| Financialization is the last gasp attempt to make something
| from nothing. You're just betting on taking money from
| another person who is betting on taking money from you. The
| memeification of retail investing and the entire crypto
| market are the most naked version where there is simply no
| relation to any real resources.
| miki123211 wrote:
| I think hedging risks is a better example.
|
| Imagine you're a software company in India, and you want to
| sign a 5-year contract with an American retailer. The
| retailer wants to know exactly how many Dollars they'll
| have to pay you for the software. You want to know exactly
| how many Rupees you will get to pay your employees.
|
| Without futures, those two goals are incompatible, and the
| contract does not happen. With futures, the Indian company
| can decide to accept $1m, and buy a financial instrument
| that lets them exchange it in 5 years at current Rupee
| prices. They have to pay somebody for that privilege, but
| they know exactly how much they're paying, versus having an
| unbounded risk of currency fluctuations.
|
| You can do the same with oil. Maybe you have no use for
| crude oil, but you expect your profits to fall as oil
| prices rise (maybe you're a transportation company locked
| into a long-term contract). You can hedge that risk by
| buying futures; if prices rise, you'll lose money on the
| contract, but you will make it up by selling the (now much
| more expensive) futures.
| alfiedotwtf wrote:
| As soon as I read this headline, I was hoping someone in the
| comments was going to link to "Special Delivery"! That one and
| "Complicator's Gloves" are probably the most memorable!
| kchoudhu wrote:
| As good as the DailyWTF story is, it's not real. Coal is
| unfortunately cash settled.
|
| Even oil, which is physically delivered settles physically in
| discrete locations. It would be pretty funny if someone
| delivered tankers full of oil to your office though lol.
| gadders wrote:
| Good job it wasn't a power future.
| timoth3y wrote:
| Planet Money had a wonderful series of episodes where they did
| exactly this a few years ago.
|
| https://www.npr.org/sections/money/2016/08/26/491342091/plan...
|
| They traced the path of their barrel from purchase, to
| production, to refining, to the sale of the various hydrocarbon
| products.
|
| It's a great listen.
| sgt wrote:
| Did they pay extra for the barrel itself? Surely that steel
| doesn't come for free.
| pelagicAustral wrote:
| Didn't the price of the actual barrel became more onerous
| than the product itself during covid?
| Swoerd123 wrote:
| This is common for a huge number of products, ranging from
| cosmetics, consumables, pharmaceuticals, bottled water,
| etc.
| HPsquared wrote:
| For carbon footprint also, I believe. For bottled water
| at least, manufacturing the bottle has by far the most
| environmental impact, even more so than the
| shipping/transportation part of the process (which you'd
| think would be severe, as water is heavy).
| thmsths wrote:
| That's an interesting tidbit. Every time there is a
| suggestion we switch to reusable glass bottles instead of
| plastic, someone raises the issue of the extra weight of
| the bottle which will lead to greater carbon emissions
| during transport.
|
| But if, as you say the largest emission comes from
| manufacturing the plastic bottle, not the transport of
| the bottle AND the content; then it seems possible to
| lower the carbon footprint by switching to glass (on top
| of the other advantages like reducing landfill
| use/litterring/environmental pollution).
| moralestapia wrote:
| >someone raises the issue of the extra weight of the
| bottle which will lead to greater carbon emissions during
| transport
|
| Lmao, that's on the order of 1-2%.
| pydry wrote:
| in one market oil prices even went negative so presumably,
| yeah.
| duped wrote:
| My understanding from some of these articles is that oil
| isn't literally transported in barrels the vast majority of
| the time, it's in tanker trucks/rail cars/ships moving from
| source to refinery to retail the whole way. Part of what
| makes it fun to "buy a barrel of oil" is that you can't go
| many places and ask for a barrel, you need to bring the
| thing to put it in (like a tanker truck or rail car).
| DrFalkyn wrote:
| You can sell the barrel after you are done
| johannes1234321 wrote:
| Is there a market for barrels? - I would assume most oil is
| stored in tanks, transported via pipeline to harbor, loaded
| onto tanker and oil trucks with never seeing a barrel and
| the barrel mostly serving as a unit for calculation.
| Mistletoe wrote:
| I have one for making into a little stove with a kit from
| Amazon and lots of people use metal barrels for burning
| trash in rural areas. They are super cheap though like
| $10.
| conductr wrote:
| Im in Texas, lots of oil, and have seen market for such
| barrels when shopping for shipping containers and IBC
| totes in the past. Usually I find sellers of these things
| near distribution hubs.
|
| The barrels never had been used for crude oil when I've
| inquired. Sometimes a refined oil product likely used as
| a raw material for a manufacturing process, but never
| crude. I think it's never transported in such small
| quantities to make sense of using actual barrels. It's
| more so a unit of measure, probably with some valid
| historical context.
|
| My understanding is it's most likely transported from a
| well via a pipeline and may need a short trip in a truck
| or train (tanker style) to get to the pipeline from the
| well. The well itself usually has a collection reservoir
| to allow for 24/7 extraction.
|
| I don't know exactly I've just been vaguely around oil
| industry and engineers my whole life due to where I live.
| pixl97 wrote:
| Hello, my family has property with nat gas and some oil
| wells on it, and I've been out in the field with
| relatives that work in the industry.
|
| In small fields they'll typically have larger tanks from
| the 1,000 to 10,000 gallon size. Wells typically also
| produce some water and small amounts of nat gas so
| they'll have some way to either store or burn the gas,
| and they'll either separate the water on site for
| disposal, or have a mixed oil/water product that is
| seperated at a later stage.
|
| If the node isn't on a pipeline a vacuum/pump truck will
| show up either when the alerting systems hit a particular
| level, or when a particular interval of time has passed
| to ensure the equipment is still working.
|
| Modern bulk pump trucks are simply the fastest way to
| move the product. No one in it for profit is going to
| move the unrefined product in amounts that small. It's
| not valuable enough.
| fragmede wrote:
| How long ago was it that it was shipped in barrels? At
| some point it must have been, but the lore of oil history
| is not something I'm familiar with.
| conductr wrote:
| Went down the Google rabbit hole, this article is the
| best summary I found (in 3 minutes of reading).
| Basically, wood barrels were first used as that's just
| what existed from wine. It didn't hold up so the iconic
| 55 gallon steel barrel was invented. The industry outgrew
| it and could save a lot on shipping/handling if they
| developed pipelines and tankers. Each of these transition
| took a few decades, but also pretty much follow the
| industrial advancements that occurred from the 1850s to
| the 1950s.
|
| https://www.skolnik.com/blog/oils-long-history-with-
| the-55-g...
| fragmede wrote:
| Good find! So I'd need to set my time machine to 1949 in
| order tknve able to bring back an actual 55 gallon drum
| of oil. Hope I don't mess up the timeline with my
| souvenir!
| tokai wrote:
| There is.
|
| https://www.purepac.co.uk/shop/category/drums/plastic-
| and-st...
| johannes1234321 wrote:
| Those are 200L, a "barrel" as a unit for crude oil is ca.
| 159 liter.
|
| Now for some use that may be fine, but that also requires
| proper cleaning (following environment proection rules
| etc)
|
| My question was more like a cycle. The metal itself
| certainly got some value as well.
| bryanlarsen wrote:
| As conductr says, barrels are still commonly used for
| refined oil products. I worked at a gas station as a
| teenager, and we sold barrels of oil to farmers. They
| worked on a deposit system, we'd buy back the barrels. Or
| more commonly the farmer brought back the empty when
| buying a new barrel so didn't get charged the deposit.
| chasd00 wrote:
| I live in Texas like another reply and those barrels are
| all over the place. They get used for everything from
| trash bins to bbqs. Also, old drill pipe is used for 99%
| of the pipe fences you see on farms/ranches.
| engineer_22 wrote:
| Barrel is a unit of measure, like gallon.
| sgt wrote:
| I know that. But if you show up to an oil field and buy a
| barrel of oil, they're not going to give it to you in
| plastic bags.
| nielsbot wrote:
| They could tho? _thinking face_
| sgt wrote:
| Imagine the plastic waste and pollution! I think they
| should maybe consider hemp? That's an environmentally
| friendly option and it'll make a tremendous difference.
| /s
| butlike wrote:
| Could petrol break down the plastic?
| reaperman wrote:
| Yes, crude oil / gasoline / diesel will break down
| polyethylene grocery bags.
| p1mrx wrote:
| Maybe they could use a plastic bag surrounded by a
| cardboard box, like the bulk cat litter at Menards.
| justlikereddit wrote:
| I tried to buy a foot of yarn but no one offered it packaged
| in feet
| bubblethink wrote:
| The Gang Solves the Gas Crisis.
| austinallegro wrote:
| I want to buy pork bellies and frozen concentrated orange juice.
| mihaic wrote:
| Randolph, I will wager you one dollar that an LLM, if put in a
| fine suit, could do just a good a job as any of our traders.
| austinallegro wrote:
| "Mr Duke your brother is unwell!"
|
| "F*K HIM!!!!"
| ghaff wrote:
| That was such a good movie. All the leads and even not so
| leads were at the top of their form.
| timewizard wrote:
| Futures contracts are actually somewhat interesting in how fully
| they are specified. If you want to see how Light Sweet Crude Oil
| Futures are delivered, that's covered in the NYMEX Rulebook,
| Chapter 200:
|
| https://www.cmegroup.com/rulebook/NYMEX/2/200.pdf
| kqr wrote:
| This level of standardisation is indeed what makes them so
| liquid and useful!
| mr_toad wrote:
| Oil is usually considered fungible.
|
| Fungible is a word that sounds weird and I don't get to say
| often enough.
| kqr wrote:
| If you are looking for more opportunities, recall that the
| difference between entities and value objects in domain-
| driven design is that value objects are fungible.
| ghaff wrote:
| Like commodity I suppose it also gets used to describe
| things that may not be 100% fungible but may be pretty
| close depending on the details and the circumstances.
| praptak wrote:
| To the first approximation, yes. But there are different
| standards for oil and they trade at different prices (e.g.
| Brent is more expensive than Urals).
| ipdashc wrote:
| I never really understood the "with delivery in Cushing,
| Oklahoma" thing, and the Delivery section on page 3 doesn't
| make it too much clearer.
|
| Surely there are people trading in these contracts that...
| don't want their oil delivered to Cushing? The Delivery section
| makes it sound like maybe it can be delivered somewhere else if
| the buyer and seller agree, maybe?
|
| And Wikipedia does make it sound like Cushing really can be a
| bottleneck:
| https://en.wikipedia.org/wiki/Oil_industry_in_Cushing,_Oklah...
| But... how? It seems like such a bizarre setup to literally
| require all the oil to come to this one specific town, I assume
| I'm missing something obvious?
| Majromax wrote:
| > Surely there are people trading in these contracts that...
| don't want their oil delivered to Cushing?
|
| A big-enough buyer will know how to get oil from Cushing to
| their facility, often by pipeline. One who doesn't really
| want oil in Cushing is likely to close out their futures
| trade before the settlement date, treating it like a purely
| financial transaction.
|
| > It seems like such a bizarre setup to literally require all
| the oil to come to this one specific town, I assume I'm
| missing something obvious?
|
| Futures contracts need to be based on the price of something,
| but the price of a physical good depends on location.
| Delivery of a barrel of crude to the South Pole would be
| much, much more expensive - and more _variable_ - than
| delivery to a big oil terminal. Contracts for physical goods
| need some kind of agreed-upon reference point, even if most
| of the time things get financially settled without delivery.
| ipdashc wrote:
| Hm, makes sense. Thanks!
| steveBK123 wrote:
| She's an entertaining writer & co anchors a podcast called Odd
| Lots, for those unaware. Entertaining and informative on various
| niches of money & markets.
| john-tells-all wrote:
| https://www.bloomberg.com/oddlots
| keepamovin wrote:
| Quirky and laugh out loud funny. Thank you for the post.
| terminalgravity wrote:
| I agree that was a fun read
| helsinkiandrew wrote:
| I remember this from 2015! (187 comments):
| https://news.ycombinator.com/item?id=10499297
|
| Came up again in 2020 (157 comments):
| https://news.ycombinator.com/item?id=22924929
| nickdothutton wrote:
| Originally I had planned to pursue geology as a career, and
| studied it at college. In those days there was still a
| significant element of the course which concerned hand specimens.
| Mostly rocks and minerals, but also an impressive display of
| different crude oils from around the world. High or low sulphur,
| viscosity, density. Uncapping the small tubes would stink up the
| whole room pretty quickly.
| HPsquared wrote:
| I think a lot of that strong smell is the mercaptans
| (organosulfur compounds) which are very pungent. Funnily enough
| that's what gets added back in to natural gas so people can
| smell if there is a leak.
| mr_toad wrote:
| Probably hydrogen sulphide, the active ingredient in stink
| bombs.
| ubermonkey wrote:
| I remember this, and it was hilarious.
|
| Somewhat related is the tale of the commodities trade from
| DailyWTF that was unfortunately executed literally.
|
| https://thedailywtf.com/articles/Special-Delivery
| throw0101d wrote:
| Somewhat related, from 2020, "The day oil was worth less than $0
| -- and nobody wanted it":
|
| * https://www.cbc.ca/news/business/oil-negative-price-1.553899...
| RaoulP wrote:
| I vaguely remember som enterprising guys decided to buy some
| sort of storage tanks and then "buying" the oil while they
| still could, for a quick buck.
| ForOldHack wrote:
| Do you have an idea what one bbl of crude oil weights? Like
| bowling balls, it depends on the quality of the crude. 55gal @
| 8.5lbs/gal to 11.4lbs/gal? 450lbs to 625lbs. Forklifts only.
| maCDzP wrote:
| I can recommend the NPR planet money episode "The onion king" if
| you are into commodities trading.
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