While the episode of negative WTI price is still being actively debated, its proper root cause is yet to be determined. This Comment contributes to the discussion and studies the event by modifying the theory of storage for an oil market with rigid operational infrastructure, where short-term supply and demand are price inelastic. We found that such pricing anomaly can be well characterized by a simple concept borrowed from the physics of extreme events.
The future prices are modelled as a financial derivative of the storage capacity. During normal market conditions, the spread between nearby futures contract is mostly determined by the carry trade and the cost of storage. However, if either inventory or the storage capacity is no longer available, the carry trade breaks down as the futures trader is unable to make or take the delivery of physical barrels. These events are akin to defaults in financial markets and prices leading to them are characterized by the financial squeeze.
We calibrate the model to inventory data at Cushing, Oklahoma and conclude that only a small fraction of the abnormal price move could be attributed to constraints on the storage capacity. The rest of the move was caused by the financial squeeze on long futures positions held against over-the-counter products. We detail the behavior of main market participants that led to negative prices. The Comment also points to several shortcomings of the recent CFTC report on this topic and suggests additional areas where a more granular look at the data could be helpful.
This comment looks at the announcement by the Danish government on 4 December to cancel the 8th offshore licensing round and all future rounds and to phase out all production of oil and gas by 2050. It describes the industry and political background to the announcement, including the ambitious legal target of a 70% reduction in GHG emissions by 2030 and climate neutrality by 2050, and the most recent official projections of offshore production. It concludes that it will shape operators’ investment and management of mature fields but its impact on Danish emissions and upstream production in 2030 and 2050 is likely to be much more modest than at first appears. However, if the reform galvanises the Danish authorities and investors to commit resources to the development of offshore CO2 storage in the period 2025-30, it may contribute significantly to Denmark’s climate objectives.
On November 8, 2017, Air Force One touched down in Beijing, marking the start of a state visit hosted by China’s president and Communist Party chairman, Xi Jinping. From my first day on the job as President Donald Trump’s national security adviser, China had been a top priority. The country figured prominently in what President Barack Obama had identified for his successor as the biggest immediate problem the new administration would face—what to do about North Korea’s nuclear and missile programs. But many other questions about the nature and future of the relationship between China and the United States had also emerged, reflecting China’s fundamentally different perception of the world.
This strategy was produced in collaboration with experts from ten leading democracies.
Following World War II, the United States and its allies and partners established a rules-based international system. While never perfect, it contributed to decades without great-power war, extraordinary economic growth, and a reduction of world poverty. But this system today faces trials ranging from a global pandemic and climate change to economic disruptions and a revival of great-power competition.
The Communist Party of Vietnam (CPV)’s Central Committee has been elected with 200 members for the 13th Congress (2021-26), unchanged from the previous term.
Delegates cast ballots to elect 13th tenure Party Central Committee
The 13th National Congress of the Communist Party of Vietnam (CPV) on January 30 evening announced the results of the election and the list of the 200 elected to the 13th Party Central Committee, including 180 official members and 20 alternative members.
Immediately after completing the vote counting, the Congress announced the list of delegates elected to the 13th Party Central Committee.
YANGON: Myanmar’s de facto leader Aung San Suu Kyi and other senior figures from the ruling party have been detained in an early morning raid, the spokesman for the governing National League for Democracy said on Monday (Feb 1).
The move comes after days of escalating tension between the civilian government and the powerful military that stirred fears of a coup in the aftermath of an election the army says was fraudulent.
Beijing’s aggressive new legislation orders its coast guard to “take all necessary measures, including the use of weapons, when national sovereignty, sovereign rights, and jurisdiction are being illegally infringed upon by foreign organisations or individuals at sea”.
Hours after the new law was passed, a flight of H-6K strategic bombers escorted by advanced fighters made a dummy “attack run” on the USS Theodore Roosevelt battle group.
Filipino fishers operating out of Thitu (also known as Pag-asa) island in the Spratly Islands also reported Chinese coast guard and militia vessels forcing them out of traditional waters.
Making a stand
New US Secretary of State Antony Blinken has responded to Beijing’s intimidation by contacting Mr Locsin, telling him the longstanding defence agreement between the two nations would be honoured.