Treasury Secretary Expects China to Follow Through on Trade Agreements
May 5th, 2020
The US and China have been getting into a dispute about the outbreak of the coronavirus. Secretary of State Michael Pompeo has said that the virus likely came from a Chinese lab in Wuhan. He has stated that the evidence continues to point in that direction. The World Health Organization has come out and denied that this is the case and stated that this is a natural created virus but this growing tension between the US and China makes the likelihood of progress on the trade deal that is still ongoing a bit more of a challenge. Of course, the pandemic has brought a lot of attention to supply chains in all industries and we are likely to see changes moving forward.
From a Reuters article about the shutdown of production in the Bakkens. Oil producers in the Bakken, which sprawls across North Dakota and eastern Montana, on average break even at $46.54 a barrel, according to an analysis by Deutshce Bank. This is well above the around $40 a barrel in the Permian basin the largest US shale field. Bakken crude BAK- fetched $3.40 a barrel on April 21. It has since recovered to about $14, still below the cost of production. Output has dropped by at least 400,000 bpd since March 1, nearly a third of the state’s around 1.4 million bpd output before the crisis. State officials expected the volume shut in to rise further. “This is truly unprecedented,” said Lynn Helms, director of North Dakota’s Department of Mineral Resources, the state regulator overseeing oil production.
Continental Resources has stopped nearly all of their drilling in the Bakken. Founder Harold Hamm has been very vocal about the price crash and declared force majeure on much of his production and shut down the majority of their production a few weeks ago. A big player in the Bakken, Concho Resources, said last week it planned to slash its 2020 capital budget further to $1.6 billion, representing a 40% decrease from its initial view.
Genscape reported that crude stocks at Cushing were up 1.8 million barrels, which is the smallest build in nearly 2 months. This is giving support to energy prices as many see production cuts having an impact and demand on the rise as some state open back up from shutdowns.
Texas Railroad Commissioner, Ryan Sitton, who urged the state to consider curtailing oil output by 20% or 1 million bpd said there are not enough votes to pass the measure and will not make a motion to vote on it. The executive vice president of the Texas Alliance of Energy Producers, Karr Ingham, said that by the end of May, Texas output is likely to fall by 20% anyway.
US Treasure Secretary, Steven Mnuchin said he expects China to make good on its trade agreement with the US. He also said he expects oil markets to rebound and that the administration was looking for more storage capacity.
The energy market is looking more optimistic currently and that has traders buying into the rally.