Trump and Putin Talk Energy Market Stabilization
March 31, 2020
Genscape reported that US crude oil stocks held in Cushing, Oklahoma in the week ending Friday March 27th, increased by 4,040,949 million barrels on the week.
Goldman Sachs said demand this week is down an estimated 26 million bpd. It said it is impossible to shut down that much demand without large and persistent ramifications to supply. It is estimates that the world has about a billion barrels of spare storage capacity. It added that while markets like WTI crude oil can go negative, Brent is likely to remain near cash cost of $20 per barrel. It said the oil price war made irrelevant by a large decline in demand and made coordinated supply response impossible to achieve in time. Goldman Sachs believes the current oil crisis will see energy industry finally achieve the restructuring it so badly needs. It said commuters and airlines account for 16 million bpd of global oil demand and may never return to prior levels.
Energy market bounce off lows yesterday as many traders are feeling better after China reported good manufacturing activity. China’s March PMI was higher than it was in January signaling a strong return to industrial activity. China’s teapot refineries are running at rates last seen in January and are expected to increase processing rates up to 12 Mb/d by the end of this week.
President Trump had a phone call with Russian leader Vladimir Putin yesterday and they talked about working together to stabilize the energy markets. They agreed to have their top energy officials meet to discuss declining global oil markets.
I know a lot of these numbers get tossed out, but oil prices have fallen very dramatically and are at levels that have not been reached for many years. From John Kemp of Reuters: U.S. CRUDE PRICES near the wellhead at Midland in the heart of the Permian Basin in Texas have fallen to less than $5 per barrel. In nominal terms, crude prices at Midland are the lowest since before the first oil shock in 1973. In inflation-adjusted terms, crude prices have fallen to the lowest since the 1930s.