Another wild day in the oil markets. I bet that if we pulled back the curtain we would find hedge funds, traders and other speculators who were long and never intended to take delivery but planned to sell for a higher price—only to find that there were not only no buyers—but no place to store the oil. Which one of their trades will blow up next?
Here are Crude oil futures today so far—as of 1pm Central time 4/21/20—$7.46 a barrel—down $12.97—or 63.49%—1:30 p, it went below $7 a barrel or 65% around 1:30—now it’s heading back towards $12 a barrel—no telling where it will end up.
This article is about as brutally negative as one can get—making all sorts of future predictions that may or may not pan out. These shale producers are bankrupt—President Trump has supporters there—will we be foolish enough to bail these people out? They owe around $200 billion. What will President Trump do—will we pay $200 billion?
President Trump said via Twitter. "We will never let the great US Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!"
So it is best to let these companies go bankrupt and the resulting unemployment all along the supply and production paths. To avoid this should tax-payers bail them out?
The even greater concern to me is the already $Trillions we are already indebted in our World, and the $Trillions more being printed out of thin air. In the end, we all have to pay the "Piper!"
These are very, very, difficult decisions, each having their consequences. Let us pray that those that are making these decisions, make the decisions, that in time, uplift all!
Here’s B’s conclusion: "It costs about $45/bl to produce shale oil. No U.S. shale producer is currently in profitable territory. All are already highly indebted. They still hesitate to shut down their wells. Once shut down the wells tend to clog up. They will need expensive rework to be reopened. That is unlikely to be profitable during the next two to five years if ever."
"The stone age did not end for a lack of stones. The oil age will not end for a lack of oil. Oil demand has probably seen its global peak. Alternatives have been developed. The pandemic will likely be with us for some two years. It will change the behavior of many people."
"There is no reason to expect crude oil to ever again reach its previous peak price of more than $100/bl."
"The total debt of U.S. shale oil producers is estimated to be above $200 billion. None will be paid back. The carnage may well lead to collapses in the banking system."
"All countries which have their budgets depending on oil sales are now in deep trouble. As they lose their importance as producers and consumers the global policies around them will also change."
"The pandemic only amplifies the existing structural problems and imbalances in our markets and societies. It is likely to leave permanent marks on them."
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