Oil Getting Support On Rumor U.S. May Join OPEC And Russia In 10% Production Cut

Trump seeking truce between OPEC+ members
Oil price led by WTI are trying to stabilize
The Energy Report

The Energy Report

 

The Phil Flynn Energy Report 

Democrats want to hijack the nation's Coronavirus economic protection bill so they can play politics at the expense of the American people.

The Wall Street Journal reported, "Senate Democrats blocked a rescue package designed to blunt the economic impact of the coronavirus pandemic, after a dispute with Republicans over corporate bailout provisions and aid to dislocated workers. Lawmakers and administration officials still hope to reach an agreement on a deal worth as much as $1.3 trillion to allow both chambers of Congress to approve it as the week opened Monday. Negotiations stretched late into the night. Shortly after the procedural vote failed, Dow futures fell 5%, hitting the trigger that halts trading.”

This comes as doom and gloom predictions for employment for Americans continue to rise. Market Watch reported that "That's Federal Reserve Bank of St. Louis President James Bullard explaining to Bloomberg News why he sees the U.S. unemployment rate hitting 30% in the coming months as the world continues to grapple with the coronavirus pandemic. If his gloomy job projection proves to be true, unemployment would be worse than it was during the Great Depression and three times worse than the 2007-'09 recession, according to Reuters. Bullard also said he expects an unprecedented 50% plunge in gross domestic product. "Everything is on the table," he said, referring to additional lending programs from the Federal Reserve. "There is more that we can do if necessary... There is probably much more in the months ahead, depending on where Congress wants to go.” Still, even Bullard admits that he's looking for activity to rebound quickly. "I would see the third quarter as a transitional quarter," with the following six months "quite robust" as Americans ramp up consumerism. "Those quarters might be boom quarters," he said.

 

Oil prices led by WTI is trying to stabilize despite record-breaking demand destruction. Reports out of China of traffic jams as well as an uptick in manufacturing activity is giving oil some hope that demand might rise again.

 

Oil may be getting some support on reports that the U.S. may join OPEC and Russia in a 10% production cut.. Reuters is reporting, "The United States is sending a special representative to negotiate with Saudi Arabia, officials said Friday, after the kingdom unleashed production following years of touting its role as a stabilizing force for markets.

Saudi Arabia and Russia are locked in a war for global oil market share after their three-year deal to restrain output collapsed this month. The kingdom has vowed to increase production to a record 12.3 million barrels per day, and has chartered numerous tankers to ship oil around the world, pushing prices to near 20-year lows this week. U.S. officials believe Saudi Arabia's move to flood oil markets compounds the global economic crash during a crisis caused by the pandemic." This is precisely what we have been saying.

 

Natural gas is also getting killed by demand destruction. Reuters is reporting that, "Exxon Mobil is likely to delay the greenlighting of its $30 billion liquefied natural gas (LNG) project in Mozambique as the coronavirus disrupts early works and a depressed gas market makes investors wary. Top U.S. oil and gas company Exxon said on Tuesday it was evaluating "significant" cuts to capital spending and operating expenses. Energy firms worldwide have slashed spending this month as oil prices plummeted to 18-year lows after global travel curbs and reduced economic activity destroyed demand. The coronavirus pandemic is forcing delays to projects worldwide. Qatar, the world's largest producer of liquefied natural gas (LNG), is delaying a big expansion in which Exxon is a major partner. The Rovuma LNG project, which will produce from a deepwater block off Mozambique containing more than 85 trillion cubic feet of natural gas, was expected to get the go-ahead in the first half of 2020. But three sources familiar with the project told Reuters that Exxon's partners want to push back a final investment decision.

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About the Author

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor.