President Trump Says Russia And Saudi Arabia "Both Went Crazy" In Oil-Price War

March 31, 2020 10:43 AM
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The Energy Report



The Phil Flynn Energy Report 




I remember when, I remember, I remember when I lost my mind. There was something so pleasant about that place. Even your emotions had an echo. In so much space: And when you're out there Without care, Yeah, I was out of touch, But it wasn't because I didn't know enough, I just knew too much. Does that make me crazy? Does that make me crazy? Does that make me crazy? Possibly: probably.

Is it crazy if you are a major oil producer to create a situation where the price of your product would have the worst quarter in history? A time where oil demand destruction is at the highest level in the history of the globe. The answer is yes!


President Trump told Fox and Friends on the Fox News Channel that both Russia and Saudi Arabia "both went crazy" in their oil-price war and that "I never thought I'd be saying that maybe we have to have oil (price) increase because we do.” "The price is so low now they're fighting like crazy over, over distribution and over how many barrels to let go."


The President also said that he would call Vladimir Putin, but trying to bring Russia and Saudi Arabia back from crazy may be more difficult that it seems. Saudi Arabia, shortly after the crazy comments, said they would raise exports of oil because of weak domestic demand. Maybe someone should call Saudi Arabia and tell them demand is not any better in most countries because of the coronavirus. So keep your oil because no one really wants it. According to reports, Trump and Putin, in the call, agreed on the importance of stability in global energy markets. Sounds nice, but what does that mean?


Reuters reports that crude oil 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.


Yet there were some moral victories for oil. Despite the fact that yesterday oil probed well below the $20.00 mark, the market managed to close above $20 a barrel. Now overnight strong manufacturing data out of China, and a robust U.S. stock market is raising hopes that there may be some light at the end of this very dark tunnel. China's official Purchasing Manager's Index for March hit 52.0, blowing away expectations of 45. Last month the index plunged to a dismal 35.7. The data is raising hopes that the world will start to recover from this deadly virus.


This, along with talk of more stimulus and some pressure from the Trump administration on Russia, is giving oil producers some hope of a price bottom. Still, demand better improve because global storage could be full by May if things don't change. U.S. producers are under fire, and global oil producers are going broke. The Wall Street Journal reports that "Meanwhile, Venezuela and Iran, hit by U.S. sanctions, have sought $5 billion each in emergency funds from the IMF. Venezuela has lost half of its output because of U.S. restrictions on its oil, which is very low quality and even more expensive to pump than in the U.S.”


American Airlines will take advantage of bailout funds. They say, "We are eligible for about $12 billion in Govt aid. We intend to apply for these funds.”


Natural gas is trying to bounce as well, but some big players are bailing in a market with a once bright future. Reuters is reporting that "Royal Dutch Shell Plc pulled out of a major U.S. liquefied natural gas (LNG) export plant under development following the recent crash in energy prices, quickly followed by its partner, Energy Transfer LP, delaying its final decision on whether to go ahead with the project to next year.”

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About the Author

Phil Flynn is a senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. Phil is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.