Oil Prices Still Pressured
8 26 AM CST Friday March 27 2020
Never let a crisis go to waste.
Rahm Emanuael, Former Chicago Mayor
Oil prices have fallen again this morning to $21.73 down almost a dollar from yesterday. And no wonder. The energy industry is reeling from lack of demand and too much supply. And the supply situation is only getting worse.
Echoing Rahm’s sentiment, the Saudis are planning on expanding oil production by 2.5 million barrels a day in April. Russia is still refusing to cut output. This is a continuing push to stamp out US Shale production.
The Texas Railroad Commission is considering limiting production in the state. But at a time when companies are pressed for cash, that will only continue the pressure the industry is enduring.
The Democrats in Congress responded in kind packing jet engine emissions and $25 M for the Kennedy Center into the $2 trillion stimulus package. The really bad news is that future attempts to throttle this kind of waste back will result in shouts that the Republicans are engaging in ‘cruel’ (latest word for Rs) cuts to consumers.
The $600 per week added to the unemployment package will result in some making more than if they were working. That occurred during the 2008 recession and was a reason the recovery we so slow.
President Trump will cease using the phrase China Virus. China has complained of that label though the problem clearly started in their country.
With 3.28 million unemployment claims there can be no doubt we are in a ‘recession.’ Generally that is two quarters of economic contraction.
Around the world social mood trends negative with finger pointing about the cause and location of the virus and energy demand.
One can read the statistics on this slowdown just about anywhere. The only real cure is not spending $2 T Congress did not have. Rather everyone needs to go back to work in spite of government mandated shut-downs. And yes there are deaths from this coronavirus but every year about 23,000 die from some sort of flu.
I am wondering how the danger of random exposure will affect future behavior. Will the cruise, airline, hotel, restaurant, and movie industries be permanently affected? What about the already declining retail shopping malls?
It seems reasonable to expect that individuals will be more reluctant to quickly begin gathering again. And that in itself will slow the chances of a speedy recovery.
Insider buying helped spur a three day 20% rally. But prices are falling again this morning with the DJIA down about 800 points.
Be prepared for a lengthy downturn.