Trump likes to portray himself as a dealmaker par excellence, but even this Wall Street Journal article he tweeted about was fairly condescending of his abilities in this respect, saying "Donald Trump’s legendary deal-making ability during his years as a real-estate mogul is more fantasy than reality, but the president outdid himself in this weekend’s high-stakes oil diplomacy." At any rate, how's the reality of this Savior of the American Oil Industry act playing out? In the aftermath of this so-called Trump-orchestrated deal, the benchmark US grade West Texas Intermediate (WTI) crude cratered from an abysmally low $20 to $18-something. The situation was really bad before the OPEC+ deal, but it got even worse:
US crude oil prices sank to around $18 a barrel on Friday [17 April], the lowest level since 2002, as energy markets struggled to absorb a record glut created by the coronavirus pandemic. Prices have dropped this week despite a landmark US-backed deal by the Opec+ group of producers to cut production by almost a tenth. But traders have judged that the collapse in demand is much greater — with up to a third of global consumption lost to measures to restrict the virus’s spread.
That has led to volatility, as traders bet oil storage will rapidly fill up, including at the US crude benchmark’s delivery hub of Cushing, Oklahoma. The front-month West Texas Intermediate contract for May delivery, which expires early next week, lost as much as 9 per cent to trade down to $18.03 a barrel, an 18-year low.With "deals" like Trump's, who needs deals? The heart of the matter is that while OPEC+ (including Russia) agreed to an all-time high 10 million barrel per day production cut, global demand destruction due to COVID-19 is estimated to be between 25 and 35 million bpd. Not enough has been to reduce supply to account for losses in demand, so prices will have clear at a far, far lower price. Even if the United States completely halts oil production, that would only reduce the global glut by up to 12 million bpd. It's simple economics that escapes Trump's comprehension.
4.20 UPDATE: If you thought $18/bbl WTI crude was unbelievably low, how about $3 per barrel? With Trump "saving" the American oil industry, who needs COVID-19 to finish it off?
