The global tanking of oil prices is bad news for the industry, without question, but it represents a historic buying opportunity and it’s one that President Donald Trump is taking.
It’s definitely an “Art of the Deal” moment — the title of Trump’s bestselling book in which he details his winning business strategies. In this case, the president plans to use those principles to take advantage of negative oil prices in order to top off the nation’s strategic oil reserves at rock-bottom prices.
As Fox News reported Tuesday, oil futures contracts traded in negative territory a day earlier, a phenomenon even the most experienced industry veterans had never seen or imagined.
“Based on the record low price of oil, it is at a level that is very interesting to a lot of people, we’re filling up our national petroleum reserves, strategic reserves and we are looking to put as much as 75 million barrels into the reserves themselves that would top it out, that would be the first time in a long time its been topped out and we’d get it at the right price,” Trump said.
On Monday West Texas Intermediate crude futures contracts for May crashed an astounding 305 percent to -$36.73 per barrel. Technically, in a technical sense, that would mean oil producers would have pay that much just to get rid of their product.
“At a price below zero,” Fox News added, “buyers would be paid to take delivery as there are coasts associated with transportation and storage.”
At that price, the WTI closed at the lowest level it’s ever been since record-keeping began in March 1983, according to Dow Jones Market Data cited by the network.
Trump will need congressional approval for his plan, which means he’ll have to get House Speaker Nancy Pelosi and her testy Democrat majority on board.
“We’ll ask for permission to buy it or store it one way or the other it will be full,” the president said.
Politically, it could prove difficult for Democrats to oppose a plan to top off the nation’s oil reserves at such a bargain price. But then again, Pelosi held off for days on legislation aimed at replenishing hundreds of billions of dollars in Paycheck Protection Plan funds as part of the $2.2 trillion coronavirus relief bill — even as small businesses were scrambling to stay afloat and more than 22 million Americans were filing unemployment claims.
Pelosi was blasted by Republicans and other critics after appearing on late-night TV last week showcasing her expensive gourmet ice cream collection and $24,000-freezer in what could be the most tone-deaf political moment in history.
When Nancy Pelosi was blocking that funding while doing interviews about ice cream, Joe Biden’s only contribution was to compliment her taste in ice cream. pic.twitter.com/265mKC7q9v
— Matt Whitlock (@mattdizwhitlock) April 20, 2020
In any event, oil prices have tanked because demand has tanked, thanks almost exclusive to coronavirus-related ‘stay-at-home’ issued by the majority of governors. In addition, similar lockdowns around the world have also depressed demand; crude oil had already lost some 60 percent of its value before Monday’s fire sale.
Adding to the negative pressure, a price war between two of the globe’s top producers — Saudi Arabia and Russia — has been ravaging prices for weeks.
By Tuesday, oil fell an additional 18 percent and May’s contracts were still in negative, territory, according to CNBC.
“The contract for June delivery, which is the more actively traded and therefore a better indication of how Wall Street views the price of oil, slipped more than 18% to $16.73 per barrel,” the financial news network reported. “Earlier in the session it had dipped below $15, before paring some of those losses. The contract for July delivery fell roughly 10% to $23.68.”
Jon is a staff writer for BizPac Review with 30 years' worth of reporting experience, as well as an author and U.S. Army veteran. He has a BA in political science from Ashford University and an MA in national security studies/intelligence analysis from American Military University.
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