Crude is showing signs of life.
All after President Trump said he expects for the Saudi Arabia and Russia feud to end soon. “Worldwide, the oil industry has been ravaged,” Trump said, as quoted by CNBC. “It’s very bad for Russia, it’s very bad for Saudi Arabia. I mean, it’s very bad for both. I think they’re going to make a deal.”
However, a good deal of damage has been done.
And until we hear from the Saudis or Russia, the feud will persist. Worse, the world is running out of places to store oil, which could lead to negative prices unless the news turns positive.
According to Forbes, “Analysts at Rystad Energy, the oil consultancy based in Oslo, Norway, estimate that the world is likely to run out of storage at current production rates by April, estimating earlier this week at 76% of the world’s storage is already full. In some regions, like Western Canada, storage could be full by the end of this month.”
Major damage is being done to U.S. shale, too.
A Chapter 11 bankruptcy filing from Whiting Petroleum (the first domino to fall) yesterday is only a bad omen of what’s to come, says CNBC.
“I don’t want to be a doomsayer, but I think Whiting is just simply the first domino that’s going to fall,” John Driscoll, chief strategist at JTD Energy Services, told CNBC. “It’s a fairly substantial company, but the smaller producers, if they don’t have the hedging in place, it’s going to be a tough route — Chapter 11 might be the only way to go.”
All as U.S. shale becomes economically unviable.
Until the oil price feud between Russia and the Saudis end, and until we see demand pickup, and supply drain, oil prices will remain under pressure. There’s hope the U.S. shale boom could eventually recover at some point, too. Unfortunately, that’ll take quite some time.
While it’s best to avoid oil stocks at this time, keep an eye on the majors like Exxon Mobil, Chevron, and BP as potential long-term “blood in the street” opportunities.