Americas News
Oil Claws Back Losses As More Optimism Builds About A Post-Pandemic World
Oil on Wednesday clawed back some of its earlier historic losses of earlier this week, rising 19 percent amid emerging consensus that although global storage space for the commodity will soon run out, the overall scenario for demand as well as for the global economy will improve in a post-pandemic world later this year.
West Texas Intermediate rose $2.21, or 19.1 percent, to settle at $13.78 per barrel; Brent settled up $1.04, or 5.38 percent, at $20.37.
Howard Marks, co-founder of Oaktree Capital Management, brought a badly needed perspective to the gutted oil market on Wednesday when he explained to media that the weakness in crude prices was steeped in fundamentals: "The ultimate complication is that storing oil costs money, and storage facilities aren't unlimited; right now storage is scarce and thus expensive, so it's not worth it to buy oil today and store it."
He added, "It's not a panic: the move is completely rational," and he went on to offer hope for recovery by pointing out that some far-dated contracts this year are showing average oil prices of $20 a barrel and above while contracts expiring in 2021 are reflecting a modest demand uptick with prices near $30 per barrel.
For his part, Jim Cramer, host of CNBC's Mad Money, said stocks were due for a pullback this week: "I think it's a mistake to read too much negativity into this stuff."
He said of Monday's historic collapse, "The oil futures contracts that were due to settle today collapsed after some rookies who didn't know what they were doing got fleeced; all the traditional storage areas for crude … [are] pretty much full, and the rookies didn't know that.
"More importantly, though, the oil producers are totally disconnected from reality" because they are "pumping way too much supply."
Michael Howell, managing director of CrossBorder Capital, took an even more aggressively optimistic stance by noting that oil's collapse may offer a springboard for economic recovery when coronavirus lockdowns finally end (his company's liquidity index has been rising in response to government stimulus packages and oil's fall, which lowers transport and manufacturing costs while putting money into consumers' pockets).
The sense of cautious optimism on Wednesday extended into the coronavirus realm, with the disclosure that while the Centers for Disease Control and Prevention earlier this week warned that a second wave of the virus will occur later this year, CDC director Robert Redfield was hopeful that testing and treatment will catch up with the virus in coming months (something not reported in initial media coverage).
Redfield also reportedly said that Australia, which is now experiencing the fall season, is a harbinger for things to come in the northern hemisphere - and that so far the number of new virus infections is fairly flat.
Meanwhile in the U.S., the demonstrations to end lockdowns and reopen the economy gained further traction when a Washington state county sheriff refused to enforce governor Jay Inslee's stay-at-home order because it is a violation of constitutional rights.
Sheriff Adam Fortney stated, "As more data floods in week by week and day by day about this pandemic, I think it is clear that the 'models' have not been entirely accurate; while that is okay, we cannot continue down the same path we have been on if the government reaction does not fit the data or even worse, the same government reaction makes our situation worse."
He added with regards to Washington's apparent double standard on private versus public jobs, "Our governor has told us that private building/construction must stop as it is not essential, but government construction is okay to continue.....this contradiction is not okay and in my opinion is bordering on unethical."
