The dual black swan events of the COVID-19 pandemic and oil price war have created a unique analytical opportunity within petroleum products. As oil prices crashed, natural gas prices have largely remained unchanged due to the markets in which the commodities are used. Transportation which is the main use of oil has almost entirely stopped, whereas electricity generation and heating, the destination for most natural gases has remained similar to pre-2020 levels. Such modifications to consumption caused markets to go haywire and commodity prices to crash. With crude production cuts now occurring at a faster pace than anticipated and states lifting restrictions, supply and demand dynamics for liquids compared to natural gas has changed since April. As the United States begins returning to normal, an update to these commodity market assumptions is in order.
In this episode your host Tavis speaks on debt lawsuits, trade investigations, people getting out while the getting is good, and a poor OPEC+ performance. Music: https://www.bensound.com/royalty-free-music
There is a strong inverse relationship between crude storage levels seen at the Cushing, Oklahoma facility and WTI futures price. This relationship exists even though the storage facility only holds a percentage of total domestic crude inventory. In fact, data suggests that in order for crude prices to stabilize above $55 per barrel, inventory in Cushing will need to drop below 47.5 million barrels, or about 62% storage utilization at the facility.
Oil prices surged this morning as President Trump announced Saudi Arabia and Russia would be cutting back 10 million barrels of production with more potentially on the horizon. As the White House meets with at least seven U.S. energy CEOs on Friday and an emergency OPEC+ meeting in the coming weeks, the news comes as a brief sigh of relief in a time when our industry is struggling to keep its head above water.
In this episode your hosts Tavis and Sy talk about what you can buy with a Chesapeake stock, California regulators, Apache offices closure, drowning in wastewater, Warren’s love of oil