Oil to -$100 a barrel?

TUE, APR 21, 2020

YOUR AFTERNOON NEWS UPDATE AND MARKET ACTION FROM CNBC

AS OF TUE, APR 21, 2020 • 12:27 ET

DJIA		23042.87
		-2.57%	-607.57

S&P 500		2738.78
		-2.99%	-84.38

NASDAQ		8260.16
		-3.51%	-300.56

EDITOR'S NOTE

I'll keep this short: we've got Paul Sankey on right near the top of the show today, and if you think what happened to oil yesterday is crazy, he says even crazier is on the way.

Sankey--Mizuho's oil and gas analyst--was among the first to warn us last month that crude could go negative. (In case you missed it, oil settled at roughly -$37 a barrel yesterday. Full headlines below.) Now, unlike Goldman's Jeff Currie, who said he thinks the oil market could transition into deficit (which is bullish for oil) as soon as June, Sankey says the oil market will get even worse next month.

"Will we hit -$100 a barrel next month? Quite possibly," he warns. "If you had a stinking barrel of oil in your back yard, would you pay someone $100 to take it away? Yes, and you would probably be relieved you were not charged $300. That is the situation we are in."

Sankey points to the fact that sixty different grades of U.S. crude yesterday posted prices from -$40 to -60 a barrel, per Plains All American. "This negative price was NOT a pure paper anomaly," he says. (The May WTI contract expires today, and that "rollover" to June has been blamed for yesterday's plunge.)

Just imagine what will happen when the 20 Saudi ships with 40 million barrels of crude shows up!

Sankey's -$100 call caught my attention for another reason, too; it's the perfect inverse of what happened during the great financial crisis of '08-09. On January 2, 2008, oil hit $100 a barrel for the first time. Energy was an outperformer that helped the U.S. economy weather the last downturn, even as consumers were pinched at the pump.

Now, you have the energy sector potentially decimated and few consumers able to capture the benefit of cheaper gasoline. I just hope Sankey's right that this will help pave a sharp demand rebound in the second half of the year. All the more reason for those working on testing, treatments, vaccines, and safe reopening plans for coronavirus: it can't come soon enough.

See you at 1 p.m!

Kelly

P.S. If you can't catch Sankey on the show today, "The Exchange" is now also a podcast! Click here to subscribe.

Kelly Evans
Twitter: @KellyCNBC

Instagram: @realkellyevans

KEY STORIES

Here are the largest public companies taking payroll loans meant for small businesses

Those that have received Paycheck Protection Program relief designed for small business include publicly traded firms with thousands of employees.

North Korean leader Kim Jong Un recently had surgery, could be incapacitated, US officials say

U.S. intelligence indicates that North Korean dictator Kim Jong Un recently had cardiovascular surgery, NBC News reported, citing American officials.

Stocks making the biggest moves in the premarket: Coca-Cola, Travelers, Philip Morris, Lockheed & more

The stocks making the biggest moves in premarket trading include Coca-Cola, Travelers, Philip Morris, and Lockheed.

Coronavirus live updates: NYC's de Blasio slams federal government, Italy to begin easing lockdown in 2 weeks

Covid-19 has infected 2,494,900 around the world as of Tuesday, killing at least 171,249 people.

March home sales drop 8.5% as sellers take properties off the market – and the coming months look worse

These sales figures are based on closings that represent contracts signed mostly in late January and February, before the coronavirus shut down so much of the economy.

Trump directs Mnuchin, Energy secretary to create plan to support oil, gas industries as sell-off deepens

Trump's promise that he will "will never let the great U.S. Oil & Gas Industry down" came as West Texas Intermediate crude futures continued trading with a negative price.

Georgia got lifting coronavirus restrictions backward, Connecticut Gov. Ned Lamont says

Georgia's move came amid a wave of announcements mostly by Republican governors about how states will reopen their economies.

Stock market live updates: Stocks fall 3%, oil carnage continues, IBM drops 6%

Crude's historic decline pressured Wall Street once again as the global economic outlook becomes even murkier.

Schumer says he believes Senate will pass small business bill Tuesday, with 'agreement on just about every issue'

Schumer said he spoke "well past midnight" with House Speaker Nancy Pelosi, White House chief of staff Mark Meadows and Treasury Secretary Steven Mnuchin, and that they "came to an agreement on just about every issue."

Cramer says, 'We've got to try something' as Georgia, other states begin to reopen

States should experiment with reopening their economies from their coronavirus shutdowns in order to save small businesses, CNBC's Jim Cramer said Tuesday.