It was again a tweet from Donald Trump that influenced the markets this morning with a sharp recovery in crude oil prices. Indeed, the latter announced yesterday that he had spoken with a Saudi sovereign and Vladimir Putin and that they had all decided to reduce their production of black gold from 10 to 15 million barrels per day. Find out more about this news.
Although this tweet from Donald Trump was denied by Vladimir Putin himself, the price of crude oil still rose following its publication. Thus and in the morning of April 3, 2020, the price of crude oil took 15.55% with a barrel of Brent at 29.38 dollars. The rise is therefore slight because the barrel was worth more than double a little more than a month ago.
Let us note that the USA is currently and since 2017 following the explosion of shale oil, the first oil producer in the world. But during the week, the bankruptcy of an extraction company located in Montana heralded a series of events that would undoubtedly be long and heavy consequences for the country's economy.
It should also be remembered that oil companies have seen their share price fall by 70% since the beginning of this year and experts estimate that more than one or two out of three could go bankrupt.
The reason these companies are so sensitive to international prices is that shale gas production is much more expensive than conventional crude. Indeed, while a barrel of Saudi oil costs $4 to produce and a barrel of Russian oil costs $10, a barrel of American shale costs $45. Donald Trump therefore intends to make this his spearhead and here plays his re-election.
In spite of a fall in the price of oil at the pump which fell to 5 cents a litre of gasoline, factories are no longer working and planes are grounded, which purely and simply cancels the demand for this oil even at very low prices.
While consumption is dropping drastically, the oil available on the market keeps increasing, causing prices to fall. Currently, oil consumption has fallen by 20 million barrels per day worldwide, which is only the production of Russia and Saudi Arabia combined and the daily consumption of the entire United States.
Thus, both Russians and Saudis will of course have to reduce their production and thus prove the American President right despite their reticence on this subject. Indeed and without taking into account Donald Trump's current specific political ambitions, it is above all a global crisis in this sector that must be avoided at all costs.