The U.S. Energy Secretary says oil may now be at a bottom.
“I think we may be at a floor. I think the intent of this conversation with OPEC and the rest of the G-20 countries is simply to do exactly that, to mitigate,” said U.S. Energy Secretary Dan Brouillette, adding that prices would be much lower if no agreement had been reached.
Unfortunately, we may not be anywhere near a bottom.
Should supply-demand fail to balance out, we could see $10 oil near-term.
For one, there’s far too much supply on the market and no demand. In fact, oil just dropped under $20 a barrel on fear the biggest production cuts in history won’t be able to offset weak demand. “Oil demand will this month hit its lowest levels for the year, according to the International Energy Agency, falling 29m barrels a day below last year’s average to levels not seen since 1995,” as reported by The Guardian.
In addition, the world is still flooding the world with oil with the pact yet to begin, says Bloomberg. “State-owned oil company Saudi Aramco pledged to boost output to 12.3 million barrels a day in April as it slashed prices in a battle for market share, following the collapse of the three-year old OPEC+ pact last month.”
And, according to the U.S. Energy Information Administration, for the week ending April 10 inventory increased by 19.2 million barrels. Analysts were only expecting just over 12 million barrels, reports CNBC. “There is no feasible agreement that could cut supply by enough to offset such near-term demand losses,” the IEA said in its monthly report.
The U.S. Energy Secretary can tell us we’re nearing a bottom, but until excess supply is gone, and we see sizable demand for oil, we could see $10 barrel. Even Goldman Sachs has warned the “historic, but insufficient” deal won’t be enough to help, as reported by The Guardian.
Worse, we’re running out of places to store supply.
It’s gotten so bad some tankers are storing global oil supply at sea. According to President Trump added, We don’t have room to store oil anymore. We are using ships to store it. There’s never been a glut like this. We have to get rid of this tremendous supply,” as quoted by Forbes.
With all of that in mind, $10 oil is a very real possibility.