Larry Kudlow said oil prices should recover from recent lows as the US economy reopens in a Wednesday interview with CNBC. On Monday, US West Texas Intermediate crude oil closed at negative $37 per barrel, falling below zero for the first time ever. "I'm hoping that this oil slump will prove to be temporary," Kudlow said. He also said he hopes that the US economy will soon be able to reopen. Read more on Business Insider.
Larry Kudlow said that oil prices should recover from recent historic lows as the US economy reopens following lockdowns to curb the spread of the new coronavirus. "I'm hoping that this oil slump will prove to be temporary," Kudlow told CNBC in an interview Wednesday. "Not many people are driving right now, as you know, and there's a glut of oil." He continued: "It will, I hope, take care of itself. Markets will take care of themselves over time." The comments from President Trump's top economic adviser come after oil prices slumped to a record low on Monday, when US West Texas Intermediate crude closed at negative $37 per barrel, the first time the commodity has ever traded below zero. Prices have rebounded slightly, but remain low — oil has slumped roughly 65% year-to-date as the coronavirus pandemic craters global demand. "The coronavirus worldwide caused the collapse in demand. Through no fault of anybody, this virus has pushed us into a big economic contraction," said Kudlow. Read more: 'I've gone to cash': Mark Cuban outlines his coronavirus investing strategy ahead of another 'leg down' in markets — and says now is the time to buy real estate In the US, "the rig count is way down, demand is way down, production is falling. There's not much we can do about that," Kudlow said, adding that the White House is considering options for relief to the industry, though nothing has been decided yet. "There's a lot of deflation out there as we go through this contraction," he said. "We will propose regulatory and tax and investment policies to help out as best we can." Still, Kudlow's hope is that strict lockdowns due to the pandemic will soon be over. "We'll come out of this soon, the economy will reopen, the economy will restart," he said.Join the conversation about this story » NOW WATCH: Why Pikes Peak is the most dangerous racetrack in America
More like this (3)
Summary List Placement "Doom and gloom" about the long-term effects of COVID-19's economic slump may be...Summary List Placement "Doom and gloom" about the long-term effects of COVID-19's economic slump may be overdone, according to Capital Economics. Compared to the 2008 financial crisis, there are fewer reasons to expect the pandemic will weigh down on economic growth in the long-term as gradual rebounds are already underway, the research group's chief economist said. Instead of focusing on output, economic legacy will be seen in other areas such as structural changes, de-globalization, and the role of state. Most economies will not return to pre-virus GDP levels for another two to three years, but China — driven by an investment-intensive stimulus — will lead the way. Visit Business Insider's homepage for more stories. It isn't all "doom and gloom" when considering the pandemic's long-term effect on the economy, according to Capital Economics. Pessimism over the economic slump triggered by COVID-19 might just be overdone, Neil Shearing, the research group's chief economist said in a webcast on Thursday. Compared to the 2008 financial crisis, there are fewer reasons to expect the pandemic will weigh down growth in the long term, he said. Instead, economic legacy will be found in the pushback against globalization, higher debt levels, a different way of working, and less emphasis on austerity on austerity in particular. These factors have major implications for commodity markets, in which some industrial metal prices are above their pre-virus levels and still have further room to go. States will be radically transformed with different sectoral makeup for some economies, and some will shrink permanently while others will grow and develop in their place, Shearing said. He pointed out that most economies will not return to pre-virus GDP levels for another two to three years, but China — driven by an investment-intensive stimulus — will lead the way. Read More: Goldman Sachs says oil prices are set to move 'meaningfully higher' into next year. Here are 7 reasons why the firm is bullish, and 5 stocks it recommends buying in advance Throughout the group's forecast horizon, central banks are expected to continue to keep interest rates at rock-bottom levels. Gold prices will remain elevated in the medium-term, given that real yields, which strip out the effects of inflation, are likely to remain low. Demand of industrial metals cratered earlier this year following virus-containment measures, and led to record-low price levels in March. But prices have rebounded quickly, and all except aluminum and lead are now higher year-to-date, James O'Rourke, a commodity economist's report showed. Despite the year's rally, prices can be expected to rise a little more by end-2021, he wrote. "For one, China's economy is on track to return to its pre-virus path by end-2020, far earlier than any other major economy," O'Rourke said. "The recent ramp-up in China's fiscal stimulus, with its focus on metals-intensive infrastructure spending, has room to run this year, while a further economic boost will come from faster credit growth." The huge stimulus-led price rally after the great financial crisis came on the back of massive credit growth, on a scale which might not be repeated this time, the report said. For oil, international benchmark Brent crude's recent drop to a two-month-low shows its fragile nature of price recovery. An uneven recovery in demand, and the effect of vast surplus oil inventories accumulated in the first half of the year will likely limit any price gains. Brent is unlikely to see much in the way of price gains over the remainder of the year. Capital Economics expects it trade around $45 a barrel by the close of the year, compared with around $43 now. "Even as most sources of oil demand return to more 'normal' levels as economies recover, we suspect that jet fuel consumption will remain depressed as a result of ongoing travel restrictions and a fall in commercial passenger flights," O'Rourke said. Demand is likely to run faster than supply, which will help run down some of the overhang of unused fuel in storage tanks, but not fast enough to trigger a large burst higher in the price. "We think that the outlook for oil prices will brighten a little next year, as supply fails to keep pace with a continued revival in demand," he concluded. Read More: Jefferies handpicks the 17 best stocks spanning multiple sectors to buy now — and details why each company's future looks 'particularly attractive,' even in a downturnSEE ALSO: World Bank chief economist says full global recovery from the COVID-19 crisis may take 5 years Join the conversation about this story » NOW WATCH: Why electric planes haven't taken off yet
Bank of America says the model that 'broke' US oil companies is over — and handpicks 7 energy stocks set to soar as the industry finds new footing
After plummeting this spring, oil prices are set to recover pandemic-fueled losses by the first half...After plummeting this spring, oil prices are set to recover pandemic-fueled losses by the first half of next year, according to a recent Bank of America report. But the impact of the market collapse on the US energy industry will endure for years to come, the bank said. It will reset the industry's growth model, forcing companies to focus on cash generation and modest growth. Ultimately, that will make the investment case for the sector better, the bank said in the report, in which it shared its seven top picks. For more stories like this, sign up here for our weekly energy newsletter, Power Line. After falling to historic lows this spring, oil markets are on track to reverse pandemic-fueled losses by the first half of next year, analysts at Bank of America said in a report last week. The recovery — which is set to push the price of Brent crude, the international benchmark, to $60 a barrel — is driven by a global drop in output, largely through an OPEC agreement to curb production, and a steady increase in fuel demand, the analysts said. But while the fall in oil prices may prove temporary, its impact on the US oil-and-gas industry will endure, according to a more recent Bank of America report published Monday. "It's hard to overstate the change we believe has taken place in the energy sector in the past six months," the report said. And those changes impact energy investing, the bank added. Investors have overlooked the longterm impacts of an oil market meltdown, it said, which is causing US companies to abandon "growth as a strategy" and marks the end of a business model "that broke the US oils." Instead, companies are focusing on generating cash. Click here to subscribe to Power Line, Business Insider's weekly energy newsletter. "This has the potential to reset the US oils to its legacy promise of what the sector can represent: reintroducing investors to an investment case that offers moderate growth, competitive with the broader market, and allows direct participation in a cyclical recovery in oil prices," they wrote. Do you have a tip about energy companies? Reach out to this author at email@example.com or through the encrypted messaging app Signal at 646-768-1657. 'The worst earnings season in a generation' The US oil and gas industry is known for unbridled growth enabled by "perpetual spending on a hamster wheel," the analysts said. Growth helped carry the country to energy dominance — but, as they point out, it came at a cost. It "underpinned amongst the worst returns of any sector in the broader market over the past five years," they said. Then the pandemic struck, causing oil prices, on which these companies depend, to fall by as much as 70% by April. Today, a barrel of Brent is down about 33% since the start of the year, at about $44 a barrel. Oil companies have lost billions in the months since. In the second quarter, which Bank of America called "the worst earnings season in a generation" for US oil companies, majors Chevron and Shell, alone, for example, posted a combined loss of more than $26 billion. While the quarter reflects a temporary crash in oil prices, it could be the most consequential quarter in a decade, the analysts said. "It is serving as the catalyst that forces a reality check on the business models that have decimated market confidence in the US oils," they wrote, mentioning similar sentiments shared by executives in the exploration and production (E&P) side of the industry. Read more: More than 30 oil companies have already gone bankrupt this year, and experts say many more will follow. Here are the 15 companies most at risk. "The traditional E&P growth model of the past is not viable going forward," Devon Energy's CEO, David Hager, told investors in August. The future of oil markets The collapse in oil markets combined with a growing focus among investors on sustainability has created a complete "cocktail of disincentives to own energy" stocks, the bank said. Yet, the analysts believe that, on the other side of the coronavirus pandemic, the US oil-and-gas sector will be more investible than any time in the last decade. Months of cheap oil has transformed E&Ps, driving a new mandate of moderate growth "that is competitive with the broader industrial sector, but leveraged to a cyclical recovery," the bank said. It is "reintroducing investors to the reason this sector existed in the first place," the analysts added. Plus, oil prices are recovering. There's an "accelerated rebalancing of global oil markets," the bank said, which is set to drive the price of Brent to $60 a barrel by the first half of 2021. At the start of this year, well before the coronavirus became a pandemic, a barrel was selling for about $68. Read more: Top oil companies invested $9 billion in clean energy deals since 2016. We ranked the 6 biggest spenders. Taken altogether, Bank of America says it sees "significant value" for many American oil companies. So where is it placing its bets? Bank of America's top stock picks The analysts looked for companies with plenty of cash and limited debt that are set to rebound along with oil prices. Their top picks include Occidental Petroleum, Exxon Mobil, Hess Corporation, Apache Corporation, Devon Energy, Pioneer Natural Resources, and Concho Resources. Occidental, they said, is a "controversial stock" and the timing of its acquisition of Anadarko Petroleum was unfortunate. But they added that it has a large number of assets, an updated board, and, generally, is poised to ride the recovery in oil prices. Exxon (XOM), which made deep cuts to capital spending, is similarly set for growth, they said. "In our view, XOM will be the only oil major to emerge from the latest downturn with capacity for sustainable dividend growth intact," the analysts said. Read more: Internal documents, leaked audio, and 20 insiders reveal Exxon made managers dub more employees poor performers as the oil giant sought to quietly cut staff Devon, Pioneer, and Concho, on the other hand, have three important traits in common, the bank said. They are heavily hedged in 2020, meaning low oil prices don't weigh them down as much, they have valuable oil-and-gas assets, and they are equipped to pare back spending should oil prices remain low or sink down further.Join the conversation about this story » NOW WATCH: Here's what it's like to travel during the coronavirus outbreak
Covid-19 pandemic forecast to cause biggest slump in history after collapse in demandInvestment in global energy...Covid-19 pandemic forecast to cause biggest slump in history after collapse in demandInvestment in global energy will fall by $400bn (£324bn) this year, the biggest slump in the industry’s history, as the Covid-19 pandemic fuels a collapse in energy demand.The International Energy Agency (IEA) said the unprecedented investment slump follows the most severe plunge in energy demand since the second world war. The price of oil suffered an historic market crash last month when US oil prices turned negative for the first time. Continue reading...