THE PRICE of US oil has turned negative for the first time in history, destroying the shale gas ‘miracle’ that was going to liberate the country from using Saudi oil and restore the power of US imperialism.
The price of a barrel of West Texas Intermediate (WTI), the benchmark for US oil, fell as low as minus $37.63 a barrel on Monday. Oil producers are paying buyers to take the commodity off their hands over fears that storage capacity could run out in May.
With demand for oil drying up, as lockdowns across the world halt industry, major oil companies are renting tankers to store the surplus supply – and that has forced the price of US oil into the gutter.
There was a ‘rebound’ yesterday with oil rebounding back above zero. US benchmark West Texas Intermediate for May delivery was changing hands at $0.56 cents a barrel after closing at -$37.63 in New York.
‘This is off-the-charts wacky,’ commented Stewart Glickman, an energy equity analyst at CFRA Research. ‘The demand shock was so massive that it’s overwhelmed anything that people could have expected.’
Glickman said the historic reversal in pricing was a reminder of the strains facing the oil market and warned that June prices could also fall, if lockdowns remain in place. ‘I’m really not optimistic about the prospects for oil companies or oil prices,’ he said.
Earlier this month, oil cartel Opec members and their allies finally agreed a record deal to slash global output by about 10%. The deal was the largest cut in oil production ever to have been agreed.
But many analysts say the cuts were not big enough to make a difference. ‘It hasn’t taken long for the market to recognise that the Opec+ deal will not, in its present form, be enough to balance oil markets,’ said Stephen Innes, chief global market strategist at Axicorp.
US President Donald Trump had said the government will buy shale oil for the country’s national reserve. This however has not abated the acute concerns that storage facilities in the US will run out of capacity, with stockpiles at Cushing, the main delivery point in the US for oil, rising almost 50% since the start of March, according to the ANZ Bank which described the policy as: ‘It’s a dump at all cost, as no one, and I mean no one, wants delivery of oil with Cushing storage facilities filling by the minute.’
President Trump has been confounded by the oil crisis. He had insisted that shale oil would lead to a return to US worldwide domination over rival producers Saudi Arabia and Russia.
His response to the price collapse was immediate and brutal. Trump announced he would be defending American jobs and that he is signing an ‘executive order’ to suspend all immigration into the US, blaming migrants carrying the coronavirus plague for the crisis.
On Twitter, he ranted against ‘the attack from the invisible enemy’, and the great need to protect the jobs of Americans. He also praised the armed demonstrations of right wingers calling for ‘freedom’ and the ending of the lockdown tactic that has been used to fight the coronovirus epidemic.
Trump’s announcement and attack on migrants on Monday comes as the White House insists that the worst of the pandemic is over and the country can begin reopening. However, over the last four weeks, more than 25 million Americans have made jobless claims.
They are now being told by Trump that migrants and trade unions, not US capitalism, are to blame for their plight – while last Wednesday saw the first clash in recent months between US warships and Iranian speedboats in the Iranian Gulf.
The rapidly deepening slump, and the devastation of US workers’ jobs, means that Trump will seek to divert the class struggle at home by attacking migrants, trade unions and Iran.
US workers however know that their enemy is not fellow workers throughout the world but the US ruling class at home. They will respond to Trump’s attacks by forming a section of the International Committee of the Fourth International in the USA, to lead the American Socialist revolution. This is the way forward!