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DCape Town’s coastline is probably the best bet. From there, the route to the three most important ports is approximately the same length. Houston, Rotterdam, Singapore: Captains can reach them in 30 to 40 days with a speed of ten knots.
Many drilling companies currently rent tankers to collect their oil because onshore storage facilities are overflowing. Analysts say 160 million barrels are currently parked at sea, mostly off South Africa. 60 ships, strategically positioned as chess pieces, await the moment when the world needs their goods again.
Only one of the major oil nations cannot participate in the game: America.
The corona virus is paralyzing the world economy and the need for oil is decreasing. Production has been greater than demand for several weeks. Therefore, all sponsors must solve a question: where to put the surplus?
Bringing Brent oil from the North Sea is relatively easy because you can quickly pump it into the tanker. American companies, however, do not have this option. And that should be the government of the country, President Donald Trump will soon get into trouble.
Premiere in the history of raw materials markets.
The most important variety in the USA. USA, West Texas Intermediate, WTI for short, crashed dramatically. On Monday, the price even fell into negative territory. In New York, the price per barrel was now less than $ 40.
Producers had to pay customers to buy the oil. There has never been anything like this in the history of world commodity markets. Brent remained in the positive range and was trading at around $ 26 a barrel.
How did this accident happen? The largest depot for WTI is located in Cushing, a small dusty city in the state of Oklahoma, nearly 1,000 kilometers from the nearest port. American producers cannot simply park their oil at sea and wait for the world economy to recover again.
And Cushing’s tanks are full. Therefore, companies have to get rid of oil quickly, at any cost, even for a negative one.
There is also a technical effect. The negative price affects the May contracts that end on Tuesday. Traders who have only speculated on the price but do not want to have delivered oil must urgently sell these contracts.
Only now, in the Corona crisis, at a time when factories around the world are paralyzed and half of humanity lives with curfews, does not want anyone. The result: the price of oil reaches record lows.
Full tanks, expired contracts – all explanations cannot hide how devastating this crash is. America’s most important sub-zero oil is a symbol. The United States government, it is now clear, has failed with its petro diplomacy.
The fact that the US reference grade WTI barrel price. USA In the Asian markets in the first operations it rose again to $ 1.10 on Tuesday is only a weak consolation for the country.
The president is the loser
Donald Trump is the loser of a deal with Saudi Arabia and Russia. The Republican did his best to help the national oil industry, which is one of his biggest supporters.
Elections are held in the United States in November. Trump needs the money from the oil companies for his campaign. And the workers’ votes for reelection.
Trump agreed with Mohammed Bin Salman, Crown Prince of Saudi Arabia and OPEC ruler, and Vladimir Putin to cut funds. Less than ten percent, this is what your agreement provides for.
An extraordinary step. The United States and Russia, Trump and Putin, are joining forces to save the price of oil. But it does not work. WTI crashed. And Trump, who often brags about being a negotiator, is a loser.
And it does not appear that the price of oil will recover soon. “Right now there is almost nothing that can stop the downward trend,” says Michael Tran, commodity expert at RBC Capital Markets.
“America’s tanks are filled to the brim,” explains Tran, “historic barrels are rejected.” Therefore, there will be more “pain” in the United States.
Saudi Arabia and Russia, says analyst company IHS Markit, are in a better position to deal with low prices. Financing costs are lower in both countries, and their producers are state-owned. In the United States, on the other hand, many drilling companies will go bankrupt.
Do foreign policy with oil
Fracking has recently exploded here, the controversial process in which oil is ejected from deep rock with a mixture of sand, water and chemicals. The United States became the world’s largest oil supplier, Trump declared an era of “energy dominance”. United States oil should become a foreign policy tool. But not much of that is left now.
And the negative price shows something else: that the American economy is in bad shape. Curfews have a particularly negative impact on retail, one of the most important pillars of the economy.
There, sales fell 8.7 percent last month, the biggest drop ever recorded. The corona pandemic has cost 22 million Americans the job in the past four weeks.
And oil speculators, as the price drop shows, don’t seem to believe that Trump will quickly improve the economic situation. Your bet against WTI is also a bet against America.
