Donald Trump calls for state aid to protect battered oil companies
US president Donald Trump said this afternoon that he had asked the federal government to develop plans to protect domestic oil firms after extraordinary levels of volatility sent prices negative for the first time in history.
On Twitter, the president wrote: “We will never let the great US Oil & Gas Industry down.
“I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!”
The calls came after the price of US benchmark West Texas Intermediate flipped into the negative yesterday as traders desperately attempted to offload expiring contracts for oil deliveries in May.
Attention has now shifted to the June futures contract, which fell nearly 30 per cent today as fears grew that the record sell-off would not be a one-off event.
Due to the total collapse in demand caused by coronavirus, and rapidly increasing shortage of storage space, producers are faced with the threat of ceasing production altogether, which may prove fatal for some shale firms.
Whiting, one of the US’ largest shale producers, filed for bankruptcy at the beginning of April, and many others are at risk of doing the same unless action is taken to keep them afloat.
The Baker Hughes tally of working shale rigs fell from 504 to 438 at last count, its lowest number since 2016.
Several shale states, such as Ohio and Pennsylvania, are likely to be strategically crucial for Trump’s attempts at reelection in November.
In Texas, oil regulators are considering taking in to their own hands and enforcing production curbs for the first time in 1972.
The Texas Railroad Commission, which controls oil and gas output in the state, is currently meeting to discuss measures to limit further pumping.
Trump’s comments somewhat cushioned the price collapses impact on US markets, but traders still embarked on a sell-off as markets opened.
CMC Markets analyst David Madden said: “The turbulence in the energy market has shaken confidence in companies that are not even connected to the industry – it is a broad based sell-off”.
At one point, worldwide benchmark Brent crude looked to be headed the same way, slipping to its lowest levels since 2001, before steadying around $20.