with Paulina Firozi
President Trump painted a rosy picture of the petroleum industry’s recovery from the worst of the coronavirus pandemic — one that clashes with the pain a lot of drillers still feel on the ground.
Speaking at a roundtable discussion in Dallas yesterday, Trump praised his administration’s efforts to aid the ailing oil industry hit this year by a one-two punch — a severe downturn in domestic energy demand amid stay-at-home orders and a production war between Saudi Arabia and Russia.
“I think we’ve done a fantastic job with bringing back the oil in a rapid fashion,” Trump said at the event Thursday in the heart of oil country. “That looked pretty bad. That looked pretty bad.”
The price of oil indeed has rallied from its virus-driven lows. But U.S. producers are hardly out of the woods yet.
The price of West Texas Intermediate oil, a U.S. benchmark, briefly fell below $0 in April as Americans drastically curtailed flying and driving to stop the spread of the virus.
Now, as shutdown orders are loosened across the country, the price has jumped back up to around $35 a barrel — a sign of optimism for Trump.
“There’s never been a thing like that ever,” Trump said of oil prices dipping into negative territory. “And now I see that it’s getting close to $40 a barrel, and you’re back in business, and we got it done fast.”
Part of what is propping up oil prices is an agreement between OPEC, Russia and a handful of other oil-producing nations to curb production through much of the spring and summer in response to the pandemic.
It was Trump who helped bring Russian leader Vladimir Putin and King Salman of Saudi Arabia to the negotiating table. “We got Russia together with Saudi Arabia and they cut production,” Trump said Thursday.
But a full recovery is still a ways off.
Many major oil companies have said they will cut back on investment through the rest of the year as they prepare to weather the economic recession triggered by the virus. ExxonMobil, for one — based just outside Dallas — is cutting its capital spending from $33 billion to $23 billion in response to the outbreak.
A handful of other, smaller firms, including Whiting Petroleum and Diamond Offshore Drilling, have declared bankruptcy.
All told, the virus-driven downturn has slashed the value of the U.S. oil and gas sector by more than a third since the start of the year, according to S&P Dow Jones Indices, back when oil was trading for more than $60 a barrel.
Looking forward, analysts at Goldman Sachs say despite the recent rally, oil prices will go down before they go back up.
Oil producers have built up an estimated surplus of 1 billion barrels, the investment bank said, as economic activity has stalled during the outbreak.
That oil glut, plus the continued reluctance to travel, puts downward pressure on oil prices, which…
Read More: The Energy 202: Trump boasts oil is ‘back in business.’ Others are a lot more