Pump jacks draw crude oil from the Long Beach Oil Field in Signal Hill, California, on March 9, 2020. (Photo by DAVID MCNEW / AFP) (Photo by DAVID MCNEW/AFP via Getty Images)
Turbulent oil prices dropped to the low $30s on Thursday, falling to 16-year lows just hours after President Donald Trump announced a 30-day ban on travel from more than two dozen countries in Europe in an attempt to stem the spread of coronavirus.
Brent crude oil, the benchmark for global prices and for U.S. gasoline prices, had declined to nearly $33 a barrel as of midday Thursday, down from a one-day peak of $36 reached just an hour before Trump began his live remarks from the Oval Office.
West Texas Intermediate, the bellwether for U.S. shale oil production, saw a similarly dramatic drop, from $33.48 an hour before the president’s remarks Wednesday evening to close to $30 by the next afternoon.
Both Brent and WTI have seen their market values plunge by roughly a third from last week alone. Each is fetching less than half of what it was earning at the start of the year barely three months ago.
'The next 10-14 days are going to be pretty rough,' said Steven Kopits, managing director of Princeton Energy Advisors. 'There are going to be reversals here – big ones – almost on a daily basis: up 10-15 percent one day, then dropping again. So it's going to be really a rollercoaster ride without any real stability figure through at least next weekend.'
The plunging prices mirror similar slides in airline stocks: American Airlines and United Airlines have seen their market values decline by roughly 45 percent since the start of the year. Alaska Airlines’ stock price has tumbled by more than a third, while Delta, JetBlue, and Southwest have lost about a quarter of their respective market values.
Budget carrier Frontier Airlines on Thursday was offering up to 90 percent off on its domestic flights.
For both oil and airlines, the travel ban on Europe worsens the sudden drop-off of global demand sparked by the COVID-19 pandemic, which has spurred countries across the world to institute restrictions on travel, tourism, and shipping.
But greatly exacerbating the crisis, the oil sector, in particular, is also now drowning in an oversupply of crude, a deluge unleashed by the eruption of a price war between Saudi Arabia and Russia.
The two countries, the world’s No. 2 and No. 3 oil producers behind the U.S., failed last weekend to renew an agreement on production cuts that had helped shore-up flagging prices. In response, Saudi Crown Prince Mohammed bin Salman announced a surprise price cut and a sudden increase in production in a move widely seen as an attempt to both grab market share and punish Moscow by torpedoing the oil prices that both Saudi Arabia and Russia depend on for revenue.
Oil prices quickly began to nosedive. The pain is particularly pronounced among U.S. oil and gas producers, who rely on techniques such as hydraulic fracturing – or fracking – and horizontal drilling to extract fossil fuels from porous shale rock formations deep underground, which are more expensive than conventional drilling.
The biggest players in the U.S. shale oil industry, such as Occidental Petroleum and Continental Resources, have seen their market values drop by as much as 50 percent. Job losses in the sector are expected to reach tens of thousands. If benchmark oil prices fall to $26-28, not seen since February 2016 after Saudi Arabia last ramped-up production to grab market share, producers may be forced to shut-in their wells and stop extraction altogether.
'We're pretty close to that here,' Kopits said. 'If the Saudis persist in this policy for an extended period of time, we will be seeing out-and-out bankruptcies in the shale sector in significant numbers. Things are really dire if you have to shut-in your production.'
Without an agreement between Russia and Saudi-led OPEC – a partnership often referred to as OPEC-plus – consulting firm Rystad Energy warned Wednesday that prices could fall even further into the low-$20s.
'The global oil market has lost its regulator and now only market mechanisms can dictate the balance between supply and demand,' Espen Erlingsen, Rystad’s head of upstream research, said in a statement.
Nonetheless, Airlines 4 America, the main trade group for U.S. airlines, praised the administration’s moves in a statement Wednesday evening.
'We commend President Trump for continuing to take decisive action to protect the health and well-being of the American people. For U.S. airlines, the safety of our passengers, crew and cargo is – and always will be – our top priority,' A4A President and CEO Nicholas Calio said. 'The unforeseen outbreak of the coronavirus has directly impacted the U.S. airline industry, which is critical to the U.S. and global economies. This action will hit U.S. airlines, their employees, travelers and the shipping public extremely hard. However, we respect the need to take this unprecedented action and appreciate the Administration’s commitment to facilitate travel and trade.'
The Super Bowl is only a few days away, and the game is currently tracking to be the most expensive one ever.
Gametime, a website and app for last-minute tickets, says the average ticket price for the NFL's championship game is $9,502.50, with the most expensive seats costing nearly $38,000. That's a far cry away from the average ticket price of the first-ever Super Bowl in 1967, which was only $12. The average ticket price increased by more than $8,000 in just the past decade. Matt Rados, Senior Operations Manager at Gametime, joins Cheddar News' Closing Bell to discuss.
Earlier this week, digital investment advisor Betterment announced that it has hired Makara, a company known for its management of cryptocurrency portfolios. Sarah Levy, CEO of Betterment, joins Cheddar News' Closing Bell, where she explains why crypto represents such a promising long-term play and how her company stands to benefit from this latest move.
At-home medical labs company Getlabs raised $20 million in a Series A round, led by Emerson Collective and the Minderoo Foundation. Getlabs aims to be the boots-on-the-ground partner to telehealth. The company says more than 70% of medical decisions still require collecting diagnostic tests in person, and that it fills that void by delivering health care directly to their patients' homes. Founder & CEO of Getlabs Kyle Michelson joined Cheddar News' Closing Bell to discuss.
The White House laid out plans for a $5 billion investment into a national network of charging stations to ease EV driving anxiety. Bruce Brimacombe, CEO of EV infrastructure GOe3 joined Cheddar News to discuss how much needs to be done for drivers to get over the fear of running out of energy. "People need to be able to do what they're doing now," he said. "But that is the way that if you're going to buy an electric car, you got to feel like you're not changing your world." Brimacombe noted that building out the infrastructure between cities was GOe3's own focus.
U.S. automakers are saying that the blockade of the Ambassador Bridge, a crucial border crossing between the U.S. and Canada, is affecting their production lines. Michelle Krebs of Cox Automotive warns that the disruption "couldn't come at a worst time," amid chip and labor shortages in Detroit.
AND DETROIT-BASED AUTO MAKERS SAY THEY ARE SHUTTING DOWN PLANTS OR SCALING BACK PRODUCTION BECAUSE OF PARTS SHORTAGES.
Sonos reported better than expected Q1 earnings amid chip shortage with the release of its Roam product. CFO Brittany Bagley joined Cheddar News to discuss the smart speaker maker's successful report and its plans to hit its 2024 targets as people leave their homes as pandemic restrictions ease. "Even as people head out in the world, it doesn't mean they don't like to listen to music at home or watch a streaming movie at home," she said. "So there's still a real role for us and our products in peoples lives, sort of, no matter what else they're doing."
Lynn Martin, president of the NYSE Group, explains why investors at the New York Stock Exchange should still feel confident despite the recent Wall Street volatility and discusses the landscape for 2022 when it comes to IPOs and retail investors.
The merger of WarnerMedia and Discovery received Justice Department approval on Wednesday, and Patty Hirsch, EVP of consumer and digital platforms at WarnerMedia, joined Cheddar News to discuss current and future offerings from the media conglomerate that will control both HBO Max and Discovery+. "Content really drives so much, and CNN has always had a very long history of creating an incredible documentaries, incredible content … and this service I think is going to ultimately provide the kind of content consumers want and the kind of content that consumers are going are going to pay for," she said. Hirsch also discussed NFTs in use through its Turner Sports and DC brands.
Black entrepreneurs lead the way in the creation of new businesses, but they often cannot get the necessary funding to get their business off the ground. The Fearless Fund is on a mission to change that, and help Black business owners get venture capital. The fund also offers a unique grant program meant to help entrepreneurs with growth, peer coaching, and more, including grants between $10,000 and $20,000. Arian Simone, Co-Founder and General Partner of Fearless Fund, joins Closing Bell to discuss the Fund's mission, how it helps Black entrepreneurs, and more.
Multinational food company Kellogg’s reported an earnings beat amid supply chain issues and an extended labor strike. Kellogg’s Chairman and CEO c joined Cheddar News to discuss overcoming the obstacles and what's to come for the company. "The first half of the year is really going to be one about rebuilding inventory, and into the second quarter, starting to reestablish promotional activity for our customers and our consumers," Cahillane said. "And then the back half of the year, obviously, we're really much more back in business, and we expect to exit the year with our business in cereal being just as strong as it's ever been."
