U.S. President Donald Trump has instructed his administration to look into ways to make funds available to the American oil and gas produces who are struggling amid the lowest oil prices in two decades.
“We will never let the great U.S. 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!” President Trump tweeted on Tuesday, a day after the front-month U.S. benchmark oil futures contract crashed by more than 300% into negative territory to settle at -$37.63 per barrel.
The U.S. Department of Energy is already trying to help U.S. oil producers with finding storage for their unwanted oil. The DOE said last week that it was negotiating contracts with nine U.S. oil producers to store a total of 23 million barrels of their produced oil in the Strategic Petroleum Reserve (SPR) to help U.S. oil producers with storage availability amid the colossal demand loss from the pandemic.
U.S. oil producers are struggling to turn a profit at prices below $40 a barrel, but the massive demand loss in the pandemic and the lockdowns that followed have been pressuring prices for weeks. The May WTI Crude futures contract expires today, but the June contract is also plummeting on Tuesday, by more than 50 percent to around $10 as of 2:27pm EDT. Brent Crude prices were also plunging on Tuesday, by 27% to $19 a barrel.
Analysts are warning of mass bankruptcies in the U.S. shale patch, while the Texas Railroad Commission is meeting on Tuesday to hear testimony about potentially curtailing statewide oil production in light of the oil price collapse. Smaller independent producers tend to support some kind of coordinated action to restrict supply, arguing that the free market will wipe out the smaller players in the industry. But the bigger players, including ExxonMobil and pipeline operators, believed, at least as of last week, that the regulators should let the free market dictate the production in the state.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.