US stock exchanges hardly change – Gilead Sciences weighed down

Dusseldorf The US stock exchanges closed little changed on Thursday. Relief from US economic data initially supported Wall Street. A media report on disappointing test results with the remdesivir agent for the possible treatment of Covid-19 then depressed the mood in late trade.

The standard value index Dow Jones closed 0.2 percent higher at 23,515 points. The technology-heavy Nasdaq stagnated at 8494 points. The broad S&P 500 lost 0.1 percent to 2797 points.

Last week, 4.4 million Americans applied for US unemployment benefits. In the previous week, however, the number of initial applications had been around a million higher.

The markets rated this as positive, even if a recession could not be averted, said Steven Blitz, chief economist for the USA at the research house TS Lombard. Investors appear to be betting that the economy will recover quickly if the restrictions to curb the coronavirus pandemic are relaxed.

However, Peter Cardillo, chief economist at Spartan, advised against excessive expectations. “The worst of the pandemic is probably behind us,” said Peter Cardillo, chief economist at Spartan. “But with the oil price at the current level, there is a threat of a wave of layoffs in the US energy sector, which will nullify the effects of a restarting economy.”

The US crude oil grade WTI rose 23 percent to $ 16.95 a barrel (159 liters) after its price fell below zero for the first time at the beginning of the week. At the beginning of March – before the outbreak of the virus crisis in the USA and before the price war between Saudi Arabia and Russia – WTI had still cost twice as much.

This drop in price is a problem especially for shale oil producers. According to experts, because of the complex fracking process, they only work profitably at a price of around $ 50.

Focus on individual values

Nevertheless, investors also accessed these values. The shares of companies like marathon, Occidental or Apache won up to eleven percent. The papers of the oil multinationals Exxon and Chevron each advanced about three percent. The paper from the company active in health care was also among the top values UnitedHealth with plus 3.0 percent.

The titles of Las Vegas Sands, which rose by around twelve percent. The casino operator expects the important Asian business to recover quickly as soon as the travel restrictions there are lifted. Competitors’ shares Wynn and MGM won up to 8.6 percent.

Eli Lilly shares jumped to a record high at $ 162.56. With a smaller plus of 2.1 percent to $ 159.93, they finally went out of the day. Investors recognized the 40 percent year-over-year increase in sales of the blockbuster drug Trulicity for diabetes to a quarterly record of $ 1.2 billion.

By contrast, the shares of Target, even though the retailer’s online sales almost quadrupled in the past quarter, making up for lost business from closed stores. However, the company warned of shrinking profit margins due to wage increases for employees. Target shares lost 2.8 percent.

The titles of Crocs even slipped by more than 16 percent. Known for its rubber slippers, the shoe manufacturer fell short of market expectations with quarterly sales of $ 281.2 million and earnings of $ 0.16 per share. The company also warned of further losses in the current quarter due to virus restrictions.

Among the losers Gilead Sciences with a discount of 4.3 percent. The company denied a media report of disappointing test results with the remdesivir agent for the possible treatment of Covid-19.

The study in China was terminated prematurely due to a lack of participants and was therefore not statistically meaningful, the US pharmaceutical company explained. The Financial Times has presented the process inappropriately, the World Health Organization accidentally posted a draft clinical trial on the Internet. The UN organization confirmed the breakdown and said the document had been removed after the error became known.

Quarterly reports were also in view.

Air Products & Chemicals Withdrawn the 2019/20 financial year forecast for earnings per share from the figures. The industrial gases manufacturer’s paper then gave way by 1.5 percent.

The chip manufacturer’s quarterly report, which was announced after the market closed, was also eagerly awaited Intel, whose shares in the Dow lost 1.8 percent. Intel ultimately disappointed with its earnings outlook for the second quarter, whereupon the papers gave in even more after-hours.

The share certificates of Snap down. The makers of the photo app Snapchat want to get $ 750 million (695 million euros) of fresh money on the market in the face of the corona crisis via convertible bonds.

In the US bond market, trend-setting ten-year government bonds rose 5/32 points to 108 16/32 points and returned 0.603 percent. The euro exchange rate went up and down in US trade and ultimately slid below the $ 1.08 mark again. At the close on Wall Street, the common currency was $ 1.0771. The European Central Bank set the reference price at $ 1.0772 (Wednesday: 1.0867). The dollar thus cost 0.9283 (0.9202) euros.

More: Read here what moves the German stock market on Thursday.

.

Wall Street on the upswing after oil price collapse

Dusseldorf After the turmoil of the past few days, Wall Street is breathing a little more. The prospect of further stimulus measures on Wednesday lured investors back into the US stock market. The standard value index Dow Jones closed two percent higher at 23,475 points. The technology-heavy Nasdaq advanced 2.8 percent to 8495 points. The broad S&P 500 gained 2.3 percent to 2799 points.

Impaired by the historic oil price chaos, the Dow Jones ended Tuesday trading 2.7 percent lower at 23,018 points. The technology-heavy Nasdaq dropped 3.5 percent to 8,263 points. The broad S&P 500 lost 3.1 percent to 2736 points.

“Stock markets seem to think that stimulus from governments and central banks will be enough to neutralize the economic damage caused by the coronavirus pandemic,” said Rabobank economist Teeuwe Mevissen. “As long as this mood persists, economic data don’t seem to matter.”

The Federal Reserve (Fed) pumps trillions of dollars into the financial markets through the purchase of securities. In parallel, the US Senate launched another $ 500 billion stimulus package. That is certainly not the last, said analyst Joshua Mahony from the brokerage IG. “US President Donald Trump has demonstrated his willingness to increase debt in the name of economic growth.”

With the overall market, oil stocks also went on a recovery course. They had come under pressure in the past few days because of the price hype of the US variety WTI. The shares of Exxon and Chevron grew up to 3.4 percent.

Look at the individual values

One of the biggest winners on Wall Street Biontech with a course increase of almost 27 percent. The Mainz biotech company, which works together with the US pharmaceutical company Pfizer researching a vaccine against the lung disease Covid-19 has received approval for a clinical study in Germany.

In the USA, too, the active ingredient will soon be clinically tested after approval. While in the Dow Pfizer shares In line with the market, increasing by 1.8 percent, the Biontech stocks listed on the Nasdaq gained almost 27 percent.

The titles of Chipotle, which rose by twelve percent. The strong online business cushioned the slump in the stationary business of the fast food chain, the analysts of the investment bank BMO wrote. The company, which also has branches in Germany, made a surprisingly high quarterly profit of $ 0.18 per share.

The papers from Netflix On the other hand, they fell by 2.8 percent, although the online video store was able to win twice as many new customers as expected due to the coronavirus restrictions. However, the company warned that the boom would slow down as soon as the restrictions on public life were relaxed again.

But that doesn’t change the positive long-term business prospects, wrote the analysts of the asset manager Cowen. They also considered Q2 user numbers to be too conservative because of the still widespread exit restrictions.

Quarterly numbers, among other things Texas Instruments, AT&T and Biogen in front. The chipmaker had lost less revenue and profit in the first quarter than feared, which gave the shares an increase of 4.8 percent. The telecom company’s papers, on the other hand, lost 1.3 percent after a drop in sales and a withdrawn outlook.

Biogen fell by 9.4 percent to the end of the Nasdaq 100. The biotech company was not only in the spotlight with its quarterly figures, but also with its active ingredient aducanumab against Alzheimer’s.

The application for approval of this product is to be submitted later than previously announced. That raised more questions than answers, complained about RBC analyst Brian Abrahams and immediately lowered the price target for the share.

There was also news too United Airlines and Facebook. The shares of the battered airline dropped 7.2 percent because United wants to raise fresh money through a billion dollar capital increase.

Facebook on the other hand, jumped 6.7 percent after strong losses from the previous day. The network giant wants to penetrate further into India and buys almost ten percent of the Jio Platforms for $ 5.7 billion (€ 5.25 billion). This is the subsidiary of a leading mobile operator.

In the US bond market, ten-year government bonds lost 17/32 points to 108 10/32 points and returned 0.624 percent. The euro was trading at $ 1.0820 at the close on Wall Street. The European Central Bank set the reference price at $ 1.0867 (Tuesday: 1.0837). The dollar thus cost 0.9202 (0.9228) euros

With agency material.

More: Read here what happened on the German stock market this Tuesday.

.

Asset managers: climate protection remains a top issue

Investors are increasing their pressure on companies to develop a sustainable strategy. The corona crisis must not be an excuse to ease in the effort. .

US exchanges give way despite oil deal

US exchanges

After the Easter weekend, the stock exchanges start trading and react to the Opec plus oil deal.

(Photo: AP)

new York Wall Street started the new trading week at a loss. The upcoming balance sheet season casts its shadows ahead, experts said. Many investors expected weaker results as a result of the corona crisis and the resulting paralysis of business life.

In addition, signs of the long-term effects of the pandemic clouded the mood on the floor. Oil prices, on the other hand, rose after the leading producers agreed on the largest cut in production ever.

The Dow Jones index of standard values ​​was 2.3 percent weaker in New York midday trading at 23,181 points. The broader S&P 500 lost two percent to 2,733 points. The Nasdaq technology exchange index fell 0.9 percent to 8082 jobs. The Frankfurt Stock Exchange was closed on Easter Monday.

On Tuesday, the US banks give JP Morgan Chase and Wells Fargo the starting signal for the balance sheet season. Analysts expect a weak outlook for the rest of the year to be reflected in the number of financial institutions.

This also applies to other industries, said Mike Loewengart, investment strategist E-Trade Financial Corp. The numbers also offer a lot of opportunity for coffee grounds reading – for example on the question of whether the downturn has already been fully factored in or whether it will come even more violently.

The organizers of cruises already felt the consequences of the coronavirus crisis on Monday at the stock exchange. The shares of Carnival and Royal Caribbean gave in eight and 15 percent respectively.

The US Centers for Disease Control extended their ban on all cruise ships. There have been numerous coronavirus cases on some ships in the past.

ford anticipates an adjusted pre-tax loss of approximately $ 600 million in the first quarter due to the pandemic. A year earlier, the automaker made a profit of $ 2.4 billion. The share certificates fell by 5.6 percent.

On the oil markets, the North Sea Brent rose by 1.7 percent to $ 32.01 a barrel. US crude was trading 0.9 percent higher at $ 22.98.

More: The US institutes are threatened with the “triple whammy”: the idle economy, provisions for loan defaults and lower key interest rates are depressing profits.

.

Dow Jones, Nasdaq, S & P500: US exchanges remain on recovery

Dusseldorf For the third day in a row, the US stock markets posted gains on Wednesday. In addition to the hope that the worst of the corona pandemic in the United States will soon be over, leftist Senator Bernie Sanders’ exit from the Democratic pre-election campaign provided additional boost to the stock markets.

The Dow Jones index rose 3.4 percent to 23,433 points, the broader S&P 500 rose 3.4 percent to 2,749 points, and the technology-heavy Nasdaq Composite gained 2.6 percent to 8090 points.

“Sanders’ exit eliminates the residual risk that some of his political ideas will be implemented,” said Ed Mills, Raymond James political scientist at CNBC. The now likely presidential candidate of the Democrats, ex-vice president Joe Biden, is considered to be less radical towards financial markets and corporations. Sanders had, among other things, caused nervousness among private insurance companies in the United States with his demand for health insurance for all citizens.

The US stock market also started on Tuesday with strong gains – but then had the sharpest turnaround since October 14, 2008. The three major indices closed with slight losses.

The US stocks are still in a bear market. This is achieved when prices have fallen by more than 20 percent compared to the high. Three of the past four weeks ended the indices with losses.

For this week, however, the courses after the rally on Monday have been up so far. One reason for this is the positive signals from Asia regarding the coronavirus pandemic. There were no new deaths in China for the first time on Monday, the former epicenter of the pandemic, the Wuhan region, is no longer isolated and even industry is slowly starting up again.

In the last week of March, the decline in sales in the Chinese car market was only 24 percent compared to the same period in the previous year. For comparison: In February, sales of the corona virus had dropped 80 percent. The Chinese car market is the largest in the world.

Also positive signals from the USA

There are also first positive signals for the development of the pandemic in the USA: “As far as we can see there is a flattening (the curve),” said the governor of the US state of New York, the center of the pandemic in the USA. The number of deaths continues to rise, however: 731 people died in New York alone on Tuesday of COVID-19, 1,800 across the country – a new high. US President Donald Trump said the crisis was at its peak.

A theory from the University of Washington is now assuming fewer deaths in the United States than previously feared. Around 60,000 deaths are now predicted by August 4. As of Tuesday, the estimate was 82,000. The calculation model is part of a series of studies cited by the United States Presidential Office.

In addition to the pandemic, investors are also focusing on countermeasures. In the United States, Democrats and Republicans are discussing an increase in aid. At the end of March, an economic stimulus package worth around $ 2.2 trillion had already been decided. The government now wants to provide another $ 250 billion, the opposition Democrats are demanding $ 500 billion.

Bank analysts JP Morgan assume that further government stimulus packages are a prerequisite for sustainable share purchases.

Look at other asset classes

The drop in demand caused by the coronavirus pandemic is severely affecting the raw materials markets. The price of aluminum drops 1.4 percent to a four-year low. At $ 1457.50 a ton, the metal used in automobile and aircraft construction is as cheap as it was last four years ago. The price of copper loses similarly and is $ 4,964 per ton.

Meanwhile, traders further hoped that “Opec +”, which includes other exporting countries such as Russia in addition to the members of the export cartel, will agree on a significant reduction in production volumes at their meeting on Thursday.

If the USA pulls together with the “Opec +”, even a relatively low throttling of ten million barrels per day could give the oil price a strong boost, predicts Naeem Aslam, chief market analyst of the brokerage firm AvaTrade. “Without the US on board, even a 15 million barrel reduction would probably not raise the price above $ 40.”

On Wednesday, the US oil grade WTI rose by almost eleven percent to $ 26.16 a barrel (159 liters). This helped the stocks of the oil companies Exxon and Chevron at course gains of more than six percent each. The papers of the slate oil producers Marathon, Occidental and Apache even advanced up to 16 percent. This group would particularly benefit from a production brake, because experts say that because of the complex fracking process, they only start to cover costs from an oil price of around $ 50.

Focus on individual values

UPS and FedEx: The titles of the two groups rose by up to six or more than eight percent. The package deliverers were boosted by the announcement of Amazonto temporarily suspend its own delivery service in the USA. According to the “Wall Street Journal”, the online retailer wants to use the freed-up resources and employees to cope with the sharp rise in orders.

American Express: On Wednesday, the financial service provider’s share gained 5.1 percent. In doing so, it continued its positive trend: Monday saw an upward trend of more than ten percent, followed by another 3.8 percent on Tuesday.

Moleculin: The papers posted a record price jump of 150 percent to $ 1.27. The pharmaceutical company had released encouraging test results for a corona drug. Competitor Aker reported progress in the development of a vaccine against the Covid-19 pathogen. Its shares peaked at $ 22 to $ 6.96 and were still trading at $ 5.95 at the close.

MC Donalds: The fast food company has suffered a sharp slump in business due to the corona pandemic. In the past month, comparable revenues worldwide fell by a good 22 percent compared to the previous year, as McDonald’s announced in Chicago on Wednesday. The world’s largest burger chain also said, however, that it raised $ 6.5 billion on the capital market in the first quarter and suspended share buybacks to protect its liquidity in the corona crisis. The stock climbed 1.08 percent.

With agency material

More: Cash for citizens: Economists praise the helicopter money

.

Saudi Aramco is hoping for recovery

Saudi Aramco

The company recently flooded the world market with cheap oil.

(Photo: imago images / ITAR-TASS)

Berlin Saudi Aramco shares are supported by new hopes of an agreement in the oil price war. The stock ended trading on the Tadawul Stock Exchange on Monday at a price of 31.95 Saudi rial (SAR). It came close to the 32 rial ($ 8.53) rate it had been issued on during the world’s largest IPO last December.

A conflict between Saudi Arabia and Russia had previously weighed on Aramco’s paper: because Moscow was not prepared to accept further cuts in production, Riyadh flooded the market with cheap oil. Aramco had also offered discounts of up to $ 6 a barrel (159 liters) of oil to its customers. The oil price had slumped by more than 50 percent.
But last week, under the threat of punitive tariffs on imported crude oil, US President Donald Trump put massive pressure on the oil nations to end their dispute. The result: On Thursday there will be a crisis meeting of the producing countries by telephone.
Now there is some hope again: Russian President Vladimir Putin has already introduced new quantitative limits. Aramco missed the date on Sunday when it normally announces the price discount or surcharge for Saudi oil over the following month’s world market price.
Since then, Aramco shares have risen again. The world’s largest IPO had raised $ 29.4 billion for 1.7 percent of Aramco’s stake. Previously, only China’s internet retailer Alibaba was bigger at $ 25 billion in 2014. Aramco’s stock market value at the time was $ 1.88 trillion, and shortly afterwards the market capitalization of the world’s most valuable and profitable company exceeded the hoped-for $ 2 trillion mark.

On March 16, the price of paper from the world’s largest oil producer reached a low with a closing price of 27.80 rials. As a result, Aramco papers crashed significantly less than those of rivals such as Russia’s Rosneft, Brazil Petrobras or western oil companies like Exxon or BPwhose courses have almost halved in the meantime. At the end of December the Aramco share had reached a high of 38 SAR.

According to analysts, Aramco benefits from the fact that the oil giant has guaranteed an annual dividend payment of $ 75 billion over the next five years at the IPO. In 2019, net income fell 21 percent to 88.2 billion. His company can live “very comfortably” with an oil price of $ 30 a barrel, says Aramco’s CFO Khalid Al Dabbagh. Analysts see little potential for improvement in the current Aramco price: “We like Aramco’s fundamentals, but we think that the valuations are now only fair and no longer attractive,” said John Bates of PineBridge Investments Europe.

More: Gold index funds benefit from the lack of physical bars and coins.

.

In a world drowned in oil, they discover another huge reserve in Brazil

In a world that doesn’t know what to do with so much crude, Petrobras and Exxon Mobil Corp. have just found a large amount off the coast of Brazil.

Petroleo Brasileiro SA, as the state-owned oil producer is officially called, announced a discovery with partners that the Brazilian oil regulator’s estimates estimated at 7.8 billion barrels. That’s a little less than Norway’s reserves, although only a part can be recoverable.

The finding comes at a time when the incentive to develop new reserves seems doubtful. Petrobras was the first major oil producer to announce production cuts as the price war between Saudi Arabia and Russia and the COVID-19 pandemic expose how vulnerable the global oil market is to supply and demand shocks.

Before the dramatic oil collapse last month, experts were already pointing to oversupply and stabilizing global demand by the end of this decade.

But Petrobras says that production costs in the pre-salt area from which the oil was extracted can be covered with oil prices in the range of US $ 21 to US $ 25 per barrel. Brent, the global benchmark, rebounded to nearly $ 30 on Thursday.

Petrobras and Exxon operate the Uirapuru prospect in the prolific pre-salt region of Brazil, with 30% and 28% stakes, respectively. Norway’s Equinor ASA has another 28%, while an association between Portuguese and Chinese producers owns the remaining 14%.

The discovered block is about 200 kilometers off the coast of the state of Sao Paulo, at a depth of 1,995 meters.

Brazil sold the drilling rights to Uirapuru for 2.65 billion reais (US $ 500 million) in 2018, a year in which oil was trading between US $ 50 and US $ 86 per barrel. The hotly contested auction had bids from companies like BP Plc, Total SA, Royal Dutch Shell Plc and Chevron Corp. Equinor said at the time that Uirapuru had the potential to add twice the company’s annual output.

Petrobras is not alone in adding more potential oil supplies to the world in the future. Apache Corp. announced another major oil discovery off the Suriname coast.

.

Corona pandemic: slump in oil prices weakens US economy

new York The situation was “just sobering” two weeks ago, Dan Eberhart recalls. The head of Canary Oil, an oil service provider from Denver, Colorado, fired the first 40 employees at the time and hoped desperately for a signal from the White House. But since then the situation has deteriorated dramatically. “The whole industry will soon jump over the cliff,” he believes. “We just don’t know where the floor is.”

The oil price has dropped to its lowest level in 18 years this week. Hardly anyone is driving a car these days, airlines are canceling their flights on a grand scale. The oil producers are not only struggling with the slumping demand in the corona crisis. They also suffer from the oversupply because Saudi Arabia and Russia are currently flooding the market with oil in a price war.

Trump announced on Thursday that Russia and Saudi Arabia would cut production, which caused the oil price to skyrocket again.

What would particularly delight drivers in normal times is currently endangering the American dream of independence in energy supply. It was above all the controversial fracking that enabled the United States to significantly increase its domestic production and thus become an oil exporter and thus independent. However, the costs for this type of production are high and are no longer worthwhile given the low oil prices on the world market.

Lydia Boussour, economist at Oxford Economics, predicts: “The oil price crash has a negative impact on the US economy.” If the oil price decline persists, the American economy will cost around 0.2 percent of GDP.

“Destruction of Demand”

Already last year, when the price of oil fell but was still far from today’s level, the problems worsened for many companies. According to Hayes and Boone’s, a law firm specializing in energy and restructuring, a total of 50 oil companies applied for bankruptcy protection – including 33 oil and gas producers and 15 service providers for oil fields.

Even the big names like Chevron and Schlumberger from Texas announced billions of dollars in depreciation. They are also reducing their investments in shale – in other words, in fracking funding.

The low oil price has also brought the US President on the scene. He wants to meet with the CEOs of the largest oil companies on Friday to discuss ways out. Various options are likely to be negotiated: Will there be government aid to the US oil industry? Or are punitive tariffs on oil from Saudi Arabia conceivable? Among other things, the state could buy and store oil. The oil companies were left out of the latest aid package.

The meeting is scheduled to take place on Friday at the White House. According to the report of the “Wall Street Journal”, CEO Darren Woods from Exxon Be mobile, Mike Wirth from Chevron, Vicky Hollub from Occidental petroleum and Harold Hamm from Continental Resources. The news of the meeting alone boosted the oil price on Wednesday.

Loud Goldman Sachs the new oil price war is “not just the biggest economic shock of our life”. The oil industry is “in the crosshairs”. And this at a time when the coronavirus is already making things difficult.

“This destruction of demand is catastrophic for us,” says the head of Canary Oil about the effects of the corona crisis. His company is an oil field service provider that carries out oil field drilling for customers in the oil and gas industry, rents fracking equipment and offers maintenance and repairs.

The oil manager has been at the head of Canary Oil for 15 years and is well wired to the White House. He has been collecting donations for Republican senators for years and regularly calls Trump’s economic adviser Larry Kudlow.

He already had the President himself on the phone. Most recently, he appealed to the White House on the CNBC: “Trump should actively try to solve the problem with Russia and Saudi Arabia.”

Eberhart, who is active in major oil states in Colorado, North Dakota and Oklahoma, is seeing a number of companies shut down capacity, fire people, draw lines of credit.

Colorado’s friting company Whiting Petroleum had used its entire $ 650 million credit facility last week to be on the safe side. That should actually help service the outstanding bonds. As early as Wednesday of this week, however, the company had to apply for bankruptcy protection.

Funding at a record level

Eberhart is also in negotiations with his banks. The companies in the oil industry are notorious for their high levels of debt. “Many did not recover very well from the last slump in oil prices in 2014,” explains Eberhart. “Hardly anyone has a buffer for bad times.”

In addition, storage capacities are becoming scarce across the country. “For the first time ever, we don’t have enough,” says Eberhart. Regulators in Texas are therefore considering officially reducing production capacity for the first time in decades.

The prices for storage on ships have quadrupled. Storage prices in tanks in Cushing, Oklahoma, have also doubled in the past three weeks. Eberhart is convinced that this could lead oil producers to reduce their capacities.

So far, however, there has been no sign of a capacity shutdown. Despite the low oil price and high storage costs, the US oil companies have recently produced record quantities of oil so that they do not have to accept a drop in sales. According to the Energy Information Administration, the US oil industry has continued to produce 13 million barrels of oil a day.

That is only slightly below the record production volumes of the past. The demand for oil does not justify this: it fell from 8.8 million barrels to 6.7 million barrels a day last week. A year ago, demand was 9.2 million barrels.

“Right now we have a supply and a demand problem,” explains Helima Croft, head of RBC Capital Markets’ global raw materials strategy. She estimates that as more states call on citizens to stay at home, demand will drop to 6.2 million barrels a day.

More: The battle for the oil price: how are Saudi Arabia and Russia positioned?

.

IEA chief Barol sees oil market in deepest crisis for 100 years

Frankfurt, Vienna The corona pandemic poses new challenges for the most prominent oil diplomats. Fatih Birol usually meets as energy minister of oil producers and importers as head of the International Energy Agency. But these days everything is over the phone: “I work three times as hard from home, but much less efficiently,” he jokes.

There is a lot to discuss. Birol sees the oil market in the worst crisis in 100 years. He does not expect a quick improvement, despite the recent rise in oil prices.

In his opinion, the drop in demand is so huge that even an agreement in the price war between Saudi Arabia and Russia would not bring about a breakthrough.

Birol warns of the drastic economic and political consequences of the drop in oil prices in countries like Iraq. “At the current price level, oil revenues are just enough to pay half of the government officials,” explains Birol.

There is no room left for supporting the economy, spending on health and education. The same applies to Nigeria, Algeria or Ecuador.

Read the interview here:

Mr. Birol, you are known as an optimist in the oil industry. Have you lost your confidence in the corona crisis after the oil price crash?
The oil markets are going through a historic crisis that we have not seen in 100 years. We have also had oil oversupply, economic and financial crises and a drop in oil prices in the past. But for the first time in the history of the oil industry, we are seeing two shocks at the same time and with great force: oversupply and a decline in demand.

Four weeks ago, Russia and the Opec heavyweight Saudi Arabia started a price war and the strategic alliance between the non-Opec countries and the oil cartel broke. Does this price war still make sense in the middle of the corona crisis?
Of course, it would be desirable if all of the major oil producers gathered around a table to stabilize the market. But to put it in a nutshell: The growth in oil production resulting from the changed production policy is two to three million barrels a day. But the fall in demand in April is up to 20 million barrels a day. As long as the decline is so huge, individual cuts will have no significant effect on the global oil market.

What distinguishes the current situation from the economic downturn after the financial crisis?
The drop in oil demand is not only due to the major economic difficulties. There have also been severe economic setbacks in the past. But this time we experience the unique effect that around three billion people are locked up worldwide. Around 60 percent of global oil consumption is in the transport sector – cars, buses, planes. If more than three billion people are largely restricted in their mobility, the demand for oil will decrease very sharply.

What will happen in the second half of the year?
In my view, the crucial question will be whether people can leave their homes and return to a normal life. There is currently a great deal of uncertainty as to whether there will be a return to previous mobility. Against this background, I currently do not dare to make a forecast, since the medical development of the pandemic cannot yet be assessed.

What can be done about the crisis?
The oil industry is a very important part of the global economy. If the major oil producers come to an agreement, I expect stabilization for the global economy. But such an agreement alone will not reverse the trends in the oil market. We also need a quick end to the pandemic so that people can be mobile again and the economic catch-up process can begin.

Hasn’t the lowest oil price in almost two decades been a positive impetus for the economic downturn in many countries?
Of course, low oil prices can help in countries with high import needs and low incomes. In normal times this is a strong support for the economy in these countries. But these are not normal times. Because of the pandemic, people are currently unable to use oil at all. At the same time, there are some countries in the Middle East, Africa or Latin America that are hit hard by the low oil price.

graphic

Can you give examples?
Iraq, for example. The country’s oil revenues fell by 85 percent compared to the previous year. You have to consider how precarious the situation is: at the current price level, oil revenues are just enough to pay half of the government officials. There is no room left for supporting the economy, spending on health and education. This can endanger the country’s social stability. This also applies to Nigeria, Algeria or Ecuador. All of these countries are currently experiencing major difficulties.

What do the low oil prices mean for Russia?
Compared to the countries just mentioned, Russia is in a better situation. The economy is more resilient and the financial resources are also greater. But one should not forget that Russia’s economy is also very dependent on oil and gas revenues. And because most gas supply contracts are linked to the oil price, prices are falling there too. This will leave its mark on the Russian economy, though not as quickly if oil prices remain at the same level.

Who is better off in this price war, Saudi Arabia or Russia?
Both countries have high financial resources. Saudi Arabia has been the stabilizer of the oil market for many years and has played a very constructive role in stability. Given this history, I would expect Saudi Arabia, as chair of the G20, to continue to provide stability this year and contribute to global efforts to stabilize the global economy.

So the initiative to end the price war must come from Saudi Arabia?
I don’t know who takes the initiative first. However, it would be a good contribution to the stability of the global economy. But again: an agreement between the oil producers will not be enough to solve the challenges of the oil industry.

What are the chances?nthat the US interfere in the price war?
What we are seeing is that the US shale oil industry has been hit hard by the oil price crisis. Nevertheless: If the oil prices return to their old level, the shale oil industry will also return. The past has shown that. The US will recover quickly, and producers there can react very quickly to higher prices. This is the reason that countries that want to ruin the US shale oil industry will not count.

What does the low oil price mean for large corporations like Exxon, Chevron, Shell or BP?
The oil industry around the world is facing major challenges. The companies cut their expenditure in turn, this affects new investments as well as employees. The decline in investment this year is likely to be the largest we have seen in the recent past.

Handelsblatt Morning Briefing - Corona Spezial

Who are the winners and who are the losers in this development?
I see no winner in this situation so far. Sure, some countries may gain market share. But if you allow me to compare, we cannot declare a winner in the first 15 minutes of the game – the game lasts 90 minutes. Short-term victories can prove to be long-term defeats. It is therefore in the interest of everyone involved to stabilize the oil and energy markets and thus the global economy.

Is the Opec oil production cartel obsolete?
I see that there are big disagreements between the big oil producers. I can only hope that they will have more constructive discussions in the future.

What is the mood like within Opec?
I speak regularly with Opec Secretary General Mohammed Barkindo and many energy and oil ministers from different parts of the world and with various political interest groups. I can tell you that I have never spoken to anyone who is pleased with this situation.

What gives you hope that the situation will improve soon?
There are many politicians who are currently working very hard to ensure that their countries are better prepared for a pandemic like this in the future and that the energy sector is becoming more resilient.

Is Corona setting global climate change efforts back?
I hope not. Governments are currently busy fighting the pandemic. But I hope that they don’t forget the problem of climate change. That’s why we advise many governments on how to shape their stimulus packages so that they accelerate the transition to clean energy. Such measures can spur growth, create new jobs and prepare us for a better future.

Mr. Birol, thank you for the interview.

More: Trump wants to discuss punitive tariffs for Saudi oil with oil bosses.

.

Dow Jones, Nasdaq, S&P 500: Record unemployment in the US is pushing markets into the red

Unemployment claims in the United States soared to historic highs of 6.65 million last week. That affects the mood on Wall Street. .