White House economic advisor Larry Kudlow told CNBC on Wednesday that he expects the price of oil to rebound in the next few months as states lift lockdowns and the economy begins to recover.
“I’m hoping that this oil slump will prove to be temporary,” Kudlow said in the interview. “Not many people are driving right now, as you know, and there’s a glut of oil.”
Kudlow’s remarks come in the wake of extreme, record-setting volatility in oil futures trading in the past few days. U.S. crude futures for May delivery plunged below zero on Monday, with desperate traders at one point paying customers nearly $40 a barrel to take oil so they wouldn’t have to take delivery on an expiring futures contract.
Then on Wednesday, U.S. crude rebounded 25 percent after President Donald Trump threatened the destruction of any Iranian gunboats that harass U.S. Navy ships, raising the possibility of a disruption to oil supplies.
The outbreak of the CCP (Chinese Communist Party) virus, the novel coronavirus that causes the COVID-19 disease, has slashed fuel demand worldwide, and storage space for the unused oil is quickly filling up, particularly in the United States.
“Demand collapsed. The coronavirus worldwide caused the collapse in demand. Through no fault of anybody, this virus has pushed us into a big economic contraction,” Kudlow told the outlet.
On Tuesday, energy ministers from OPEC and other major oil-producing countries held an unscheduled conference call to discuss the price collapse but did not agree on any steps to slash output.
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!
— Donald J. Trump (@realDonaldTrump) April 21, 2020
By Wednesday, U.S. oil prices had zig-zagged overnight and were close to flat earlier in the morning, before Trump’s tweet. At the time of reporting, a barrel of U.S. oil to be delivered in June climbed to $13.95 on the CME Group’s New York Mercantile Exchange.
While significant, Wednesday’s big rebound of U.S. oil means it’s recovered just a fraction of its steep losses. It was close to $30 at the start of last week and nearly $60 at the beginning of the year.
“I think in the United States the rig count is way down, demand is way down, production is falling. There’s not much we can do about that,” Kudlow told CNBC in the interview, adding that the Trump administration would seek to help the U.S. oil industry with regulatory, tax, and investment policies.
“It will, I hope, take care of itself. Markets will take care of themselves over time,” Kudlow told the outlet, adding that he hopes the strict lockdowns that have stifled economic activity and depressed demand for oil and other goods, would soon lift.