All eyes on next month as US braces for oil-crash fallout

A refinery in Corpus Christi, Texas. The Trump administration is expected to fast track a program to pay companies to leave crude in the ground. (AFP/File)
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Updated 20 April 2020

All eyes on next month as US braces for oil-crash fallout

  • The negative price reflects a massive dislocation of the financial markets

The West Texas Intermediate (WTI) May contract ended in negative territory on Monday, closing the day at minus $37 a barrel. This is a serious market dislocation. It reflects that the US is running out of storage space.

Such a drop is unprecedented - very much a day for the history books.

The negative price reflects a massive dislocation of the financial markets, which have a much higher volume than the physical market. This why the futures contract for June is above $21.37 a barrel. The June price is a better reflection of the “real price of oil.”

For this month, there is no demand.

The share price of big oil like Exxon and Shell was only down a few percentage points, trading well above their lows of a month ago. This reflects that they have sufficient cushion to ride out the storm.

The Trump administration is bound to fast track a program to pay companies to leave crude in the ground.

This will crush many smaller producers in the United States with big ramifications for the banking industry and for employment in the wider sector including oil field services.

Banks who have hedges out at higher oil prices will be caught out. Owners of tankers and storage facilities can name their price at this point.

It will also have ramifications for the industry in the US going forward. We can expect many bankruptcies obliterating shale space in particular.


Qatar’s top bank Q2 profit slides over virus

Updated 12 July 2020

Qatar’s top bank Q2 profit slides over virus

  • QNB net profit in the 2nd quarter plunged 25.8%

DOHA: Qatar National Bank, the largest lender in the Middle East, said Sunday its net profits for the second quarter sank over the impact of the coronavirus pandemic.
QNB net profit in the second quarter plunged 25.8 percent to 2.84 billion riyals ($780 million) compared to $1.05 billion in the same period a year ago, the bank said in a statement.
The first quarter net profit of QNB, which has operations in 31 countries including Turkey, Indonesia and India, dropped only slightly.
Its net income in the first six months of the year also dipped 13.6 percent to $1.76 billion from $2.04 billion a year ago, it said.
The bank said it increased the loan loss provisions by $320 million in the first half to safeguard itself from any adverse shocks from the pandemic, thus affecting its profitability.
Total assets rose 10 percent to $267 billion on June 30, making it the largest lender in the Middle East and North Africa in terms of assets.