Relief. The Energy Report

How do you spell relief? T-w-o-t-r-i-l-l-i-o-n-d-o-l-l-a-r-s. The Senate passed the much-awaited stimulus bill, and now it is up to the House of Representatives to finish the job.

The anticipation of the bill was enough to give stocks two back to back up days. Yet some business fear that the bill will be too little too late to help them. The market is hunkering down for a weekly jobless claims report that will be the worst at least since World War II. There are tears and fears that coronavirus won’t go away quickly.

Still, oil and gasoline seemed to defy the fearful fundamentals and instead focused on the potential future demand boost from the Coronavirus relief package. The market also seemed to take solace in the weekly Energy Information Administration (EIA) supply report that was more bullish than expectations. It also showed that U.S. refiners, stung by plunging gasoline demand, moved quickly to cut production of gasoline. Gas production dropped last week by over 1.0 million barrels a day. U.S. gasoline production fell to 8.96 million barrels per day for the week ended May 20, from 9.97 million barrels a day a week earlier. Look for gas production to continue to fall as demand destruction continues.

The market is also looking at stories that the U.S. is pressuring Saudi Arabia to end the ill-advised and economically damaging oil price war. The Wall Street Journal reported, “The U.S. plans to press Saudi Arabia to restrain its scheduled oil production boost by leveraging the kingdom’s status as head of the G-20, according to people familiar with the matter. The U.S. intends to warn Saudi Arabia that the kingdom could also be hurt if the oil-price war destabilizes the Western financial system.”

The U.S. State Department put out a statement that reads as follows, “Secretary of State Michael R. Pompeo spoke yesterday with Saudi Crown Prince Mohammed bin Salman Al Saud. Secretary Pompeo and the Crown Prince expressed their deep concern over COVID-19 and the need for all countries to work together to contain the pandemic. Secretary Pompeo and the Crown Prince focused on the need to maintain stability in global energy markets amid the worldwide response. The Secretary stressed that as a leader of the G20 and an important energy leader, Saudi Arabia has a real opportunity to rise to the occasion and reassure global energy and financial markets when the world faces serious economic uncertainty. The Secretary thanked the Crown Prince for Saudi Arabia’s continued partnership in the face of the Iranian regime’s destabilizing regional behavior.”

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