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U.S. Treasury Secretary Steven Mnuchin weighed in on how he may work to rescue the energy industry hammered by the fallout from the coronavirus, which may include the government taking stakes in certain companies.
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“The President has asked me to work with the Secretary of Energy and we’re looking at a whole of bunch of alternatives it would be premature to comment on any one of them," said Mnuchin on Friday. "You can assume that is one of the alternatives but there's many of them" he added in a response to a reporter's question at the White House.
After oil prices turned negative for the first time in history, Mnuchin earlier this week, acknowledged the severity of the market turn which amounted to the worst week for crude prices ever with a drop of over 32 percent to the $16 per barrel level.
“Obviously it’s a pretty extraordinary situation where you see the front month of oil futures trade negative," he said while also disclosing he had been tasked with coming up with ideas to revive the ailing oil and gas industry.
“The president is determined, we want to maintain our energy independence and the president has asked me to look at all of our options and we’re doing that,” he said earlier this week.
Mnuchin, who is already dealing with providing U.S. small businesses with cash lifelines and ensuring that the airline industry has enough liquidity until demand can resume, may have a more difficult time-saving America's energy industry, say experts who expect a rash of bankruptcies among the smaller energy producers, especially in the shale space.
The Oklahoma City-based Continental, which was founded by oil tycoon Harold Hamm and is the largest leaseholder and one of the largest producers in the Bakken shale field, ceased all drilling and shut-in most of its wells in the field, Reuters reported on Friday, citing three people familiar with the matter.
Earlier this year, Continental said it would suspend paying its quarterly dividend because of the weakened demand and lower oil prices spurred by the impact of the coronavirus. Last month the company announced a slash in capital spending by 55% in 2020 compared to its 2019 levels.
This week, Hamm, asked the Commodity Futures Trading Commission, the U.S. regulator for the derivatives market, to investigate possible market manipulation. The CFTC told FOX Business, in a statement, those allegations were likely unfounded and pointed to the oversupply of crude.
“The CFTC is surveilling these markets with a fine-toothed comb on a daily basis and we increased that monitoring after we first began seeing volatility nearly two months ago. This appears to be a fundamental supply and demand issue, but we’re continuing to closely examine it so we understand all of the particulars," said a CFTC spokesperson.
The world is awash with oil so much so storage may run out by next month, Stephen Schork of The Schork Report told FOX Business.