The Washington Post - 14.03.2020

A6 EZ RE THE WASHINGTON POST.SATURDAy, MARCH 14 , 2020

as Intermediate Crude was just below $33 as the workday drew to a close Friday.) It’s an altogether different pic- ture for Pennsylvania natural gas producers: Fewer oil wells in North Dakota and Te xas mean less “associated gas,” which is extracted along with the petroleum. That c ould dent the natural gas glut and prop up prices for the Pennsylvania shale companies. Anne Swedberg Robba, an analyst with S&P Global Platts, wrote in an email that if oil remains at $30 a barrel, the slowdown in production that would follow could mean an opportunity for Pennsylvania operators. To f ill the gap in natural gas, they might be able to increase production by as much as four or five percentage points. Gas futures, in fact, are up this week. [email protected]

That s uggests a loss of jobs and income for all the companies that rely on oil production — from suppliers to field servicers to truckers to railroads to trailer camp operators to diners — that could extend onward for months to come. About 90,000 workers depend on the oil business in North Dako- ta, said Ron Ness, head of the North Dakota Petroleum Council; 35,000 directly and 55,000 in indirectly wouldn’t exist without the industry. “Commodity markets have their ups and downs,” he said with a sigh. “You’ve got to be an optimist.” If the price of oil doesn’t get back above $35, which it passed heading downward this week, he said, “we would see significant impacts. It’s a very serious matter to us.” (The benchmark West Tex-

government’s Strategic Petro- leum Reserve, in a bid to prop up prices and confidence. But it’s unlikely to change the trajectory of a week’s worth of furious calcu- lations by executives and analysts as they look at the year ahead. It was only last week that the Saudis announced they would raise their output by several hun- dred thousand barrels a day, sending the price crashing for most of this week before showing signs of life Friday. U.S. oil producers — slow to move when the Saudis launched an earlier price war five years ago, uncertain of the Saudi commit- ment — showed no such hesita- tion this week. On Monday, C laudio Galimber- ti, an analyst with S&P Global Platts, predicted that “March and April demand would be brutally curtailed.” In a worst-case scenar-

BY WILL ENGLUND

American oil producers are
slashing their budgets for new
operations for the rest of this
year, which means far fewer new
rigs, a painful downturn for doz-
ens of oil field services companies
and the certainty of layoffs, from
Te xas to North Dakota.
Worldwide, the coronavirus
pandemic has kneecapped the
petroleum business, sparking a
price war that the Saudis
launched last weekend against
the Russians, each side promising
to pump more oil even as the
virus causes demand to tumble.
U.S. companies are directly in the
line of fire of what Goldman
Sachs analysts call “a swift and
violent rebalancing.”
President Trump on Friday an-
nounced a plan to buy 90 million
barrels of oil to be stored in the

Economy & Business

ECONOMY

U.S. import prices

declined in February

U.S. import p rices fell by the
most in six months in February a s
the c ost of petroleum products
dropped, and e conomists s aid
they could decline further
because of t he coronavirus
pandemic and an oil price war
between Saudi A rabia a nd Russia.
The import price deflation and
the n ovel c oronavirus are
expected t o subdue i nflation in
the m onths ahead, which
economists say could e mbolden
the Federal Reserve to
aggressively cut interest rates
again next week. The highly

contagious virus is seen by financial markets as the catalyst that will derail the longest economic expansion on record, now i n its 11th year. “ Lower oil prices w eighed on U.S. import p rices in February b ut it will b e an even larger weight in March,” s aid Ryan Sweet, a senior economist at Moody’s Analytics in West C hester, Pa. “The drop in energy prices s hould p rompt the Fed to be even more aggressive a t its March m eeting.” The Labor D epartment said o n Friday import prices slipped 0. percent l ast month after an upwardly revised 0.1 percent gain in January. Import p rices, which exclude tariffs, were previously reported to have b een unchanged

in January. In t he 12 months through February, import prices declined 1.2 p ercent after rising 0. percent i n January. — Reuters

ENERGY

Occidental aims to counter Icahn

Occidental Petroleum said on Friday it will implement a “poison pill” t hat aims to stop investors from amassing more than 15 percent i n the oil producer, a day after activist investor C arl Icahn disclosed a nearly 10 percent stake. The billionaire investor h as

been waging a bitter battle with Occidental’s b oard o ver its $38 billion acquisition of Anadarko Petroleum, calling it a misplaced b et b ased o n expectations of h igher oil p rices. Icahn has a lso repeatedly called u pon Occidental t o disclose if it had received any takeover offers w hile looking to buy Anadarko, and said on Thursday he expects strong bids to emerge once U. S. crude prices recover in the n ear-to-medium term. Occidental said o n Friday it will issue one r ight f or each s hare outstanding a t the close of March 23 and that right will be exercisable if a person or group acquires at l east 15 percent of the company’s shares.

Icahn bought about 8 8. million s hares for $ 2.21 billion, raising his stake i n Occidental to nearly 10 percent f rom 2. percent a t the end of last year, an SEC f iling on Thursday s howed. — R euters

ALSO IN BUSINESS SoftBank Group plans to spend up to $4.8 billion buying back as much as 7 percent of its s hares, taking a step a dvocated by activist investor Elliott Management to boost stockholder value. The repurchases will run from March 16 through March 15, 2021, and the s hares will be retired, the company said Friday.

Xerox Holdings said it will pause its pursuit of HP Inc. amid a global s ell-off in the markets a fter the o utbreak o f the c oronavirus. “Xerox needs to prioritize t he health a nd safety of its employees, customers, partners and a ffiliates over and a bove all other considerations, including its proposal to acquire HP,” Xerox CEO John Visentin s aid in a statement Friday. Norwalk, Conn.-based Xerox intends to restart its pursuit o f HP when markets stabilize, according t o a person familiar with the m atter, who spoke on the c ondition of anonymity because the matter isn’t p ublic. — From n ews services

DIGEST

Oasis and Ovintiv. But the slowdown in oil production will significantly lag the downturn in demand. The rigs that are operating will generally keep pumping. The Goldman Sachs study suggests that the biggest declines in production will occur at the end of this year and the beginning of next, pri- marily in the Bakken region of the Northern Plains and in the Eagle Ford fields of South Te xas. And they are expected to continue on into the second half of 2021.

io, the firm said, there could be a 950,000 barrel-a-day decrease in global demand. By Friday, Gold- man Sachs was predicting that, in any scenario, the falloff in Ameri- can production alone would be a million barrels. In b etween those predictions, a Goldman Sachs study released Friday showed, American firms moved to cut capital spending by 30 percent. Leading the way were such companies as Occidental Petroleum, Apache Corp., Mara- thon Oil, Continental Resources,

U.S. oil producers

slash spending

Companies brace for layoffs and loss of income

the stock market gains since Trump’s election in November

At its Feb. 12 peak, the Dow
had climbed more than 61 per-
cent; by Thursday’s close, that
number had been shaved to
roughly 11 percent. That number
improved Friday but is far off the
high of a month ago.
Some analysts argue that a
recession is already underway
and that the market swoon has
further — some say much further
— to go.
“The coronavirus likely tips us
into a recession because we were
hit with a one-two punch from the
virus,” said Dan Niles of Alpha-
One Capital Partners, a San Fran-
cisco hedge fund. “It is both de-
mand and supply destruction, un-
like 9/11 or the tech bubble burst-

ing, which was just demand.” Asian markets were gutted Fri- day, w ith Japan’s N ikkei 225 shed- ding more than 6 percent and Hong Kong’s Hang Seng Index closing down about 1.1 percent. But European markets shared in the rebound after one of their worst days in history, boosted by intervention plans from the Euro- pean Central Bank. The benchmark Stoxx 600 index finished Friday up 1 percent, a big rebound from its 11 percent loss Thursday. Earlier this week, the World Health Organization designated the coronavirus a global pandemic. The virus has sickened more than 135,000 worldwide and killed over 5,000. And after months of edging closer, the coronavirus has taken root through-

out the United States and upend- ed daily life for the foreseeable future. Many states have shuttered public schools, leaving parents to find child care or miss work. The NCAA canceled its March Mad- ness championship basketball tournaments, its premier annual showcases, disappointing mil- lions of fans. Major League Base- ball and the National Hockey League placed their seasons in limbo joining the National Bas- ketball Association, which acted one day earlier. Musicians are postponing tours or canceling them. Public tours of the White House have been canceled and the U.S. Capi- tol and congressional office build- ings will be off limits to tourists

starting April 1. Even Mickey Mouse was sidelined, with Disney closing theme parks through the end of this month. “A t this point, almost everyone in the country who is paying attention knows about the prob- lem, knows about the risks, and knows in some detail about what to do to mitigate those risks. We are at maximum public awareness — a nd probably at l east close to maximum public fear,” Brad McMillan, chief investment officer at Commonwealth Financial Network, wrote in commentary Friday. “Given this maximum awareness, I would suggest we may also be close to maximum economic and market impact.” [email protected] [email protected]

○

DOW 23,185. UP 1,985.00, 9.4% ○

NASDAQ 7,874. UP 673.07, 9.4% ○

S&P 500 2,711. UP 230.38, 9.3% ○

GOLD $1,516. DOWN $73.60, 4.6% ○

CRUDE OIL $31. UP $0.23, 0.7% ○

10-YEAR TREASURY DOWN $15.40 PER $1,000, 0.97% YIELD

CURRENCIES $1= 108.04 Y EN, 0.90 EUROS

BY THOMAS HEATH AND TAYLOR TELFORD

Stocks surged Friday to end a
tumultuous week marked by
some of the biggest extremes in
trading history. Heading into the
weekend, most investors are
stranded deeply in the red for
2020 and trying to sort through
the economic unknowns of the
coronavirus.
The Dow Jones industrial aver-
age shot to its biggest point gain
ever. The blue chips closed the
day up 1,985.00 points, or 9.4 per-
cent, at 2 3,185.62. The Standard &
Poor’s 500-stock index jumped
9.3 percent and the Nasdaq was
up 9.4 percent on the day. It was
Wall Street’s biggest rally since
2008.
The gains arrived after two
days of misery, with the Dow
losing 1,464 points on Wednesday
and 2,352 on Thursday, its worst
day since the 1987 crash. The
sell-off came despite central
banks around the world moving
to shore up the economy against
the novel coronavirus fallout,
which has battered global mar-
kets for weeks.
Investors ended the week flat-
tened, with no end to the turmoil
in sight. A month ago, the 11-year
bull market w as still reigning and
the Dow, S&P and Nasdaq were
resting on their record highs. But
then the coronavirus struck, and
within a few weeks, the bull mar-
ket was over and all three indexes
were down 20 percent.
The S&P lost 8.8 percent on the
week and is down 19.9 percent in
the 17 days since its all-time high.
The Dow lost 10.4 percent this
week and is 21 percent off its
all-time high, according to S&P
Dow Jones Indices. For 2020, the
Dow is down 18 percent, the S&P
is down 16 percent, and the tech-
heavy Nasdaq is 12 percent in the
hole.
“Investors don’t know what to
do,” David Donabedian, chief in-
vestment officer with CIBC Pri-
vate Wealth Management, wrote
in commentary Friday. “People
are casting about so the period of
extraordinary volatility is proba-
bly not over. Until we see more
calm in the market, and better
news on the path of COVID-19, a
sustained recovery in markets is
unlikely.”
Friday’s chaos was in line with
the hyperactive trading on dis-

play all week, caused by investor anxiousness over the coronavirus. Even before the trading bell rang, S&P 500 futures had spiked 5 percent, triggering the New York Stock Exchange’s “limit up” brake designed to temper exces- sive optimism and ensure orderly trading at the open. Emergency action by the Fed- eral Reserve to free up $1.5 tril- lion to smooth operations of the massive U.S. Treasury market a nd an Oval Office speech from Presi- dent Trump outlining the beginning of the White House’s re- sponse to the U.S. outbreak sent investors into panic Wednesday, resulting in a 10 percent decline for the Dow and the week’s second forced halt to trading. Wall Street’s meltdown over the past month has erased most of

U.S. markets surge to end a frantic, angst-filled week

ANDREW KELLY/REUTERS Shoppers had plenty of room at Saks Fifth Avenue in Manhattan on Friday. Even with big gains Friday, major market indexes still ended the week with severe losses.

Emergency declaration lifts stocks nearly 10% after two days of dread

The Washington Post - 14.03.2020

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