Dan Celia: Oil Prices Are Dangerously Low
February 4, 2020
PHILADELPHIA—Those who filled up their tanks at the pump over the weekend, may have been pleasantly surprised at the lower prices.
But the drops are not to be celebrated, says nationally syndicated host and biblical investing authority Dan Celia. Rather, the dangerously low prices are concerning.
On Monday, West Texas intermediate (WTI) crude oil prices per barrel closed just over $50 a barrel, while Brent crude oil sat at $54.45. According to CNBC yesterday, oil has fallen more than 2%—the lowest level in more than a year. OilPrice.com also reported that Brent oil could fall to $47 a barrel as demand in China crashes due to the coronavirus.
“Oil is significantly down,” Celia said. “I can almost guarantee conversations at OPEC are focused on making deeper cuts into production to make up for the lack of demand and increased inventory numbers. It’s one thing to have $70 a barrel oil when they are looking for $80, but it’s a totally different thing to be looking at $80 and start to get concerned that it could go to $50.
“Now, for the leading OPEC nations such as Saudi Arabia or most of the Middle East, $50 a barrel is not an issue when it comes to making money because it costs nothing to get oil out of the ground,” he added. “But lowered profit is what we’re facing in the U.S. In the Middle East, it’s not about making money off the production—it’s about meeting their budgets. Remember, Saudi Arabia, the head for all practical purposes of OPEC, is a monarchy, and they need $80 a barrel to even think about meeting their budget requirements. Unfortunately, when oil dipped some years ago, they weren’t able to, because back then they were living off $100 to $110 a barrel oil. So the kingdom had to dip into its sovereign wealth fund and use that money as a reserve to fund the country’s day-to-day activities. They did that, and they’re still fine.
“But nonetheless, these oil prices are getting a little scary now,” Celia continued. “So OPEC will want to cut production again to try to drive up the price, but this tactic hasn’t been very successful. OPEC has cut production for two and a half years, and it’s hasn’t worked very well. Here in the U.S., some might say lower prices at the pump are a good thing, and yes, it does stabilize things. But at the same time, we are getting dangerously close to seeing some cuts in the oil fields, and that never ends well.”
OPEC, Celia concluded, would love nothing more than to see the majority of America’s fracking industry begin to shut down.
“They’ve been desperately trying to put U.S. oil production out of business for years, but it hasn’t worked,” he said. “And the U.S. continues to advance with technology and become more efficient and more effective. But we’ll see what happens. It’s getting a little dangerous now.”
Celia discusses these and other global and economic headlines on his daily, three-hour “Financial Issues” program, heard on more than 660 radio stations and several television networks nationwide, including FISM.TV, viewed on several post-cable television platforms and online.
Read more about Celia, FISM and “Financial Issues” or visit the FISM website, its Facebook page, on YouTube at Financial Issues with Dan Celia or on Twitter @financialissues; download the FISM app here.
To book Financial Issues Stewardship Ministries’ Dan Celia, contact Media@HamiltonStrategies.com or Patrick Benner, 610.584.1096, ext. 104, or Deborah Hamilton, ext. 102.