Oil Could Fall to -$100 a Barrel Says Energy Strategist

Oil prices have been plummeting and according to one energy strategist, they could get even worse.

Next month could be “fundamentally worse,” with prices falling to -$100 a barrel, says Paul Sankey, the managing director at Mizuho Group.

Speaking to Yahoo Finance, Sankey said, “Oil is difficult to handle and if you can’t put it anywhere, it becomes an environmental liability literally. So over this next month storage is now effectively full, you could see some extreme negatives in terms of prices offered.”

“The problem in the market today is really one of infrastructure and storage. Of course the biggest problem being that demand is down at absolutely previously unseen levels in the modern era,” said Sankey.

Crude prices could go negative again as there are 40 million barrels of Saudi oil currently on route to the U.S. The shipment was agreed upon last month.

“Those barrels take 45 to 60 days to arrive. And we can see this a flotilla of tankers that are coming towards the U.S. market … We really can’t handle it at all.”

“The real challenge is it’s difficult to shut down production as quickly as COVID hit, obviously. And so we’ve just got this terrible month ahead of us,” said the strategist.

Sankey said he would not be surprised to see major consolidation ahead. “The oil industry has overpaid themselves.

Executives have made far too much money. It’s been an embarrassment,” said Sankey. “Maybe we should just get rid of some of these people and have a lot fewer companies. And I think that’s what will happen.”