Record Unemployment Claims and Oil's Best Day Ever

Some of you may have already picked up on this, but any discussion about the COVID-19 crisis will undoubtedly include a number of superlatives such as “highest ever,” “most on record” and “unprecedented.”

This week’s events were no exception. On Thursday, a head-spinning 6.6 million Americans filed new claims for unemployment benefits, bringing the two-week total to 10 million. That’s more than the combined populations of Los Angeles and Chicago.

Seeking a way to properly visualize the massive spike in initial jobless claims, analysts at Cornerstone Macro noted that they’ll need to be log-scaled now and forever for us to see the business cycle.

Here's what 6.6 million initial unemployment claims looks like
click to enlarge

“There isn’t much to say about this chart aside from letting the chart show just how unique a backdrop today is,” Cornerstone wrote. “Yes, it’s different this time… for all to see. While it is nearly impossible to maintain these levels of initial claims going forward for too long, we wouldn’t read a ‘peak’ in this data as ‘good news.’ If claims are still near 600k in two months, we’ve got a problem.”

Every crisis has its own unique challenges, but none in my lifetime has been so far-reaching or pervasive, impacting all corners and facets of human life.

As we await the curve of new coronavirus cases to flatten and begin to roll over, it may be difficult sometimes to remain hopeful. Besides finding solace in my family, friends and faith, I’m relieved to know that the world’s greatest and brightest scientists are, at this very moment, working tirelessly as one to defeat this “invisible enemy,” as President Donald Trump has called it.

Never in the history of our species “have so many experts in so many countries focused simultaneously on a single topic and with such urgency,” the New York Times wrote this week. “Nearly all other research has ground to a halt.”

I’m hopeful that this unprecedented scale of intellectual bandwidth will bring us answers and a solution. The world may be “closed” right now, but as I heard it put recently, the “grand reopening” is coming soon.

Are Oil Production Cuts Coming?

Crude oil had its best trading day ever on Thursday, increasing by nearly a full quarter after President Donald Trump tweeted optimism that Saudi Arabia and Russia may be planning to reduce production by “approximately 10 Million Barrels, and maybe substantially more.”

Up until this point, Saudi Arabia and Russia had been increasing their output as the two competing super-producers were locked in a price war.

Although likely overly ambitious at 10 million barrels a day, a production cut is welcome news right now for the U.S. oil and gas industry, which has had to make cuts of its own to support prices. The number of active North American oil rigs has decreased by 115 so far this year, from 677 at the end of December to 562 as of today, according to the Baker Hughes oil rig count. Ten percent fewer rigs were running this week compared to last week, representing the biggest one-week drop in North American rig activity since February 2006, when the number fell close to 17 percent.

The price jump came just two days after oil posted its worst quarter on record, slipping an incredible 66 percent as global demand dried up and stocks began to build around the world. With an estimated 92 percent of the world now under some form of social distancing because of the coronavirus pandemic, the demand destruction has been far faster than at any other time in history.