Air travel won't return to pre-crisis levels until 2023, IATA chief warns - CNBC
The head of the trade association for airlines hopes that air travel will resume in Europe by the summer, and strongly opposes mandatory quarantine periods.
The impact on air travel from the coronavirus will be felt for many years to come, according to the International Air Transport Association, which estimates that passenger traffic won't rebound to pre-crisis levels until at least 2023. The trade association for the world's airlines said that demand for air travel had dropped more than 90% in Europe and the U.S. since the start of the pandemic, and warned that recovery will be even slower if lockdowns and travel restrictions are extended. "We are asking governments to have a phased approach to restart the industry and to fly again," Alexandre de Juniac, the IATA's director general and CEO, told CNBC's "Squawk Box Europe" on Thursday. De Juniac is hopeful that some flying will resume by the summer. "We are aiming at reopening and boosting the domestic market by end of the second quarter, and opening the regional or continental markets such as Europe, North America or Asia-Pacific by the third quarter, and intercontinental in the fall," he said. "So for summer we hope that you will see flights within Europe coming back, with I hope interesting prices and very safe processes of control." The European Union's external borders remain closed to non-EU nationals until mid-June. The European Commission has recommended a phased approach for its member states to reopen borders that would start with countries with low levels of coronavirus infections. The comments from the IATA com as travel groups are desperate to bring operations back to life and some are already rolling out plans to do so. United Airlines has expressed its aims to schedule Europe and China routes in June, Dubai's flagship Emirates Airline will recommence nine outbound routes starting May 21 and European low-cost carrier Ryanair expects to have 40% of its flights running by July 1. Budget carrier Wizz Air will restart routes from London's Luton Airport starting June 16, Lufthansa is planning service expansion in June and IAG will resume some flights in July, among others. But any hopes for a boost to the industry with some resumed travel will be dashed if governments institute mandatory 14-day quarantine periods for travelers upon arrival, de Juniac warned. "We are advocating with governments not to implement quarantine measures that will retain people for two weeks that will arrive anywhere," he said. "We think that it is useless provided we have implemented the health and sanitary controls that we are discussing with governments. It is absolutely key for the tourist industry which is so important for so many countries in Europe." Scores of countries including Australia, New Zealand, China, Spain and potentially the U.K. are requiring international travelers to quarantine for two weeks upon arrival, with varying degrees of enforcement: in Australia, arrivals are escorted to a hotel where they must remain for 14 days, while in other countries they are expected to "self-quarantine" at home. Hong Kong issued state-monitored tracking bracelets that arrivals must wear to ensure they do not leave their area of quarantine. Such policies will no doubt deter many people from wanting to travel. De Juniac believes quarantine periods are simply not necessary as long as airlines and airports uphold stringent sanitation and monitoring practices. "Is it possible to have an aircraft full and without risk of contamination? Our answer is yes," de Juniac said, "provided we implement control and sanitary processes for passengers just before the flight by asking for temperature control, by the obligation to wear a mask, by cleaning the aircraft properly and disinfecting properly, by limiting the distribution of food to pre-packaged food, by limiting cabin luggage to one luggage to avoid disembarking and embarking process to be too overcrowded." With such a multi-layered approach, he argued, "you limit the risk of contamination... And then the quarantine is not useful from our point of view in this case." Lufthansa airplanes parked on the runway in Frankfurt, Germany. Looking at the nature of flying numerous people packed into a tight space, loading and picking up luggage, using the airplane toilets it's hard to imagine that any sort of virus spread or contamination could be entirely avoided. But the IATA chief was adamant, citing on-board studies carried out "that demonstrate that the risk of contamination is absolutely minimal even when you don't have special equipment." He added that air filters in planes ensure safe ventilation, that sitting behind seat backs rather than face-to-face with other passengers reduces droplet spread, and that mandatory masks will further reduce contamination. "So if you have special equipment, special controls, special cleaning, you reduce the risk to something which will never be zero but will be negligible. That is our strong conviction based on studies, on the equipment we are using and on something which is even more important, that is safety, which is the key priority of this industry," he said. De Juniac stressed that passengers' safety came first, and that resumption of activity was ultimately up to government decisions. "I think the travelers are expecting us to implement a safe process of sanitary and health control for passengers. We are working with governments on that," he added. "It will be possible to fly safely at least in Europe we hope, and then it depends on government decisions to lift travel restrictions and border closures."
Chamath Palihapitiya calls Amazon's Jeff Bezos the best investor, better than Warren Buffett - CNBC
"People used to lambaste Jeff Bezos for not being profitable, but when you looked under the hood, he was the single best investor of our generation," Social Capital CEO Chamath Palihapitiya told CNBC.
Social Capital CEO Chamath Palihapitiya argued Tuesday on CNBC that Jeff Bezos is a better investor than Warren Buffett, pointing to the Amazon CEO and founder's history of reinvesting in the business. "People used to lambaste Jeff Bezos for not being profitable, but when you looked under the hood, he was the single best investor of our generation, even better than Buffett, because he would take billions of dollars of free cash flow and invest it into the future," Palihapitiya said on "Squawk Box." Palihapitiya has in recent weeks become particularly outspoken about his disdain for stock buybacks, saying last month they represented "a growing strain of incompetence amongst CEOs and amongst boards." On Tuesday, he called them a "fundamentally idiotic business practice." Under Bezos' leadership, Amazon has largely eschewed stock buybacks but reinvested heavily into its business to drive future growth and capture more market share. Amazon recently told shareholders they "may want to take a seat, because we're not thinking small," while explaining it plans to invest its expected $4 billion second-quarter profit in coronavirus-related efforts. Buffett, the legendary investor and CEO of Berkshire Hathaway, has touted the value of share repurchases, although he hasn't given them an unconditional stamp of approval. He repeated that philosophy at Berkshire Hathaway's recent shareholder meeting, arguing they need to be done in a price- and need-sensitive manner. "When the conditions are right, it should also be obvious to repurchase shares and there shouldn't be the slightest taint to it any more than there is to dividends," Buffett said. He added some stock buyback programs have been "stupid," but not "immoral." Palihapitiya said he is in agreement with Buffett on the need for buybacks to be done "under the right conditions." "You don't send the money out the door before you take care of yourself and invest for your own future," said the early Facebook executive turned venture capitalist. Palihapitiya said he believes there should be a checklist companies go through before they buy back stock, including necessary spending on research and development and ensuring the CEO isn't compensated "600 times" more than "the lowest employee in your company." "Coming out of 2020, I think what we should realize is we have a very brittle economy, a very fragile ecosystem of companies that are over-levered. We need to create incentives for these folks to save and to invest in the future," he said. "There is a business case to be made in every company to either save and/or to plan for the future, and instead to just give it back randomly in the open market is one of the dumbest business decisions you could make," he added.
A new way of measuring ice melt in Antarctica, Greenland sounds alarm about global sea level rise - CNBC
Global sea levels have risen 0.55 inches since 2003 due to ice melt in Antarctica and Greenland driven by climate change according to new data measurements from several NASA satellites.
Global sea levels have risen 0.55 inches since 2003 due to ice melt in Antarctica and Greenland driven by climate change, according to new data measurements from several NASA satellites. Scientists found that Greenland's ice sheet lost an average of 200 gigatons of ice per year and Antarctica's ice sheet lost an average of 118 gigatons of ice per year. One gigaton of ice can fill 400,000 Olympic-sized swimming pools. Previous studies of ice loss typically analyze data from multiple satellites and airborne missions. The new study, published in the journal Science, took a single type of measurement height measured by an instrument that bounces laser pulses off the ice surface to give the most accurate measure of ice sheet change to date. "If you watch a glacier or ice sheet for a month, or a year, you're not going to learn much about what the climate is doing to it," said lead author Benjamin Smith, a glaciologist at the University of Washington. "We now ... can be much more confident that the changes we're seeing in the ice have to do with the long-term changes in the climate." Last year, Greenland's ice sheet, the biggest in the world, contributed to a sea level rise of about 1.5 millimeters in a year of record melting driven by hotter temperatures. The country has seen a significant amount of coastal glacier thinning, with some glaciers losing up to 20 feet of elevation each year as hotter temperatures melt ice and warmer ocean temperatures erode the ice at their fronts, according to the study. In Antarctica, satellite measurements showed that increased snowfall has actually thickened some part of the ice sheet in the continent's interior, though ice loss in West Antarctica and the Antarctic Peninsula outweighed the affects of snowfall. "In West Antarctica, we're seeing a lot of glaciers thinning very rapidly," Smith said. "There are ice shelves at the downstream end of those glaciers floating on water. And those ice shelves are thinning, letting more ice flow out into the ocean as the warmer water erodes the ice." Melting from ice shelves doesn't raise sea levels because they are already floating, but the shelves do provide stability for the glaciers and ice sheets behind them, the scientists said. The findings come from the Ice, Cloud and land Elevation Satellite (ICESat-2) that was launched into orbit in 2018 to take elevation measurements of Earth, as well as satellite measurements from 2003 to 2009 that measured ice sheet change. Global sea levels will rise 2 to 6 feet by 2100 on the current trajectory, driven mainly by melting in Greenland and Antarctica, according to satellite data. But scientists warn that the projections underestimate the climate change impact on sea level rise. Those estimates have dire consequences for coastal residents, who comprise more than 40% of the total U.S. population and $7.9 trillion in gross domestic product. Sea level rise will destroy coastal property values, displace people and eventually hit global markets unless serious measures to combat greenhouse gas emissions are taken across the world.
Lime lays off 13% of staff as coronavirus batters scooter-sharing start-ups - CNBC
About 80 employees are being let go as a result of the cuts, Lime CEO Brad Bao said.
Scooter-sharing firm Lime is laying off 13% of its global workforce, as the coronavirus pandemic has wiped out demand for on-demand transportation services. About 80 employees are being let go as a result of the cuts, Lime CEO Brad Bao said in a letter to staff Thursday. They will receive an email and meeting invitation to talk through the departure process and exit package, he added. "Almost overnight, our company went from being on the eve of accomplishing an unprecedented milestone the first next-generation micromobility company to reach profitability to one where we had to pause operations in 99% of our markets worldwide to support cities' efforts at social distancing," said Bao. "Needless to say, while we thought we had planned for all possibilities this year, we did not anticipate a global pandemic." At the start of the year, Lime said it would let go roughly 100 employees and close operations in 12 markets in a bid to achieve profitability this year. Further cuts suggest the company will struggle to meet that target as global lockdown restrictions heavily disrupt the nascent "micromobility" space. "While we certainly can't predict what comes next, we remain confident that Lime will emerge stronger than ever once we get to the other side of this pandemic," the company said. Layoffs in the scooter space haven't been limited to Lime. U.S. peer Bird recently laid off 406 employees over a Zoom call a move that drew backlash online while Swedish rival Voi has laid off and furloughed most of its staff to survive the impact of lockdowns in Europe. Meanwhile, others in the urban mobility space have also been affected by the pandemic. Uber is reportedly mulling plans to lay off about 20% of its staff more than 5,400 employees amid a sharp decline in its ride-hailing business. In 2018, venture capital investors were gushing over electric scooter companies like Lime. Investment into e-scooter start-ups continued last year with Voi and German rival Tier raising sizable sums. But concerns over the pandemic in addition to existing cash burn worries will likely slow the brakes on that trend. According to The Information, Lime has been seeking emergency funding from new investors at a valuation of just $400 million a $2 billion drop from the $2.4 billion the company was last valued at.
US crude surges nearly 15% as inventories reportedly rise less than expected - CNBC
Data from the American Petroleum Institute showed Tuesday that U.S. crude inventories jumped by 10 million barrels in the week to April 24 — to 510 million barrels, according to Reuters. That was lower than analysts' expected.
Oil prices jumped in the afternoon of Asian trading hours on Wednesday following a report that showed a smaller than expected crude inventory build stateside. West Texas Intermediate for June delivery surged 14.75% to $14.16 per barrel. International benchmark Brent crude futures also added 4.5% to $21.38 per barrel. The moves came after data from the American Petroleum Institute showed Tuesday that U.S. crude inventories jumped by 10 million barrels in the week to April 24 to 510 million barrels, according to Reuters. That was lower than analysts' expectations of a build of 10.6 million barrels, Reuters reported. Still, in a note dated April 28, Moody's Investors Service said it was reducing its near-term oil price assumptions for WTI as well as Brent. "Exceptionally weak short-term prices will persist until production drops enough to ease the strain on storage facilities already operating at or close to full capacity," said Elena Nadtotchi, vice president and senior credit officer at Moody's. "Significant supply adjustments in due course should help to balance the market later in 2020, but the pace of the market's rebalancing and rising oil prices will depend on demand recovery." Moody's price prediction for WTI is currently $30 per barrel this year, and $40 next year. For Brent, it sees prices averaging $35 per barrel in 2020 and $45 in 2021. Oil prices swayed wildly on Tuesday between gains and losses as investors continue to keep an eye on depleting crude storage space amid a dearth in demand. The coronavirus pandemic, which has forced countries around the world to shut down their economies temporarily as people are told to stay home, has also effectively frozen major economies globally. WTI for June delivery fell 4 cents, or 3.4%, to settle at $12.34 per barrel on Tuesday. International benchmark Brent crude, on the other hand, gained 47 cents, or 2.35%, to settle at $20.46. CNBC's Pippa Stevens and Sam Meredith contributed to this report.
Ford projects adjusted pretax loss of $5 billion in the second quarter - CNBC
Wall Street is watching to see how much cash Ford burned in the quarter as well as any guidance for the second-quarter and beyond.
Signage is displayed outside the idled Ford Motor Co. Michigan Assembly plant in Wayne, Michigan, U.S., on Monday, March 23, 2020. Ford Motor lost $2 billion during the first quarter and warned investors that losses during the second quarter will widen as the company grapples with the fallout from the coronavirus pandemic that's shuttered factories and devastated sales. Before taxes, and after adjusting for one-time items, Ford lost $632 million, and that number is expected to top $5 billion during the second quarter, the automaker said Tuesday. Ford shares were down about 6% during extended-hours trading Tuesday to $5.10, erasing the automaker's gains for the day. Shares of the automaker are down about 42% this year. The automaker's total revenue, which includes auto sales and financing, slid 14.9% to $34.3 billion. The coronavirus had a "negative effect" of at least $2 billion on the company's earnings during the first three months of the year, Ford said. The outbreak significantly hobbled Ford's performance, "as protecting people and helping society respond to the crisis became primary measures of current success alongside balance-sheet management and operational excellence," the company said. Ford burned through $2.2 billion in cash during the quarter, a number Wall Street is closely watching. Investors are also looking for updates on important product launches, such as the Ford Bronco SUV and redesigned F-150 pickup. Both were expected this year. $35 billion in cash Ford Chief Financial Officer Tim Stone declined to disclose specific cash flow guidance for the year. He said the company had $35 billion in cash as of last Friday, after paying its suppliers. He said that amount is enough to get the company through the end of the year without any production, if it were to come to that. The company tapped $15.4 billion last month against two existing credit lines. Ford earlier this month also sold about $8 billion in bonds, it said April 17. "Our objective is not to just withstand the crisis," Stone told reporters during a call Tuesday. "We're ensuring the flexibility to continue to invest in our future." Stone said an $11 billion restructuring plan for the automaker into the early 2020s remains "on track." Ford suspended its quarterly dividend and pulled its 2020 guidance last month as it shuttered its U.S. plants due to Covid-19. The company, citing the volatility of the economic environment, did not announce a new 2020 forecast. Rolling shutdowns Automakers across the globe have been forced to conduct rolling plant shutdowns due to Covid-19. What started as a problem in China to begin the year, quickly grew to a supply base issue and then a global pandemic that shut down U.S. facilities, which remain closed. Urged by the United Auto Workers union, Ford, General Motors and Fiat Chrysler announced plans to temporarily close their plants due to the coronavirus on March 18. Pending discussions with the union, the facilities could begin to reopen as soon as next month. Ford on Tuesday said it plans to begin reopening its European plants next week with new global safety protocols to limit the spread of Covid-19, providing a potential template for reopening its U.S. operations. Ford's first-quarter vehicle sales fell 12.5% from a year ago, the company said earlier this month. IHS Markit expects worldwide vehicle sales to decline 22% this year to 70.3 million units, led by a 26.6% fall in the U.S. to 12.5 million units, compared with a year ago.
Oil drops 11%, extending Monday's 25% decline - CNBC
Oil prices dropped 11% in overnight trading, after falling 25% on Monday due to ongoing fears that storage is reaching capacity.
Oil prices slid 11% during overnight trading, extending Monday's nearly 25% decline on ongoing fears that storage around the world is rapidly filling. West Texas Intermediate, the U.S. benchmark, slid 11.03%, or $1.41, to trade at $11.37 per barrel, while international benchmark Brent crude traded 2.85% lower at $19.42 per barrel. On Monday, WTI fell 24.56%, or $4.16, to settle at $12.78 per barrel. International benchmark Brent crude fell 6.76% to settle at $19.99. Each contract is coming off its eighth week of losses in nine weeks. The coronavirus pandemic has erased as much as a third of global demand for oil, according to some estimates, which has sent prices tumbling to record lows. "The June contract is falling due to the reality of demand levels being well below current production levels and limited storage options," Reid Morrison, PwC oil and gas advisory leader, told CNBC. "Choppiness in the markets will be significant as economies deal with lockdowns and returning to normal," he added. Prices were also pressured on Monday after the United States Oil Fund, which trades under the ticker 'USO' and is popular with retail investors, said it would sell all of its contracts for June delivery beginning Monday, in favor of longer-term contracts. "The move [by the USO] is a recognition of the bleak prospects for the US oil sector in May and June," said Cailin Birch, global economist at The Economist Intelligence Unit. As demand drops more and more producers have announced production cuts. But some believe it won't be fast enough to combat the unprecedented fall-off in demand from the pandemic. Earlier in April, OPEC and its oil-producing allies agreed to a record production cut that will take 9.7 million barrels per day off the market beginning Friday, while Exxon and Chevron are among the U.S.-based companies that have scaled back operations. But sill, Birch noted that even as crude prices have dropped U.S. oil production held at a record level in the first quarter of 2020, "filling up almost all available storage capacity." WTI and Brent are both on pace for their fourth straight month of losses for the first time since 2017. Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.
WHO warns that 'children will die' as coronavirus pandemic postpones vaccinations against other diseases - CNBC
The World Health Organization warned Monday that children across the world will die as the coronavirus pandemic forces some countries to temporarily halt vaccinations for other deadly diseases such as polio.
The World Health Organization warned Monday that children across the world will die as the coronavirus pandemic forces some countries to temporarily halt vaccinations for other deadly diseases such as polio. At least 21 countries are reporting vaccine shortages as a result of travel restrictions meant to curb the spread of the Covid-19 pandemic, WHO Director-General Tedros Adhanom Ghebreyesus said during a press conference at the agency's Geneva headquarters. "The tragic reality is children will die as a result." Just as immunization has been postponed in some countries, heath-care services for other diseases, such as malaria, have been disrupted, Tedros said, noting that the number of malaria cases in sub-Saharan Africa could double. Tedros urged member countries to help ensure vaccination programs are fully funded, saying the Global Alliance for Vaccines and Immunization will need $7.4 billion to immunize 300 million children with 18 vaccines by 2025. "When vaccination coverage goes down, more outbreaks will occur," Tedros said. The coronavirus outbreak, which began in Wuhan, China, in late December, is "far from over," Tedros said, adding the agency is concerned about new cases cropping up in Africa, eastern Europe, Latin America and some Asian countries. "We are continuing to support these countries with technical assistance through our regional and country offices and with supplies through solidarity flights," he said. WHO warned world leaders last week that they will need to manage around the coronavirus for the foreseeable future as cases level off or decline in some countries, while peaking in others and resurging in areas where the Covid-19 pandemic appeared to be under control. "Make no mistake, we have a long way to go. This virus will be with us for a long time," Tedros said Wednesday. While social distancing measures put in place in numerous countries to slow the spread of the coronavirus have been successful, the virus remains "extremely dangerous," Tedros said at the time. Current data show "most of the world's population remains susceptible," he said, meaning outbreaks can easily "reignite."
'Scary,' 'visceral,' 'unprecedented': Traders describe oil's wild week and fall to negative prices - CNBC
Traders recount a historic week in the oil market that saw prices dip into negative territory for the first time ever, and where they see prices headed.
"Scary," "unbelievable," "so dramatic," "unprecedented," "very visceral": These are among the choice words Wall Street veterans used to describe what was, for the oil market, a week for the history books. On Monday, for the first time on record, West Texas Intermediate (WTI), the U.S. oil benchmark, plunged below zero and into negative territory. Before Monday, many thought this was impossible. Maybe, just maybe, it could drop to zero, effectively erasing all value. But negative territory seemed unimaginable, not least because it's hard even to wrap one's mind around it. Pay someone to take your oil? Yet that's exactly what happened. "It was a take-your-breath-away kind of scary moment," said Rebecca Babin, managing director at CIBC Private Wealth Management. "It truly was like watching a full speed train wreck. But you couldn't stop watching." The coronavirus pandemic has sapped as much as a third of worldwide demand for oil, according to some estimates. Producers have continued to pump, but with air travel halted and people staying home there's simply nowhere for this oil to go. Refiners certainly don't want it. And worldwide storage both onshore and offshore is quickly filling up. Analysts warn that we could reach tank tops, or maximum capacity, in a matter of weeks. Everything came to a head on Monday. WTI has a physical settlement, meaning that as the monthly contract reaches expiration, whoever holds the contract is due a physical barrel of oil. Traders, in an effort to profit from the differential, buy and sell contracts without any intention of holding them at expiration, while refiners and airlines are among those on the other side who actually want the oil. The contract that plunged into negative territory was for May delivery. Demand isn't expected to rebound any time soon. And with nowhere to put the oil, people were left scrambling and ultimately would do anything in this case, even pay to have it taken off their hands. There are nuances, of course. For one, the May contract expired on Tuesday, meaning that trading volume was thin as it plunged into negative territory. By that point the contract for June delivery was much more actively traded and thus a better indication of where the Street viewed oil prices. Negative prices themselves are also not completely without precedent. Natural gas, for instance, has traded below zero in the past, and in the physical market certain regional grades of crude were already trading in negative territory prior to Monday. And there were some traders who warned that, as storage filled, prices would continue to decline dramatically. But it was still shocking, nonetheless, to watch the downward descent on Monday of the world's most actively traded oil contract. "This is an industry that I've been a part of for a long time now, and when it gets broken like that, or you get a really bad situation like that, it draws all kinds of unwanted attention and people getting hurt," said Again Capital founding partner John Kilduff. A slow and then sudden unwind When the futures market opened at 6 p.m. ET on Sunday night, the WTI contract for May delivery traded at $17.73, or about 3% below its Friday settle price of $18.27. Oil was coming off its sixth straight day of losses, and its seventh negative week in eight. The nearly 20% decline for the week was especially notable since, only days before, OPEC and its oil-producing allies had agreed to a historic production cut that would take 9.7 million barrels per day roughly 10% of global supply offline. It wasn't enough to assuage investor fears. It turned out that $17.73 would be just a few cents shy of Monday's high. By midnight eastern time WTI was trading in the $15 range. Selling continued in overnight trading, and at 8 a.m. prices had slipped to $11. Just after noon, prices dropped into the single digits. "It was like watching a really bad traffic accident unfold right in front of you," said Kilduff, who's been in the energy industry for more than 25 years. "You knew there was going to be damage, even if it was thinly traded. You knew somebody was on the other side of those trades, and you kind of got a little bit of a sick feeling." After prices entered the single digits, there would be no going back. At 1:51 p.m., WTI broke below $1, and at 2:08 p.m., less than a half hour before the settle, it fell into negative territory. Kilduff called it a "crossing the Rubicon moment." The selling didn't stop there. Ultimately, the contract settled at negative $37.63. That prices kept falling deeper into negative territory after crossing zero is what most surprised RBN Energy CEO Rusty Braziel. "That's what freaked everybody, was the fact that these guys were in such dire circumstances," he said. "There was not a single soul that I have talked to that came anywhere close to predicting what happened." Braziel has been in the energy industry for decades, first as a trader and now as a consultant. While trading, he experienced his fair share of volatility including the 1986 crash that sent oil prices tumbling below $10. The heavy selling on Monday, rather than Tuesday when the contract was set to expire, was also notable, he said. By Tuesday's opening bell the May contract was back in positive territory, and steadily climbed higher to settle at $10.01. But it was the lowest settle on record apart from Monday's plunge since the contract's inception in 1983. For context, the previous "lowest ever" title was held by the $10.42 settle on March 31, 1986. "The fact that there wasn't going to be enough storage and that things could get really hairy around expiration was not a surprise," said Babin. "But to the degree that it happened, and the speed that it happened, it was actually kind of scary." Trouble brewing Part of Monday's historic fall was certainly technical, as the financial and physical worlds collided. The volume was thin, and the majority of professional traders and funds that hold these contracts had likely already rolled their positions into later contracts. On Monday the June contract held steady above $20. Despite that, the drop into negative prices cannot be dismissed as merely a glitch. For one, it shows the depths of the imbalance between supply and demand wrought by the coronavirus outbreak. "To put a fine point on the horrible economic situation we're in right now with this pandemic, it was Monday's trading," Kilduff said. It also shines light on the fact that zero doesn't necessarily provide a floor for prices. Losses can be limitless in futures. Brent crude, the international benchmark, has held up slightly better than WTI, since it prices in the North Sea which affords it easier access to storage as opposed to landlocked Cushing, Oklahoma, where WTI prices. "Slightly" is the operative word here, however, since Brent is hovering around a more than 20-year low. And WTI's Friday settle price of $16.94 is hardly something to celebrate. At the beginning of the year it traded above $60. Less than six years ago it topped $100. With prices this low, at a certain point producers will be forced to turn off the taps. A number of companies including Exxon, Chevron and ConocoPhillips have already announced production cuts, and additional cuts are expected. The consequences could be especially severe for U.S. companies, since shale oil is harder to extract from the ground and therefore more expensive to produce. These companies are also typically loaded up with debt, meaning weakness can ripple through the broader financial system. Vital Knowledge founder Adam Crisafulli called the sector the "FANG" of credit, especially high yield. "Banks are intimately linked to oil," he said in March. Whiting Petroleum, once a large player in the oil-rich Bakken Formation, earlier this month was the first major company to declare bankruptcy. Analysts warn there could be many more coming. Retail investors take a hit Traders have speculated that retail investors, who might not have fully understood futures trading, could have been on the other side of Monday's drop to negative prices. The U.S. Oil Fund, which trades under the ticker USO, has seen record inflows recently, suggesting that, as oil prices fell, retail investors wanted to get in on the trade. On Tuesday brokerage firm Interactive Brokers said it lost $88 million as a direct result of the drop in crude, which saw some users incur "losses in excess of the equity in their accounts." And Bank of China has reportedly suspended transactions for new crude positions, according to a report from Reuters, amid an uproar from those who lost money. The Chicago Mercantile Exchange, known as the CME, handles WTI contracts, and CEO Terry Duffy argued that the exchange worked "to perfection" on Monday. "We worked with the government regulators two weeks prior to making our announcement that we were going to allow negative price trading," he said Tuesday on CNBC's "Closing Bell". "So [it] was no secret that this was coming at us." He added that the exchange is not geared towards novice investors, but "professional participants." Even for those not directly impacted by Monday's drop, the move still grabbed attention: everyone suddenly wanted to know what was going on. Kilduff said he heard from people he hadn't spoken to in years. "I think about how scary this is for retail, and how disconcerting this is," added Babin, who's been a trader for 20 years. "It shined a light on some of the weaknesses in the market that, as traders and professionals, we have come to rely on as being rock solid for so long. And then to see it so quickly kind of blown apart it's real and it could really hurt a retail investor." June swoon? The natural follow-up question to negative prices is, of course, this: Will this happen again? Some analysts are saying it very well might, if storage continues to rise while demand stays depressed. "Will we hit -$100/bbl next month?" Mizuho analyst Paul Sankey wrote in a note on Tuesday, to which he answered, "quite possibly." "The physical reality of oil is that it is difficult to handle, volatile, potentially polluting, and actually useless without a refinery," he added. Meanwhile Goldman Sachs believes that global storage capacity could be full within 3-4 weeks, which "will likely create substantial volatility with more spikes to the downside until supply finally equals demand." If the June contract does dip to zero it will be a much more dire sign, Brazile said, than what happened this week, as it will show that the "supply demand balance in the United States is "completely out of whack." Looking ahead, there are still many question marks so long as the extent of the coronavirus pandemic remains unknown. But traders say that, longer-term, the production cuts, as well as an uptick in demand, should ultimately lead to price stabilization. Babin, for one doesn't see negative prices becoming the norm. "We don't expect crude to be this explosive rocket V-shaped recovery, but we don't expect it to trade negative continuously for the next several months." - CNBC's Michael Bloom and Nate Rattner contributed reporting. 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Trump says he talked to Apple CEO Tim Cook, who predicts a V-shaped recovery after coronavirus - CNBC
Trump said he and Cook spoke on Friday about economic recovery.
President Donald Trump said he spoke with Apple CEO Tim Cook on Friday and discussed the Covid-19 pandemic and state of the economy. Trump said Cook believes the economy will have a v-shaped recovery, where a big downturn is matched by an equally big upswing, following the outbreak. An Apple spokesperson did not immediately respond to a request for comment. In the past, Apple has ignored claims Trump has made about the company or private conversations with Cook. The coronavirus has rattled markets for the majority of the year as investors grapple with its economic consequences. The virus has sickened more than 2.7 million people worldwide, according to data from Johns Hopkins University. Shares of Apple began to sink in February, when the company warned it did not expect to meet its quarterly revenue forecast, citing slowed production and weakened demand in China as a result of the coronavirus outbreak. Shares then cratered again in mid-March as part of a broad market sell off and after the Nikkei Asian Review reported that the company considered delaying its annual iPhone launch by months. Apple announced its newest, cheaper iPhone model, the iPhone SE, on April 15. The company has gained some of that drop back in April. Since January, Apple shares are down nearly 4.5%. Subscribe to CNBC on YouTube.