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Larry Kudlow, President Donald Trump’s chief economic advisor, said that the price of oil should recover over the next several months as the economy starts to reopen following strict coronavirus lockdowns.
Oil “demand collapsed. The coronavirus worldwide caused the collapse in demand. Through no fault of anybody, this virus has pushed us into a big economic contraction,” Kudlow said on CNBC’s “Squawk Box” Wednesday morning.
“We’ll come out of this soon, the economy will reopen, the economy will restart,” he added. “It will, I hope, take care of itself. Markets will take care of themselves over time.”
Kudlow’s comments came amid one of the biggest oil routs on record with West Texas Intermediate crude prices down 70% this year.
The historic downward pressure on oil prices restarted in earnest on Monday, when the WTI contract for May delivery plunged below zero to trade in negative territory for the first time ever. The May contract rallied on Tuesday to finish trading at $10.01 per barrel, but the more actively traded June contract fell 43.37% to settle at $11.57.
Traders have chalked up the eye-watering slide both to a steep pullback in petroleum demand — as people stay home amid the coronavirus outbreak — and falling-but-still-excessive production, leaving the globe awash with oil supply and full reserves.
“I think in the United States the rig count is way down, demand is way down, production is falling. There’s not much we can do about that,” Kudlow added on Wednesday. “There’s a lot of deflation out there as we go through this contraction. … We will propose regulatory and tax and investment policies to help out as best we can.”
“I’m hoping that this oil slump will prove to be temporary,” he said.
— CNBC’s Pippa Stevens contributed reporting.