Top Trump economic advisor Larry Kudlow told CNBC on Wednesday that the price of oil should recover over the next several months as the economy starts to reopen following strict coronavirus lockdowns.
“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 “Squawk Box.”
“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 ever, with West Texas Intermediate crude prices down 70% this year.
The historic swoon started 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 slide to a steep pullback in petroleum demand — as people stay home amid the coronavirus outbreak — and 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 said in the interview. “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.
The unprecedented crude sell-off appeared set for a partial rebound on Wednesday. WTI futures jumped more than 30% around 9:40 a.m. ET to $15.18 a barrel, reversing steep losses in the turbulent overnight session. The midweek rebound came just a few hours after international benchmark Brent crude fell to its lowest level in more than 20 years.
Still, given oil’s massive sell-off from highs north of $50 a barrel earlier this year, small-dollar changes in WTI futures prices such as Wednesday’s jump of $3.61 can register as moves of 20% or more.
— CNBC’s Pippa Stevens contributed reporting.