Chinese travel limits further depress oil prices; analysts consider longer-term impact
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Oil prices fell again Monday on news of the spreading coronavirus cases.
For the week, they’re down about 8%.
Some of this is panic selling, but some key players in the energy markets are asking if we’re in for a longer-term drop in flying, driving and manufacturing from one of the most critical oil buying countries, China.
China is the world’s number-two oil consumer, behind the U.S. As Beijing announced more restrictions on air, rail and car transport, energy company S&P Global Platts put Chinese oil demand on what it calls “negative watch.”
“What’s spooking the market right now is the uncertainty,” said Claudio Galimberti, who leads demand analytics for S&P Global Platts. “We don’t know if this virus will be contained. This has a potential to be really a game-changer.”
Still, as the international, or Brent, price of oil fell below $60 a barrel Monday morning, Saudi Arabia’s oil minister said OPEC can supply if needed to stabilize prices.
In other words, keep calm, said Christopher Haines, oil analyst at Energy Aspects in London.
“When the price got to around $60 that’s when OPEC really started to step in. And they started kind of signaling they are monitoring the situation, just to give the market a bit of confidence so it doesn’t fall out,” he said.
But oil markets aren’t only about confidence and psychology. Analyst Michael Tran at RBC Capital Markets is consulting artificial intelligence.
“We used geolocation data to essentially track human foot traffic [inside airports],” he said. Tran found no drop-off in airports outside China. “In other words, jet fuel demand destruction is currently a Chinese issue, it’s not an international issue.”
It’s a contained problem — for now. The Chinese government has, however, banned overseas group tours, starting Monday.
COVID-19 Economy FAQs
What’s the outlook for vaccine supply?
Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.
How has the pandemic changed scientific research?
Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.
What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?
Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”
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