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
How are Americans feeling about their finances?
Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.
Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.
Are people still waiting for unemployment payments?
Yes. There is no way to know exactly how many people have been waiting for months and are still not getting unemployment, because states do not have a good system in place for tracking that kind of data, according to Andrew Stettner of The Century Foundation. But by his own calculations, only about 60% of people who have applied for benefits are currently receiving them. That means there are millions still waiting. Read more here on what they are doing about it.
What’s going to happen to retailers, especially with the holiday shopping season approaching?
A report out Tuesday from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.
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