As cases of COVID-19 climb, oil prices face a longer recovery
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A key OPEC committee met Monday to assess production levels amid concerns of weakening economies and oil demand in the world.
The world economy had been recovering in recent months, but now COVID-19 cases are rising in places that happen to use a lot of oil, including India, Brazil and the United States.
“Cases are surging, and a lot of governments are imposing lockdown measures again, reimposing those,” said Herman Wang, who covers OPEC for S&P Global Platts. “So that’s going to have an impact on energy demand.”
That’s keeping prices down. The average pump price in the United States today is $2.15 a gallon and falling.
Still, the next round of COVID might not crush gasoline use the way it did in the spring.
“People feel safe in their cars,” said Jacques Rousseau, managing director at ClearView Energy Partners. “And they have that level under control in terms of the circle of people, you know, much more confident in driving in their cars versus getting on a plane or a train.”
Jet fuel demand may stay weak
The bigger fear for oil producers is people don’t want to fly, as jet fuel demand remains weak. The group known as OPEC Plus — a bloc of exporters, including Russia — is scheduled to loosen supply in January. Now, it’s not so sure.
The Saudi energy minister Prince Abdul Aziz Bin Salman has said the group will do what it can to keep supply in line with demand, which would bolster prices.
And consultant Sara Vakhshouri at SVB Energy International said the minister’s audience is not just market analysts and traders; it’s algorithms, big-data programs that incorporate key words in the public conversation to generate price forecasts
“So Prince Abdul Aziz is talking not only to me and you and traders in the market, he is also talking to a computer, to the artificial intelligence,” Vakhshouri said. “And this is something fascinating.”
He wants them all to get the message that crude prices will be going up, Vakhshouri said.
OPEC’s next full meeting is in six weeks.
COVID-19 Economy FAQs
Are states ready to roll out COVID-19 vaccines?
Claire Hannan, executive director of the nonprofit Association of Immunization Managers, which represents state health officials, said states have been making good progress in their preparations. And we could have several vaccines pretty soon. But states still need more funding, she said. Hannan doesn’t think a lack of additional funding would hold up distribution initially, but it could cause problems down the road. “It’s really worrisome that Congress may not pass funding or that there’s information circulating saying that states don’t need additional funding,” she said.
How is the service industry dealing with the return of coronavirus restrictions?
Without another round of something like the Paycheck Protection Program, which kept a lot of businesses afloat during the pandemic’s early stages, the outlook is bleak for places like restaurants. Some in the San Francisco Bay Area, for example, only got one week of indoor dining back before cases rose and restrictions went back into effect. Restaurant owners are revamping their business models in an effort to survive while waiting to see if they’ll be able to get more aid.
How are hospitals handling the nationwide surge in COVID-19 cases?
As the pandemic surges and more medical professionals themselves are coming down with COVID, nearly 1 in 5 hospitals in the country report having a critical shortage of staff, according to data from the Department of Health and Human Services. One of the knock-on effects of staff shortages is that people who have other medical needs are being asked to wait.
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