As oil inventories are growing because of an oil price war overseas, oil use is being drastically cut by restrictions imposed by the coronavirus for business and individuals.
A litre of gas has plunged to below $1 in some parts of B.C., hitting 99.9 cents a litre briefly at several stations in Vancouver on Friday before rebounding to an average of $1.09 a litre.
It’s been 15 years since the price at the pump hovered around the $1 mark for a sustained period, according to Patrick De Haan of gas-tracking website GasBuddy.com.
“It’s all coronavirus related. All this is coronavirus related,” said De Haan.
When the flu’s outbreak in Wuhan in mid-January started to affect demand in China, it pushed down the price of oil, he said.
When oil hit US$45 to $55 a barrel, the Organization of Petroleum Exporting Countries (OPEC) called an emergency meeting on March 5, to which Russia was invited, and discussed cutting production to keep the price from dropping further.
Saudi Arabia and Russia refused to limit production and have been flooding the markets since, causing the price to continue to plunge, he said.
“So we had both of these things at the same time, supply going up while at the same time demand is going down,” said De Haan. “If we didn’t have the coronavirus, none of this would be happening.”
He said the situation could get worse for the oilpatch, with prices dropping further for benchmark crude and at the pumps, but he couldn’t predict how low or for how long.
“Even if things do get better, the industry probably won’t turn around for much of 2020,” he said. “It’s going to take the market a long time to absorb some of the supply.”
He said the U.S. is mulling a production cap for its producers, which may affect the North American market. But the longer the prices stay low, the greater the impact, especially on the Canadian economy.
“It’s hard to cheer for the lower prices when tens of thousands of jobs are on the line,” he said. Plus, lower prices weaken the loonie.
He said the turnaround for the industry is tied to the length of time the coronavirus affects Canadian business.
The U.S. benchmark S&P 500 stock index fell more than 4 per cent on Wednesday after a dire warning on the U.S. death toll from the coronavirus sent investors running from even the most defensive equities.
The Dow Jones Industrial Average fell 973.65 points, or 4.44 per cent, to 20,943.51, the S&P 500 lost 114.09 points, or 4.41 per cent, to 2,470.5 and the Nasdaq Composite dropped 339.52 points, or 4.41 per cent, to 7,360.58.
The Toronto Stock Exchange’s S&P/TSX composite index closed down 3.8 per cent at 12,876.37, with shares of security software company BlackBerry Ltd falling nearly 18 per cent after dismal quarterly results.
Economic data showed U.S. manufacturing activity contracted less than expected in March, but disruptions caused by the coronavirus pandemic pushed new orders received by factories to an 11-year low, reinforcing economists’ views that the economy was in recession.
Also, business closures as authorities tried to contain the coronavirus pushed private payrolls down by 27,000 jobs last month, the first decline since September 2017, the ADP National Employment Report showed separately on Wednesday.
The blue-chip Dow Jones Industrial Average and benchmark S&P 500 indexes extended losses after suffering their worst first quarter as President Donald Trump warned Americans of a “painful” two weeks ahead and health officials highlighted research predictions of an enormous jump in virus-related deaths.
Roughly two weeks before the first-quarter earnings season is due to start in earnest, investors are “very sensitive to the latest headlines” about the virus due to a lack of fundamental information,” said John Augustine, chief investment officer at Huntington National Bank in Columbus, Ohio.
“We don’t know all the economic and earnings impact yet and this is a sober thought for Americans with those projections of the death rate,” said Augustine.
S&P 500 firms are expected to enter an earnings recession in 2020, falling 4.3 per cent in the first quarter and 10.9 per cent in the second, according to the latest estimates gathered by Refinitiv.
President Donald Trump said he might join a discussion about oil production and prices with Saudi Arabia and Russia that, according to him, is ongoing.
“The two countries are discussing it and I am joining at the appropriate time if need be,” Trump told reporters as quoted by Reuters. He also said he had talked separately with Russia’s President Vladimir Putin and Saudi Arabia’s Crown Prince Mohammed and that these talks had been “great”.
Oil has plummeted to $25 for Brent and $20 for West Texas Intermediate, but some U.S. grades are trading a lot lower than this: Louisiana Light, for instance, fell to as little as $5.85 a barrel over the last week of March, and Wyoming crude traded as low as $1.25 a barrel.
But even WTI at $20 is quite problematic for most producers in the United States, so it is no surprise there have been calls for production cuts. One member of the Texas Railroad Commission, Ryan Sitton, said he had discussed the matter with OPEC’s chairman, Mohammed Barkindo.
Earlier this week, executives from two large shale oil producers, Parsley Energy and Pioneer Natural Resources, wrote to the commission to request the imposition of obligatory production cuts. These cuts would be an unprecedented move that highlights the devastating effects of the oil price war that coincided with the Covid-19 outbreak, which has wiped out about a fifth of global demand, according to estimates from experts.
Meanwhile, however, Saudi Arabia said it was going to flood Europe with deeply discounted Arab Light, a move seen as an attack on Russia in one of its key markets, which doesn’t bode well for any negotiations. Demand in Europe is floundering because of the coronavirus outbreak, and refiners are cutting their orders of Saudi crude by 25 percent, Reuters reported, citing unnamed sources.
OTTAWA – Canadians are far from done with dealing with COVID-19, as measures to fight the spread of the virus are expected to continue until at least July, according to a government document obtained by the National Post.
“Current GoC [Government Operations Centre] modelling suggests as a best case scenario that current measures continue until at least July.”
That short line, written in a COVID-19 “Daily Sitrep Highlights” by Immigration, Refugees and Citizenship Canada (IRCC) on March 30 and obtained by the National Post, is the clearest timeline we’ve seen from the federal government to date on how long Canadians will have to endure measures to fight COVID-19.
Is IRCC referring to social distancing measures such as encouraging self-isolation or banning public gatherings? Or the closure of the Canadian border to most foreigners? Maybe the obligatory 14-day quarantine for those who return to the country? Possibly all or none of the above?
The document does not specify, and spokespeople for IRCC and Public Safety Canada (that oversees the GOC) did not respond to questions.
But the Government Operations Centre is Ottawa’s brain during a national crisis. During such times, some of its many roles are creating risk assessments, “national-level planning and whole-of-government response management,” according to its website.
Thus, it holds a central role in coordinating all the measures put in place by the federal government to fight the COVID-19 pandemic, such as the ones mentioned above.
As of now, Prime Minister Justin Trudeau has refused to answer specific questions by reporters regarding the government’s internal projections of the spread of COVID-19.
But over the last week, government officials have been hinting that distancing measures would be recommended – or enforced if necessary – for more than just the next few weeks.
“There are obviously many, many different projections of how long this could last, how serious this could be, how many cases we could be facing. But those projections all hinge on choices that Canadians are making today, choices they made over the past few days, choices they will be making over the coming few days,” Trudeau responded to a question on Friday, without revealing any information about said projections.
“We will be able to say more about how many weeks or months this lasts for as we see the impacts of the behaviours people have engaged in over these days,” he added.
Later that day, Canada’s deputy chief public health officer, Dr. Howard Njoo, told reporters that Canadians will be in it “for the long haul.”
But again, he shied away from mentioning any specific dates.
“It’s not going to be days and weeks, it’s definitely months, many months. And the one thing that other countries are also looking at, and we’re looking at as well, is that is there a possibility of a second wave? Who knows?” Njoo said. ‘We’re looking at all possibilities and planning for all potential scenarios.”
Another seldom-reported clue that the drastic measures put in place to fight the global pandemic will last until the summer is the fact that the Canadian border will remain closed to non-American foreigners until at least June 30.
Government officials did not explicitly mention that date during the announcement two weeks ago. Rather, it was buried in the formal government order that enacted the drastic measure.
Already, some federal organizations are preparing for the fact that Canadians will most likely be told to stay home throughout April.
On Monday, the Canada Revenue Agency set out a memo to employees telling them the order to work from home if their work is deemed “non-essential” is extended from April 5 to May 1.
If they cannot work from home because of IT limitations, illness or family issues such as caring for children during school closures, then they are asked to go on paid leave.
“We have a long road ahead, and we will be continually taking stock and adjusting our approach to ensure we can continue to provide Canadians with the assistance they desperately require during this time. We continue to be tremendously grateful for your on-going dedication, flexibility and cooperation during this difficult time and as needs and expectations change over the coming weeks and months,” wrote CRA Commissioner Bob Hamilton.
To date, the Treasury Board Secretariat (TBS) – the public service’s employer – is ordering departments to allow teleworking as much as possible during the global pandemic.
That order will be revised by April 10 at the latest, at which point it could be extended, modified or simply cancelled.
Privacy & Cookies Policy
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.