U.S. Jobless Claims Soar Amid Pandemic
March 26th, 2020
The weekly initial jobless claims number came out this morning and claims were substantially higher than expectations. Estimate were for 1.5 million new claims, but the number came in at 3.28 million which is a new record. With all the people that have been displaced by the virus that has shut down a large portion of the economy many thought the number would be higher than expectations.
The DOE released their inventory report yesterday and with all that is going on I am not sure it has a big impact on the market as it is being impacted by other factors currently. Crude stocks were up 1.623 million barrels the ninth week in a row that crude stocks have increased. The stocks of crude oil at Cushing, Ok were up 858,000 barrels.
Gasoline stocks were down 1.537 million barrels and distillate stocks were down 678,000 barrels. US crude production was down 100,000 bpd but still at a very high 13 million bpd. With low crude oil prices and a lot of talk about oil companies cutting expenses the rig count and production will have to start to decline at some point. According to a survey by the Dallas Federal Reserve Bank of oil and gas companies, the US energy sector is cutting capital spending and jobs as business activity fell and the outlook has turned “extremely pessimistic” amid the coronavirus pandemic.
There are already signs of much lower gasoline demand, as EIA reported that implied demand (product supplied) fell by 859,000 barrels and distillate demand fell by 218,000 barrels.
The market has been hit with a double edged sword with fuel demand destruction by the coronavirus pandemic and the OPEC and Russian price was flooding the market with supplies. Some energy experts still believe there is no handle to how much the world will come to a halt in fuel consumption and that it will be impossible for several months for oil to stabilize vs. fall. One oil expert has predicted that WTI crude oil price may fall below $10 in the next few months. While other warn that this is short lived, and the second half of this year could lead to a major price spike.
Refinery margins for gasoline and jet fuel fell dramatically on Monday with the RBOB/Crude crack spread posting negative prices, a sign of losing money for refining per barrel of gasoline.
Some analysts are forecasting that world petroleum demand will fall by 2.8 million bpd in 2020, which is the largest yearly drop in almost 40 years of recording data.
Vitol Group’s CEO, Russell Hardy, estimates a demand loss of 15 to 20 million bpd over the next few weeks. He said the figure equates to an annual demand decline of about 5 million bpd. He also stated that refineries have cut about 7 million bpd and more cuts are coming as storage fills up. In regard to prices, he stated that they will drift lower as the demand halt is only hitting the markets now.