Year: 2020

Consumer Demand and Refinery Run Recovery

COVID-19’s impact on the aviation industry has been significant, but the decrease in demand for jet fuel is a only drop in the crude oil bucket. With the media focusing so much of their attention on jet fuel decimation, market participants are associating this fact to the overall global demand picture. Until the media’s portrayal of oversupply in processed aviation fuels is corrected, the negative demand outlook for the oil industry as a whole cannot be fixed.

Predicting The Impossible

On September 5th, Saudi Arabia cut its official crude selling price to Asia and U.S. buyers in an attempt to “boost global demand” all while U.S. crude oil inventories are seeing drawdowns at historic rates. In addition, the Russian Oil Minister announced on September 18th that global oil inventories are in decline and yet the world’s main oil forecasting agencies, analysts, and companies are pessimistic about oversupply creating a grim oil demand outlook. Clearly forecasting oil demand in 2020 is becoming a seemingly impossible task and has the world’s best scratching their heads.

Crude Drawdowns and Price Disconnects

As crude oil demand was decimated at the start of the global coronavirus pandemic, storage around the world began to rapidly fill causing commodity prices to tank. The supply and demand imbalance was corrected when producers came together to make global production cuts thus stabilizing prices. When economies began to restart and consumers began to leave their homes, demand started to climb to outpace supply. As storage levels began to fall, prices remained constant but when there was a tiny inventory build at the beginning of September, prices went into a freefall highlighting the growing disconnect between free market principles of supply and demand and emotion driving the actual price of crude oil. Instead of following commodity principles, pricing has become largely influenced by market sentiment.

Never Forget

Today we remember the heroes lost in the tragedy of September 11, 2001. Today we remember how we came together as a nation to rebuild, reunite, and move forward. Today we remember how those terrible events brought us together. But most importantly, today we recognize we must once again come together as a nation to overcome these current events to build a better tomorrow. #NeverForget