Oil, U.S. Farmers, and More Struggle in a Shifting Market
April 22, 2020 | FIRESIDE CHARTS
Earth Day looks to be celebrating the big 5-0 this year with a continuing meltdown of the fossil fuel industry. Oil prices have fallen (deeply, in some cases) into negative, can’t-even-give-it-away territory. As demand lingers at historic lows, the immediate issue facing the industry is a severe lack of storage capacity. Prices on oil tanker rentals have soared as barrels grow to record-high concentration in the Pacific, and will likely cut in to profits once demand eventually resumes. Major oil producers have struck a deal to slash production by 9.7 million barrels a day, but those reductions aren’t slated to start until next month. Is that soon enough to revitalize the struggling sector? Meanwhile, U.S. farmers are facing their own struggles; corn prices are also tumbling as cheap oil has undercut demand for ethanol, and the quarantine diet is eating into meat and dairy prices. Will the Fed’s easing programs and the soon-to-be-reloaded Paycheck Protection Program help ease the burden in a fiscal & monetary one-two punch?
1. Time to fill up your oil tank…but somehow I doubt your oil company will pay you to do so…
Source: WSJ Daily Shot, from 4/21/20
2. It is time to fill the National oil reserves! Even spot oil is negative…
Source: WSJ Daily Shot, from 4/21/20
3. Daily rental rates of oil tankers have soared as demand for storage space continues to grow. This is not sustainable….
Source: Bloomberg, from 4/22/20
4. Have you ever noticed that when oil prices increase, gas prices go up immediately; but when oil prices fall, gas prices take their time coming down? Prices at the pump have a lot further to fall…
Source: WSJ Daily Shot, from 4/22/20
5. With so much oil available at such low prices, demand for ethanol from corn is also crashing corn prices…another hit to U.S. farmers…
Source: WSJ Daily Shot, from 4/21/20
6. Where and what we eat has changed…How much bacon and cheese was in your diet? Prices for hogs and milk used to make cheese are also collapsing…
Source: WSJ Daily Shot, from 4/21/20
7. What has the Fed been doing? Here is a summary, excluding QE, including current limits/capacities…
Source: WSJ Daily Shot, from 4/22/20
8. The cavalry….will it be enough and in the right places?
Source: WSJ Daily Shot, from 4/21/20
9. While some states have seen cases peak, others are just beginning. As a nation, we are not out of the woods yet!
Source: WSJ Daily Shot, from 4/22/20
10. This one hits close to home (pun absolutely intended)!
Source: BoredPanda.com, from 4/20/20
11. Happy Earth Day!
Source: NewYorker.com, from 4/22/20
From massive unemployment spikes to an oil price shock and industries virtually grinding to a halt, 2020 certainly kicked off with a bang. For a review of first quarter events and what they could mean for the future, watch our quick 1Q20 video market commentary by BCM Portfolio Manager, Dave Haviland.
Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be helf in client accounts.