The oil complex is trading much higher this morning due to a flurry of bullish headlines: increased chances of a federal stimulus package, weaker dollar, oil strikes in Norway, and the development of Tropical Storm Delta.
Unless you’re a bear hibernating, everyone knows the Coronavirus is causing panic and particularly panic in the markets. Speaking of bears, we are now possibly entering a bear market.
In an effort to reduce greenhouse gas emissions from transportation, 12 Northeastern states and Washington D.C., including Pennsylvania, are weighing a regional program that would raise the price of gasoline. The Transportation and Climate Initiative (TCI) defines their program as a “bipartisan group or Northeast and Mid-Atlantic Jurisdictions” looking to “achieve additional benefits through reduced emissions, cleaner transportation, healthier communities, and more resilient infrastructure.” According to CBS Pittsburgh, their recent plan would require wholesalers of gasoline and diesel in participating states to buy carbon credits to sell their fuel. Critics of the program are quick to point out that the costs of these credits will be passed on directly to the consumer.
As the end of this week winds down and people prepare for the holidays next week, light liquidity will most likely be the name of the game in our energy markets. Light liquidity means trading volume is lower than normal which is to be expected during this time of year. Therefore, the bid/ask spreads are wider. Meaning that if the computer-driven trading houses decide to either buy or sell a lot of volume, the market can move violently in one direction rather quickly. What does this mean for our industry? This means that our customers can be very opportunistic especially if we see a retracement in prices after this rally we’ve seen since the beginning of December.
The events over the weekend in Saudi Arabia are causing concerns throughout the nation. The oil installations attacked resulted in the removal of six percent of daily world consumption, which will have an impact on motorists and consumers in the United States as early as today. The attack on Saudi Aramco’s Abqaiq plant in Buqyaq and the Khurais oil field is the biggest disruption to Saudi Arabia’s oil industry since the early 1990’s. The pain consumers may feel center around how long it takes normal output from the world’s second-largest oil producer to return.