Why would the price of oil increase? Where is the demand going to come from? The coronavirus is shutting down cities in China. The Chinese govt has quarantined 6 cities with 50 million people and told them to stay at home. There is a travel ban in effect. In non-quarantined cities like Beijing they have only a fraction of the people in the streets they normally have. Restaurants are empty and movie theaters are closed. Malls are pretty much empty. This virus will spread to other countries like Hong Kong and India. When people are staying home there is not much demand for oil or gasoline. The only industries in demand is healthcare with overrun hospitals, with limited amount of drugs and face masks. Sadly the crematoriums are running 24/7 in some of the Chinese cities. With Chinese factories closing, the supply chain of parts to the West will be affected. Car plants may have to shut down. Apple might not get enough iPhones from China.
The Western media have claimed this week that the coronavirus is no more serious than the regular flu. This of course is disinfo. Britain and Canada have requested all of their citizens in China to come back home and undergo a 14 day quarantine. The U.S. is quarantining people flying in from Asia. We are seeing cruise ships quarantined and many cruises are being cancelled. The same may happen to air travel. Who is willing to sit for a few hours in a cabin with someone coughing and the air is recycled? I expect to see fewer flights in the affected regions of Asia. Conventions and group meetings will have to be cancelled. Commerce will slow down.
Does this sound like the normal flu to you? The R0 for the coronavirus is estimated at 4.08 which means each infected person will infect 4 more. The number of infected people is estimated to double every 6 days. The coronavirus is a variation of the SARS virus and has a death rate of around 4%-6%. It is extremely infectious and can live on metals like stainless steel for between 5 and 28 days and survive with temperatures as low as 4C. Any city with an outbreak of coronavirus will have to be shut down, businesses closed and people told to stay home. There will very little travel allowed in these cities. The demand for oil will plummet. It is quite possible we will see $35 oil later this year.
I don't see oil going higher. This is just my opinion, but that's how I see it.
TradingShot
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@BDG, Thanks for sharing your opinion. Very detailed indeed. My signal is purely technical and I state the reasoning behind it.
dane4
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@BDG, Whenever you run out of reasons why something can't go up, that is how you know you found a bottom.
BDG
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@dane4, or in the case of oil, you could check the oil inventory report. A surplus of world oil week after week means the price should be going down because of the lack of demand. Example: If the coronavirus spreads to Europe and U.S. like it has in China, which reduces commerce/travel/shipping (produces greater supply & less demand).
And on the other hand if there is an oil shortage, then the price should be going up, depending on how long the shortage lasts. Example: If war breaks out with Iran and their oil production goes offline. (produces less supply & greater demand)
cfrey1988
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@BDG, I agree with the posters thesis. At the end of the day, oil should not stay sub $50 for extended periods of time. If they have to they will cut production to increase prices. If you can handle some volatility going long oil here completely makes sense. At the end of the day, I believe we will be back in the $60 range within 6 months at the most. I am long and strong OILU myself.
BDG
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@cfrey1988, OPEC always claims to cut prices, but they never do. Every OPEC nation cheats because they need the money. The Saudi's are running low on money. They issued their first bond last year and they want to sell 10% of Aramco to China in order to get cash. They are privatizing many of their public infrastructure projects in order to raise money. If they don't keep bribing the key people in their kingdom, they won't be around for much longer. They have remained in power for so long because of the money they control. If they lose this advantage, then their blood thirsty opponents will be more than happy to take control of the country. Yes they will claim to reduce oil output, but they never do. It will be like turning off their own life support machine. They can't survive 6 months if they reduce the oil output by as much as 10%. They need every last drop that they can get. But for the sake of argument, let's check back and see what the price of oil is in 6 months. See you back here on August 6, 2020.
dane4
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@BDG, That is way too much speculation and conspiracy to profit from. Like @TradingShot I trade the chart. Everything else is noise. There are too many factors that are too unpredictable for me to speculate to determine how I may or may not trade. However, the one set of facts that do not change is what the chart is telling me. I have a much better probability of trading the chart than trying to guess when the next war or plague is going to be.
needzrehab
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@BDG, There is 0 evidence saying that it can live on metals between 5 and 28 days or survive in temperatures as low as 4C. That is according to Harvard Health (health.harvard.edu/blog/the-new-coronavirus-what-we-do-and-dont-know-2020012518747). We know basically very little about it, except that it has infected about 1400 people and killed 40, a death rate of approximately 2.8%. Most of those deaths were from the very old or very young, who died from complications around that. For comparison, in 2017 the flu virus killed around 4,000 Americans per week. That's just Americans, not even the rest of the world. So yes, the novel Coronavirus is not nearly as deadly as the flu virus.
Sounds like what you are peddling is disinfo.
BDG
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@needzrehab, the flu virus does not kill 4000 Americans per week. Not sure where you heard that. It averages 10,000 dead per flu season and not 200,000+ that you implied. The reason it is so high is because it is everywhere in the population. But people who get the flu can form some immunity to it so they may not catch it next time around. The coronavirus is brand new and people don't have a built in immunity to it and if you have a weak immune system then you are more likely to catch it. Asians are most susceptible to the coronavirus especially the very young and the old. The coronavirus is a relative of the SARS virus that struck in 2003 which was deadly serious, unless you want to dispute that too. Btw SARS had almost a 10% mortality rate. Now if you really think that the coronavirus is no more dangerous that the regular flu virus, then you should call up Xi Jinping and tell him to release the 50 million people that he has quarantined in those 6 cities. Let him know that he has nothing to worry about. Phone up Trump, Boris Johnson, and Trudeau and let them all know not to get their people out of China or to quarantine people coming in from China. But I'm pretty sure those leaders know something that you don't. And one of those things is not to trust the mortality numbers coming out of China. But I'm sure you will figure that out yourself in a couple of months.
The flu virus is a very simple virus, that's why it can keep coming back time and again. There is absolutely no immunity to the flu. If there was, it wouldn't keep coming back. The coronavirus is a very complicated and hard to replicate virus, meaning it will not be coming back (just like SARS and MERS didn't). -ncbi.nlm.nih.gov/pmc/articles/PMC4369385/
The reason that the flu is much worse is because it is so easy to replicate, and will therefore come back year after year after year even if most of the population has been vaccinated against it. The coronavirus will stop coming back once this outbreak is over, because it won't be able to replicate anymore. -
ynhhs.org/patient-care/urgent-care/flu-or-coronavirus
The governments don't want anyone spreading viruses that are not well understood. That's just basic politics. China is very good at lying, so we don't have accurate data regarding the virus. We don't want unknown viruses in the U.S. or any other country. Of course they are going to be quarantined. If we can stop people from dying, why the hell wouldn't we? If the flu virus wasn't worldwide, we would quarantine every country that had it to prevent it from spreading.
SARS killed around 9.3%, but this virus is nowhere near as bad as that. Again, the mortality rate is around 2%. It still doesn't change the fact that you're spreading misinformation based on things you know nothing about.
The Western media have claimed this week that the coronavirus is no more serious than the regular flu. This of course is disinfo. Britain and Canada have requested all of their citizens in China to come back home and undergo a 14 day quarantine. The U.S. is quarantining people flying in from Asia. We are seeing cruise ships quarantined and many cruises are being cancelled. The same may happen to air travel. Who is willing to sit for a few hours in a cabin with someone coughing and the air is recycled? I expect to see fewer flights in the affected regions of Asia. Conventions and group meetings will have to be cancelled. Commerce will slow down.
Does this sound like the normal flu to you? The R0 for the coronavirus is estimated at 4.08 which means each infected person will infect 4 more. The number of infected people is estimated to double every 6 days. The coronavirus is a variation of the SARS virus and has a death rate of around 4%-6%. It is extremely infectious and can live on metals like stainless steel for between 5 and 28 days and survive with temperatures as low as 4C. Any city with an outbreak of coronavirus will have to be shut down, businesses closed and people told to stay home. There will very little travel allowed in these cities. The demand for oil will plummet. It is quite possible we will see $35 oil later this year.
I don't see oil going higher. This is just my opinion, but that's how I see it.