Mixed Messages Continue

Mixed messages continue on all fronts, writing this from Harmony, trying everywhere to practice social distancing and prudently using my limited supply of hand sanitizer. The farther one travels from the city into the North Country, there are more sceptics regarding the threat of the COVID-19 virus, and a more nonchalance attitude about the distance we are keeping from our neighbors. Whether minor or major the perception of the threat of this new virus, the impacts are real. Crude oil prices hover at $22.00 a barrel. The stock market after losing nearly 10,000 points grudgingly rebounds in part thanks to a 2 trillion dollar stimulus package passed today by congress (Representatives risked swamp exposure returning to Washington DC for a roll call vote) and signed by the president. Gasoline prices in places are under $2.00. (At truck stops on I-79 regular gas is $1.93). Toilet paper is in limited supply the local market now is selling non brand “TP” but with a two rolls limit. Natural gas prices (April NYMEX is $1.63 –Dominion South Point the local price is $1.19) continue to be in the doldrums forcing gas drillers, our shallow conventional independents along with the unconventional Marcellus Utica companies to cut costs, cut employees and hope for the best to weather the virus storm. “Covid-19 is creating wholly unprecedented impacts across energy markets, compelling radical changes to our forward balance expectations and challenging standard assumptions,” Genscape Inc. senior natural gas analyst Rick Margolin said in a note to clients on Wednesday.  ”… There are no true precedents … Thus, we expect our forecast changes to be frequent and potentially stark over the weeks and months ahead.” As to the shale oil producers in Texas, Louisiana and New Mexico where due to their production, the U.S. produces nearly 13 million barrels per day and has elevated the U.S. as the world’s top oil producer, the battered oil price spells dark days ahead. According to the Dallas Federal Reserve Bank’s quarterly survey released March 24, “the numbers are bad, the comments dire… The average breakeven in what is called the Permian Basin is reported to be $46 a barrel”. How long can these companies stay solvent with oil prices in the twenties? To quote comments from the survey, regarding the dramatic drop in price, which they attribute to the price war between Saudi Arabia and Russia coupled with lower oil demand due to coronavirus. “The administration talks about their great relationship with Russia and Saudi Arabia. Why won’t they place on of their ‘perfect’ phone calls to help negotiate the end of the oil war?” and another, “If Russia and Saudi Arabia hold the line for a year, they can then sell oil for $80 per barrel with no competition from U.S. shale.” The small and midsize oil producers (by and large the Shale oil companies) where left out of the Stimulus Bill. The U.S. Department of Energy has withdrawn a solicitation for the purchase of 30 million barrels for the Strategic Petroleum Reserve citing a lack of certainty of congressional funding. Other industries and major corporations are reportedly more fortunate. On the international front Victoria Coates (per Wikipedia, an American art historian, blogger, and political consultant). She has served as the deputy national security advisor to the Mideast and North Africa, and in February was moved to the Department of Energy. She has now been assigned to Saudi Arabia to give the Trump administration an added presence in the region. Her start date isn’t known because of the coronavirus upheaval. In the interim over 3,000,000 of U.S. workers filed for unemployment and for now COVID-19 means intentional caution and more mixed messages. May we all be safe.