It seems the experts are finally catching up to me.  The US Energy Information Administration has revised down its outlook for fuels demand due to the coronavirus outbreak and it’s looking bleak (for producers) and great (for consumers).

“EIA estimates that COVID-19 will reduce China’s total petroleum and liquid fuels demand by an average of 190,000 b/d in 2020. This forecast is based on estimates of three separate components (Figure 2):

• The reduction in demand for petroleum and liquid fuels caused by the general decline in Chinese economic activity as measured by gross domestic product (GDP);
• The volume of foregone jet fuel consumption in China caused by flight cancellations; and
• The additional impact on China’s demand for other transportation fuels.”

(Excerpt from This week in Petroleum, Feb. 12th, 2020)

Another factor they cite is the lower-than-expected heating fuel consumption caused by our warmer than usual winter (global warming?).  However, the extent of China’s lower consumption is captured in their graphic below.  The lower projections are based on the forecast hurt the virus will affect on China GDP – and despite the optimists and those simply in denial, China is a huge part of the global economy these days.

The futures prices (as mentioned in previous posts) have been declining for these same reasons.  It’s a shame that the gasoline prices never seem to fall as much as the crude price – or at least it sure doesn’t feel like they do when I gas up.

Those in denial (the stock market?) are insisting things may slow down, but they will inevitably get back to normal.  TRUE DAT.  But, when the negative comparisons (lower economic activity, lower revenues and earnings etc.) start registering over the next month or two these same doubters will panic and go risk-off; selling like scared rabbits.

When we begin to see inventory builds (not yet) then investors will awaken to the reality.

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