An epic battle between Russia and Saudi Arabia. Shrinking demand for jet fuel, gasoline and diesel. And now an unprecedented travel ban between the United States and Europe. It's a nightmare scenario for the oil market.

US crude oil plunged another 6% to $31 a barrel on Thursday after President Donald Trump announced the travel restrictions with Europe in a bid to contain the coronavirus pandemic. Crude dropped to as low as $30.02 a barrel. At that level, it was down 27% for the week.

The travel ban is only intensifying fears in the oil patch about demand destruction for energy products.

"The move is unprecedented so the full fuel demand impact is largely unknown," Ryan Fitzmaurice, energy strategist at Rabobank, said in an email. "This is on top of the very public OPEC+ skirmish that has oil producers opening the proverbial faucets in an effort to flood the market."

Russia, seeking to halt the rise of US shale oil, refused to go along with OPEC's proposal last week to cut production. Saudi Arabia, the de facto leader of OPEC, retaliated against Russia by promising to flood the market with cheap oil.

At the same time, investors around the world are fleeing from risky assets of all stripes, including stocks, junk bonds and yes, commodities.
Recession fears knocked the Dow into a bear market on Wednesday, the first since the Great Recession. The S&P 500 is on track to finish in a bear market as well Thursday, marking the end of the bull run that began at the end of the Great Recession.

Against that backdrop, Brent crude, the global benchmark, dropped 7% Thursday to $33.30 a barrel.

'Loss of confidence'
The big problem for the oil market is that jet fuel demand is cratering. Thousands of flights have been canceled and more will likely be nixed because of restrictions and nervous travelers.

Rystad Energy estimates that the travel ban with Europe will cause the loss of 600,000 barrels per month in jet fuel demand. That's on top of the 700,000 barrels per month that the firm had previously estimated due to earlier coronavirus disruptions.

Beyond the demand implications, the travel ban with Europe is weighing on investor confidence.

"It leads to further loss of confidence in the governments' handling of the fallout and increases uncertainty about the extent of the virus impact on the overall economy," Bjoernar Tonhaugen, head of oil markets at Rystad Energy, said in an email.

Big Oil under siege
The crash in oil prices has slammed the energy companies large and small. The energy sector of the S&P 500 plunged 10% Thursday alone.

ExxonMobil (XOM) and Chevron (CVX) have lost about one-fifth of their values this week. Continental Resources (CLR), the driller founded by shale pioneer Harold Hamm, is down over 40%.

Occidental Petroleum (OXY) has lost more than half its value this week. The debt-riddled oil driller slashed its dividend 86% Tuesday and promised to cut its once ambitious spending program.

Occidental's losses reflect intensifying concerns about the company's financial health after it spent heavily last year to acquire rival Anadarko Petroleum. Legendary investor Carl Icahn, one of Occidental's largest shareholders, warned that Anadarko deal would backfire if oil prices crashed.

Despite these concerns, Icahn has been aggressively buying Occidental's beaten-down stock in recent days. Icahn, who is seeking to oust Occidental's board, has quadrupled his stake in the company to around 10%, his representatives confirmed to CNN Busness.

source: https://edition.cnn.com/2020/03/12/investing/oil-prices-trump-europe-travel-ban-coronavirus/index.html

Trump Welcomes Falling Oil Prices; Likens Cheap Gasoline Brought on By Oil Crash to a Tax Cut

For at least the second time this week, President Donald Trump described the plunge in oil prices as being great for Americans, saying the ensuing decline in pump prices are “like a tax cut.”

“Frankly that’s like a big tax cut, not a little tax cut for the consumer,” Trump told reporters Thursday at the White House. “So there’s something about that that I like.”

The president’s reaction to the plunge in oil prices has run somewhat counter to the response of the U.S. Energy Department, which on Monday denounced “attempts by state actors to manipulate and shock oil markets.” It also comes as the crude drillers that Trump had vowed to help unleash America’s oil upon the world are facing the biggest crisis since the shale revolution began.

Monday’s oil market crash, the biggest since 1991, came about after talks between Saudi Arabia and Russia to curtail production amid the coronavirus outbreak fell apart and both countries prepared to flood the market.

Trump confirmed that he held a call on Monday with Mohammed bin Salman, saying he asked the Saudi crown prince what was going on. “They’re having a dispute with Russia,” he said. “This is something that drove oil prices down.”

U.S. gasoline futures fell as much as 23% on Thursday after the president announced his plans to ban travel from 26 European countries. Gasoline in New York was down almost 24 cents a gallon to 87.08 cents at 11:42 a.m., the lowest since December 2008.

Harold Hamm -- a shale industry titan and Trump confidant -- told Bloomberg Television Wednesday that he’s seeking to file an anti-dumping complaint with the U.S. Commerce Department against the Saudi plan to flood the market. The administration is also considering lowering royalties for oil and gas extracted from federal land.

source: https://www.bloomberg.com/news/articles/2020-03-12/trump-likens-cheap-gasoline-brought-on-by-oil-crash-to-a-tax-cut