Price changes for Thursday, March 12, 2020

Hi to all,



Here’s what I have for this week’s price changes:



*Heating and stove oil to drop by 4.6 cents a litre.

*Diesel fuel to drop by 4.6 cents a litre, and...

*Gasoline shows a drop of 3.5 cents a litre.



My averages still indicate further drops for next week already in the pipeline as spot prices for gasoline remain 6.5 cents less than the price change for this week, and 3.5 cents down from the average for heating and diesel fuels. We haven’t hit bottom yet in Newfoundland and Labrador. There’s plenty of space for retailers to drop prices further from the regulated maximum.



Market highlights

OPEC-Russia oil price war

The news is dominated by a Russia and OPEC oil price war and both sides are ready to pump more.

     Or should that read Saudi Arabia and Russia?

     Both countries are supposedly at odds after talks broke off on further cuts to production on Saturday, and Saudi Arabia said it would drop all production limits. With OPEC now backed into a corner, it is Saudi Arabia mounting back to full production, with the Saudi’s with the most production capacity to let loose by.

     Saudi Arabia is already producing 9.5 million barrels a day with capacity that it can ramp up to hit 12.5 million barrels a day of production as early as three months from now.

     The Russians are able to harness 300,000 barrels in an instant with another 200,000 barrels worth of capacity to spare. They're presently pumping 11.3 million barrels a day according to my last data.

     The losers in all this may be the resilience of small producers in the US shale industry who are dealing with higher production costs.



Corona virus still hitting hard

The Corvid-19 virus is taking its toll of refined demand and demand for crude oil itself is now at a bargain, prompting some to buy and store at low prices, if not consume it.

     But consumption has dropped worldwide with a noticeable drop in some distillates, like kerosene, which being close to jet fuel, is readily apparent as the airline industry is taking a hit as a result of the Corona virus.

     Prices for the refined product lost close to 32 percent compared to the same timeframe for last year according to the IATA (International Air Transport Association) and down 18 percent over the last month since the Corona breakout.



US EIA inventories

The latest report from the Energy Information Administration still shows low refiner capacity as refiners are slow to come back online from spring maintenance programs, and what’s the rush?

     Refineries operated at 86.9 percent of capacity as crude oil gained 800 thousand barrels of stock.

     Gasoline inventories took a dip as 4.3 million barrels were taken from inventory and 4 million barrels dropped from distillate stocks.

     US domestic production was pegged at 13.1 million barrels per day with still no sign of affects of Corona.



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil