Reckless and dishonest journalism about the coronavirus, oil futures edition

This is a very good example of how irresponsible our media has become on coronavirus reporting from the Washington Post. They are manipulating all narratives to try to stoke panic because Trump has destroyed their brains.

So lower fuel prices is supposed to be bad news for the airlines, eh? This is their economics columnist.

Oil futures collapsed 30% this evening after falling the most since the financial crisis on Friday. The cause? A price war between Russia and Saudi Arabia, who used to be strong allies. Goldman Sachs had already warned that oil may be headed into the 20s over their spat:

“This has turned into a scorched Earth approach by Saudi Arabia, in particular, to deal with the problem of chronic overproduction,” Again Capital’s John Kilduff said. “The Saudis are the lowest cost producer by far. There is a reckoning ahead for all other producers, especially those companies operating in the U.S shale patch.”

After the initial drop the losses were pared somewhat, with each contract trading down slightly more than 21%…

Saudi Arabia’s price cut followed a breakdown of talks in Vienna last week. On Thursday, OPEC recommended additional production cuts of 1.5 million barrels per day starting in April and extending until the end of the year. But OPEC ally Russia rejected the additional cuts when the 14-member cartel and its allies, known as OPEC+, met on Friday.

The meeting also concluded with no directive about the production cuts that are currently in place but set to expire at the end of the month. This effectively means that nations will soon have free rein over how much they pump.

“As from 1 April we are starting to work without minding the quotas or reductions which were in place earlier,” Russian Energy Minister Alexander Novak told reporters Friday at the OPEC+ meeting in Vienna, adding, “but this does not mean that each country would not monitor and analyze market developments.” 

On Saturday, Saudi Arabia announced massive discounts to its official selling prices for April, and the nation is reportedly preparing to increase its production above the 10 million barrel per day mark, according to a Reuters report. The kingdom currently pumps 9.7 million barrels per day, but has the capacity to ramp up to 12.5 million barrels per day.

Not everything is about the goddamn virus, which so far remains far, far, far less of a killer than the flu (and that’s with zero clarity on the true number of people that have been infected). This is going to be a crazy period for market volatility across the board if oil producers are going haywire.

It remains to be seen what the coronavirus panic is going to do to the hospitality and travel industries. People are afraid of leaving the country now, not only because of the virus, but because of the widespread use of quarantines that have now been applied in western democracies, not just totalitarian China. If you leave for business or pleasure, you might not make it home even though areas of infection have been highly concentrated. In Italy, for example, even before the quarantine, a single region was responsible for over 90% of the coronavirus deaths. The leak of the quarantine policy had the opposite of its intended effect: It made people who were potentially infected scramble to leave the area. Genius.

Of course, people taking vacations at home does not help the airlines much but it does help other sectors of the economy. I can tell you Daytona Beach and St Augustine are packed. Whether that is an increase year-over-year because people are taking staycations, who knows.

The berserk policy response is probably going to turn this into an economic own-goal for many places, but it will not be permanent. I don’t care what the armchair epidemiologists on Facebook say to justify the fact that they have turned into moronic toilet paper hoarders. At least they will make retail sales figures interesting. (Of course, that is mostly pulling demand forward and substituting expenditures from other areas. Some of these idiots probably won’t need to buy paper products for five years now.)

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