have the oil prices bottomed

[jay4696 0]

i have a feeling that they will drop to $45 a barrell before beginning to rise again. It seemed there was a bounce today but longer the virus goes on- it will stall some travel plans and slow the economy down and thus oil consumption. Also fact that tesla is taking off- future maybe less oil use and more electric use.

[Rob Kramer + 696]

I think longer and a bit lower hard to tell tho theres no rational ammount of over or under sold it just sells off till its bought again. But I heard from a Chinese guy I know who's parents are from the infected area businesses and people are in very hard times as noone is working right now. I don't think tesla effects anything . 

[notsonice + 1,063]

If anyone can predict when the Virus will be contained then maybe a floor in WTI or Brent can be guessed. Otherwise the longer China needs to be locked down the better the chances China will be in a full blown recession dragging down all those who rely on Chinese made goods in final product output (Hyundai had to shut down all production in South Korea yesterday as they are unable to get crucial parts out of China to complete cars on the line) Good luck to everyone

[0R0 + 6,251]

So far, China oil imports are down 3MMBbl/d A big deal. Saudi reported two petrochem China customers taking of 1 mil/d orders since they can't get their plants restarted after Lunar New Year. 

So far, the oil market is holding up at the $50 mark because of the assurances from China that their Hubei lockdown response is "working" so the disease spread is curtailed. 

The broader spread in China has smaller quarantine zones. Does not seem to be doing any better. As those cases are rising more rapidly than in Hubei last I checked, this weekend.

The key is that China has not created a reasonable screening process to allow folks out of quarantine and back to work. Much of the manufacturing labor lives inland and works at the coastal industrial centers. The inland expansion of infections has not really slowed down much. The lack of sufficient test kit supplies is the problem, including causing under-reporting of infections. That, somehow, did not get a big ramp up in supply. Perhaps because adequate test kit supply would reveal the actual extent of the epidemic. Not to speak of allowing testing of dead bodies collected off the streets and apartments to determine the death rates which are obviously much higher than reported from hospital deaths. .

So we don't know whether this quarantine effort actually slows the spread beyond where it hit already. We are going week to week waiting for the go ahead for workers to return to crowded shop floors. The good news is that outside the Hubei epicenter, where hospital capacity is severely overrun, deaths are few and mortality is 0.16%. Meaning that the disease is eminently treatable, and though it is not a retrovirus, retroviral meds work on it. By my crude calculations, when untreated, mortality is ~8%, mostly (80%) men over 60. The recovered number shot up to 727 today, while only 3.6%, and only 2.9% Hubei, it is better in the rest of the country. Treatment is 10 to 20 days. 

The damage is not that great in manufacturing yet, as only one post Lunar New Year week was lost at about 40% down relative to last year. The big long lasting damage for oil demand is in the flight quarantine of China in general. About 10-12% of China's population (actually flights overseas per population, most flights are by a smaller number of frequent flyers) fly out of the country each year. And it will have an impact long after the epidemic is under control.

Then there is the question of parts exports out of China which are already shutting down factories outside of China as their first post Lunar New Year deliveries have not arrived.

So there is potential for more than the 3 MMBbl/d drop in China imports as supply chain disruptions spread outside China. Possibly 4 MMBbl/d for this month. OPEC will obviously do a temporary deep cut, till inventory accumulations stop. 

I suspect the replacement of China sources of production, which has now gone into super overdrive, will result in permanent abandonment of China for those items. That means that drivers for higher prices, on top of current curtailed drilling programs due to low prices, there will be a rebound in demand for infrastructure expansion in the target countries for China expatriated production. Without actually estimating it, I would presume about 1 MMBbl/d above where we were last year for say May 2020 onwards and would last a year or two. 

Hubei is about 4,3% of China population and about 5% of GDP. It is obviously shut down and will remain so for at least a few more weeks till Wuhan hospitals report treating mostly non-critical patients. China events and eat in restaurants (6% of GDP) are shut down and likely to remain so for a few more weeks outside Hubei, Another 5% of GDP. Travel has dropped off a cliff and has not revived as much as one would expect yet . So the proportional damage would be 10-14% of GDP for Feb, assuming folks return to work after Feb 10. That is a 1.5 MMBbl/d which will not recover this month. If the return to work is delayed again, then it is 3 MMBbl/d demand drop during the delay period.

At this point it is more likely that the Feb 10 return to work will actually happen. It won't be at 100% capacity because schools will remain closed a few weeks longer. 

So prices can remain supported at $50 if OPEC cuts beyond what Libyan production has done and China goes back to work next week. If not, then $40 is likely. 

[notsonice + 1,063]

The good news is that outside the Hubei epicenter, where hospital capacity is severely overrun, deaths are few and mortality is 0.16%. Meaning that the disease is eminently treatable ????? When you look at the numbers the only place people are dying is Hubei.... Now one has to wonder why they are not able to treat and recover the same as those outside of Hubei???? One bet is China really does not want anyone to know if many more are dying outside of Hubei to give the illusion that they are in control. Personally I think it is so much worse than what is being reported and expect a Total lockdown in China to take root until the true new cases being reported significantly drop. Reality is they are trying to stop a virus that easily spreads the same as the cold or flu. No one has ever been successful in stopping the cold or flu from spreading to all corners of the globe. Hope they enjoy the lockdown in China. I would no get my hope up to far in the factories in China firing up any time soon

[0R0 + 6,251]

2 hours ago, notsonice said:

The good news is that outside the Hubei epicenter, where hospital capacity is severely overrun, deaths are few and mortality is 0.16%. Meaning that the disease is eminently treatable ????? When you look at the numbers the only place people are dying is Hubei.... Now one has to wonder why they are not able to treat and recover the same as those outside of Hubei???? One bet is China really does not want anyone to know if many more are dying outside of Hubei to give the illusion that they are in control. Personally I think it is so much worse than what is being reported and expect a Total lockdown in China to take root until the true new cases being reported significantly drop. Reality is they are trying to stop a virus that easily spreads the same as the cold or flu. No one has ever been successful in stopping the cold or flu from spreading to all corners of the globe. Hope they enjoy the lockdown in China. I would no get my hope up to far in the factories in China firing up any time soon

They are simply not trying hard to save Wuhan. They practically wrote it off and letting the virus do its worst.. 

The resources are diverted to the other provinces where the disease has spread in order to stop it where excess treatment capacity is available. Only what is left over is then sent to Hubei. Test kits, antiviral cocktail drugs, masks and protective gear, all go to Wuhan  last.  

[Hotone + 412]

30 minutes ago, 0R0 said:

They are simply not trying hard to save Wuhan. They practically wrote it off and letting the virus do its worst.. 

The resources are diverted to the other provinces where the disease has spread in order to stop it where excess treatment capacity is available. Only what is left over is then sent to Hubei. Test kits, antiviral cocktail drugs, masks and protective gear, all go to Wuhan  last.  

I don't know about Test kits, drugs or protective gear, but they have run out of masks in many places in China.  I am from Malaysia and one of my friends had been buying masks and sending them to China.  He sells them for a small profit only to his acquaintances in China.

Here is a video of people waiting to buy masks in Hong Kong.  The queue doesn't seem to end:

https://youtu.be/hId0MTo2UxM

[Douglas Buckland + 6,308]

Question:

If Chinese production slows or halts, reducing their demand for oil, is it rational to assume that EVENTUALLY other countries will puck up that production with the resulting increase in the demand for oil?

[0R0 + 6,251]

1 minute ago, Douglas Buckland said:

Question:

If Chinese production slows or halts, reducing their demand for oil, is it rational to assume that EVENTUALLY other countries will puck up that production with the resulting increase in the demand for oil?

Yes, and with an extra kicker of having to build new infrastructure while they are at it.  Which is lost in my longer post up from here.

[Zhong Lu + 845]

I just follow prices.  Sold INO with profit last week and is currently only scalping. Speculative pharmaceuticals and facemask producers like APT are selling off, and BABA is rallying like crazy on dip buying.  

Making good money right now betting against corona virus.  (Long BABA since 213 on Friday evening). So that should give you an extent of what the majority of the market is thinking.  If it turns, I'll get out but so far pretty profitable.

Also, it seems like the final support lines @ 50 for oil is holding.  The dip to under 50 appears to be stop fishing. Might go long oil soon.

Edited February 5, 2020 by Zhong Lu