Calming The Fears
Oil prices failed to come back as coronavirus fear will not go away. A stark warning from the Centers for Disease Control (CDC) that it’s a matter when, not if the virus will spread caused more panic in the trade. Talk that the U.S. had the virus contained did little to ease concerns. The American Petroleum Institute did report what normally would have been supportive data. This showed crude supply increased by 1.3 million barrels which was widely in line with expectations. Distillate inventories also fell by706,00 barrels and gasoline increased by 740,000 barrels. But can President Donald Trump East the fear?
The President Tweeted that “I will be having a News Conference at the White House, on this subject, today at 6:00 P.M. CDC representatives, and others, will be there. Thank you!”
The rally overnight failed as well as we heard more horror stories about demand.
United Airlines
In response to the continued drop in demand for travel to China, and due to the U.S. Department of State's decision to raise its China travel advisory to a Level 4, United (NASDAQ:UAL) is suspending operations between its hub airport cities and Beijing, Chengdu and Shanghai until Apr. 23.
American Airlines
Due to growing concerns regarding the coronavirus, American (NASDAQ:AAL) has suspended flights to and from mainland China and Hong Kong from its DFW and LAX hub until Apr. 24. “We will continue to evaluate this schedule and make any adjustments as necessary,” American said in a statement.
Delta Air Lines
Delta (NYSE:DAL) has decided to temporarily suspend all U.S.-to-China travel until Apr. 30. Customers whose travel plans are affected will have the option to ask for a full refund or request new accommodations after Apr. 30. The airline will continue to monitor the situation closely and may make additional adjustments as the situation continues to evolve.
Air Canada
Air Canada (TSX:AC) temporarily suspended all direct flights to Shanghai and Beijing from Canada until Mar. 27, and from China until Mar. 28. It also suspended its Toronto to Hong Kong flights from Mar. 1-27, but its Vancouver to Hong Kong route remains active. The carrier has extended its goodwill policy, allowing customers who are unable to travel due to new government-imposed entry requirements to be able to re-book their travel or be eligible for a refund later. Travelers will have the option to re-book their flights free of charge if they travel by June 15, 2020. Customers traveling to, from or via Beijing, Shanghai or Wuhan will also have the option of canceling their flight for a full refund.
British Airways
British Airways canceled all flights to Beijing and Shanghai until Apr. 1. Flights to and from Hong Kong remain unaffected. Customers flying to and from Hong Kong up until Apr. 1 will have the option to re-book on to another flight operated by British Airways to the same destination at a later date, or request a refund.
So with no signs travel is going to get better, in fact getting worse, it leads do more demand destruction.
Supply Chain issues for companies will become more of an issue. Sources from the Los Angeles port system suggest that tankers coming in at one of the largest ports in the country is drying up. In the meantime oil will take its cue from stocks.