With demand falling, oil companies are slashing production and jobs.
With the coronavirus pandemic all but eliminating travel, demand for energy is tumbling, and oil companies from Algeria to West Texas are slashing budgets. Refineries are cutting production of gasoline, diesel and jet fuel, and oil companies are dropping rigs, dismissing fracking crews and beginning to shutter wells.
As much as 20 percent, or 20 million barrels a day, of oil demand may be lost as the global economy slows, according to the International Energy Agency. That is roughly equivalent to eliminating all U.S. consumption. To make matters worse, Saudi Arabia and Russia are increasing oil production to regain market share from American oil companies that increased production and exports in recent years.
The Trump administration has been trying to convince Saudi Arabia and Russia that they should cut production to help stabilize the oil market; President Trump and President Vladimir Putin of Russia discussed energy markets in a call on Monday. But the energy demand destroyed by the virus now overshadows anything that Saudi Arabia or Russia could do to reduce exports.
Global oil benchmark prices hover around $20 a barrel — levels not seen in a generation — and regional prices in West Texas and North Dakota have fallen even further, to around $10 a barrel. That is about a quarter of the price that shale operators typically need to cover the costs of pulling oil out of the ground. If these prices persist, a big wave of bankruptcies is inevitable by the end of the year, experts say.
Trading in stock markets is unsteady.
Markets wavered on Tuesday as investors remained jittery following a period of staggering volatility in financial markets in the wake of the coronavirus pandemic.
The S&P 500 drifted from losses to gains and back again, while stocks in Europe pared most of their early gains as the day progressed.
Though the worst of the recent swings in asset prices seem to have ended, financial markets are trying to find a footing even as the number of coronavirus cases climb. The passage of a $2 trillion stimulus package in Washington helped shore up the spirits of investors, as it promised to shower billions of dollars on industries that have been damaged by the outbreak.
“We appear to be seeing improved sentiment,” Yousef Abbasi, global market strategist at INTL FCStone, a financial services and brokerage firm, wrote in a note to clients on Tuesday. “And when sentiment does start to improve around the virus and its ultimate economic impact — the market will find it difficult to ignore the size and scope of the fiscal and monetary stimulus that has been undertaken.”
But even as stocks rebounded well off their lowest point, following a surge last week, March is set to be the worst month for the S&P 500 since October 2008, when investors feared a collapse of the economy in the wake of the global financial crisis. The S&P 500 is down about 11 percent this month, and 18 percent so far this year.
As consumers stay home and factories shut down, millions of workers have lost their jobs. Wall Street economists and analysts continue to downgrade expectations for the economy.
Goldman Sachs, for example, expects U.S. economic output to plunge at an annualized rate of 34 percent in the second quarter. The unemployment rate will hit 15 percent, the bank said in a research note on Tuesday.
Here’s how major benchmarks have done in March, through Monday:
⬇️S&P 500 down 11 percent
⬇️Dow Jones industrial average down 12 percent
⬇️FTSE 100 in Britain down 15 percent
⬇️Nikkei 225 in Japan down 10.5 percent
⬇️Brent crude futures down 55 percent
CNN’s Chris Cuomo tests positive for the coronavirus.
Mr. Cuomo is “feeling well,” according to a memo distributed to CNN staff members, and he plans to continue hosting his prime-time program from a studio at his home. Mr. Cuomo confirmed the news himself on Twitter.
Mr. Cuomo, 49, is one of the most prominent members of the American news media so far to learn he has the coronavirus. His illness is also notable in part because of the outsize role his brother, Governor Cuomo, has played in leading the response to the virus in the hard-hit state of New York.
Governor Cuomo, when asked about his brother on Tuesday, said “he is going to be fine.”
“He’s young, in good shape, strong, not as strong as he thinks, but he will be fine. But there’s a lesson in this,” he said. “He’s an essential worker, a member of the press, so he’s been out there. If you go out there, the chance that you get infected is very high.”
Airlines need to apply for government bailouts by Friday.
The Treasury Department called on distressed airlines to submit their applications to receive billions of dollars of coronavirus bailout money by Friday and to identify what they will offer in stock, warrants or other compensation to protect American taxpayers.
In guidance released on Monday evening, the Treasury Department outlined the application process for airlines, which have been crippled as the pandemic has ground domestic and international travel to a halt. Companies must refrain from layoffs or pay cuts through the end of September and curb pay increases if they receive funds.
The legislation that Congress passed last week included $25 billion of grant money for airline carriers and $4 billion for air cargo carriers. It also included another $29 billion in loans and loan guarantees.
Also on Tuesday, the Transportation Department clarified a requirement under the law that airlines maintain minimum nationwide service. That rule applies only to places, not airports, and allows airlines to reduce the frequency of flights to those places, the agency said. Airlines can also request exemptions from serving destinations that “are not reasonable or practicable to serve,” the agency said.
Small businesses could be approved for loans in one day.
The Treasury Department unveiled a loan program on Tuesday that would allow small businesses to apply and receive approval for loans in one day, offering a lifeline for those hit by the coronavirus pandemic.
The program, which received $349 billion in funds through the economic relief package signed into law last week, is being run through the Small Business Administration with oversight from the Treasury. It is intended to help millions of businesses keep their workers on the payroll and cover some additional expenses as much of the economy is shuttered.
From Friday, business owners will be able to seek the loans at any participating lender, bank or credit union. The loans, which have a maximum of $10 million, will be forgiven if the employers do not lay off their workers. They are available to businesses with fewer than 500 employees.
“Speed is the operative word; applications for the emergency capital can begin as early as this week, with lenders using their own systems and processes to make these loans,” said Jovita Carranza, the S.B.A. administrator.
Garment factories in Bangladesh face ruin as orders from Western retailers are halted.
The empty shopping malls in Western cities are a testament to the crisis borne by global clothing and retail industries. But the impact reaches further, as the daily flow of thousands of orders placed by Western retailers to supplier factories in South Asia has slammed to a halt.
Fast fashion retailers rarely own the factories that supply them with their wares. Instead, the vast majority of garment and footwear orders are outsourced to suppliers in emerging markets like Bangladesh, where overhead is cheap and the cost of human labor is cheaper.
As orders dry up, factory owners face financial ruin, while the livelihoods of hundreds of thousands of garment workers hang in the balance.
The majority of suppliers are in countries that can be the most vulnerable to large global economic shocks, such as India, Myanmar, Cambodia and Bangladesh, the second-largest garment exporter nation after China.
Yes, we’re streaming: 156 billion minutes of distraction.
The number of hours Americans are devoting to streaming shows and movies has skyrocketed in the weeks since much of the country was given stay-at-home orders, according to a new study released by Nielsen.
Total streaming viewership has gone up 35 percent in recent weeks, and the size of the audience is more than double what it was this time a year ago, Nielsen said.
Americans watched a total of 156 billions of minutes of streaming shows and movies on television during the week of March 16, according to Nielsen, which does not measure what people watch on phone screens or tablets. In a comparable week last year, Americans streamed 71 billions minutes. All of the major streaming services — Netflix, YouTube, Amazon, Hulu — had increases, the research firm said.
Netflix had the largest share of streaming minutes, with YouTube in second place. Netflix’s viewership has jumped 28 percent in the United States in the last few weeks, and the platform has many of the most-streamed shows, including originals like “Love is Blind” and standbys like “The Office.” The Netflix documentary series “Tiger King” was released March 20 and has been the No. 1 program on the platform in the United States for more than a week.
Much of television has had rating surges, including cable news and the evening news programs. But the streaming statistics are evidence that people are looking for distractions.
“Sure, consumers are tuning to the news, keeping abreast of what is happening globally, nationally and in their local area,” said Scott N. Brown, the head of TV product at Nielsen, “but at some point, they are going to want to get away from the outside world and take a break.”
The Fed tries to ease Treasury markets by making dollars available globally.
The Federal Reserve on Tuesday unveiled a new program that would let foreign central banks swap out their Treasury securities for dollars in short-term agreements.
The goal is to prevent foreign nations from selling Treasuries in a scramble to acquire dollars. By stopping fire sales, the effort could help to ease strains on the crucial market, which is the backbone of the broader financial system.
“They don’t want foreign central banks selling Treasuries into very illiquid markets,” said Gennadiy Goldberg, a market strategist at TD Securities.
The new program will allow foreign central banks with accounts at the Federal Reserve Bank of New York to enter into overnight repurchase agreements, swapping out security holdings for needed dollar funding.
The Fed has currency swap lines in place — through which foreign central banks can temporarily exchange their currencies for dollars — but they exist only with 14 counterparts. Now central banks with plentiful Treasury holdings but few ways to turn them into quick cash — including the People’s Bank of China — will be eligible to apply.
This new effort, available April 6, could widen that scope, allowing the Fed to funnel funding into economies where it lacks deep and longstanding relationships with its monetary policy counterparts. Because the agreements are backed by Treasuries, they will be very low-risk.
Catch up: Here’s what else is happening.
JCPenney became the latest retailer to furlough many of its workers, saying on Tuesday that it was making the move to protect the “future of our company.” The retailer did not say exactly how many of its 90,000 workers would be furloughed, but said it would affect the majority of its store employees.
The Conference Board’s measurement of consumer confidence fell sharply this month, according to figures released Tuesday. It was the steepest one-month drop since August 2011. The data was collected through March 19, before many of the job losses from the coronavirus outbreak hit.
Walmart said it would start providing masks and gloves to workers. The company will also begin taking the temperatures of employees as they show up to work at stores and distribution centers. Any employee with a temperature of 100 degrees or higher will be sent home and cannot return to work until they are fever free for at least three days.
Lee Enterprises, a newspaper chain with more than 70 titles including The Buffalo News and The St. Louis Post-Dispatch, said it was instituting pay cuts and furloughs worth two weeks’ salary. It’s the latest media outlet to cut costs in response to the dismal advertising climate.
Airlines around the world will issue an estimated $35 billion in ticket refunds in the second quarter of the year, the International Air Transport Association said on Tuesday. In all, the industry is predicted to burn through $61 billion in cash by the end of June.
Ford Motor said Tuesday that it was indefinitely postponing the resumption of auto production in North America “to help protect its workers.” The announcement came five days after the company said it aimed to reopen a factory in Mexico on April 6 and some U.S. plants on April 14. Ford said it expected to start making a federally approved ventilator in cooperation with GE Healthcare at a plant in Ypsilanti, Mich., the week of April 20, with paid volunteers from the United Automobile Workers union.
Reporting was contributed by Michael M. Grynbaum, Clifford Krauss, Carlos Tejada, Ben Casselman, Alan Rappeport, Michael Corkery, John Koblin, Elizabeth Paton, Niraj Chokshi, Raymond Zhong, Peter Eavis, Davey Alba, Sheera Frenkel, Kevin McKenna, Mohammed Hadi, Geneva Abdul, Jonah Bromwich, Kate Conger, Ernesto Londono and Daniel Victor.