Global Oil Demand Shrinks, Hit by Coronavirus
The International Energy Agency (IEA) has updated its forecast and expects global crude oil demand to fall in the first quarter of 2020. This would be the first quarterly drop in over a decade. The main reason for the slowdown is the outbreak of the coronavirus. IEA also cut its 2020 annual forecast by 365,000 barrels per day, which is a 30 percent decrease from its previous forecast. Furthermore, the Organization of Petroleum Exporting Countries (OPEC) has also slashed its forecast by 230,000 barrels per day.
At the time this was written, West Texas Intermediate (WTI) and Brent crude oil prices have recovered slightly but remain below January 6 levels when the outbreak was first announced. WTI is down roughly $11 per barrel or 18 percent since January 6, 2020, and Brent is still down nearly $12 per barrel or 17 percent over the same timeframe. Wholesale diesel prices followed suit and remain down over 30¢ per gallon or 11 percent.
Pipeline protests cripple Canadian railways
Last week Thursday, Canadian National Railway (CN) announced it would shut down operations in eastern Canada due to blockades set up by protesters against pipeline expansion projects. The shut down will impact a key corridor connecting western Canada to the eastern part of the country. The railway is responsible for moving roughly 250 billion Canadian dollars—roughly $190 USD—worth of products including commodities and consumer goods. The Teamsters warned the shutdown could cause layoffs reaching 6,000 employees. Both the company and the teamsters have urged the federal government to intervene to resolve the situation as quickly as possible.
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