Impact Of Coronavirus On Oil and Gas Market

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How The Coronavirus Impacts Oil And Gas Prices

Time to get pumped: According to price statistics provided by the Department of Energy, you should get ready to pay less for gas. As of the first week in February, the national average price of regular unleaded gas fell to about $2.43 per gallon; a month ago, it hovered around $2.60 per gallon. Diesel prices, too, are down: The national average cost of a gallon of diesel comes in at about $2.91, versus $3.02 a month ago. Normally, gas prices tend to rise in late winter and early spring for two reasons in particular: Gas demand increases as the weather warms and drivers take to the road more, and refiners switch over to pricier summer-blend gas formulations.

What’s fueling the dip in gas prices

You can credit cheaper crude oil prices for the drop at the gas pump. Fears that the coronavirus will put a significant crimp in China’s oil demand are behind the slide. China is the world’s largest oil importer, and it makes sense that travel bans imposed because of the virus will most likely lessen how much petroleum the Chinese economy burns.

Traders appear to be preparing for a sizable loss of demand. One example: Benchmark West Texas Intermediate crude went for $63 per barrel in January, but has recently fallen to $50 per barrel. It’s predicted that WTI will most likely trade from $50 to $55 per barrel until the coronavirus, or fears of it, have subsided, and then rise again modestly.

Natural gas keeps getting cheaper

Much like gas prices, gas demand is also falling. In both the United States and Europe, mild winter temperatures have meant lower heating demand, and long-range weather forecasts suggest that the mild temperatures will continue for quite some time. With spring just around the corner and stockpiles of natural gas already high, it’s reasonable to assume that the glut of gas won’t be depleted in the near future. Prices will reflect the abundance of this natural resource: Gas is unlikely to trade much above $2 per MMBtu for now, and it may not even crest the $2 mark.

So while the coronavirus is uppermost in people’s minds, prices on fuel and heating are down. All of which lends credence to the adage that it’s easy to find good and bad in everything.

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Sandra Murphy

Sandra Murphy

Holds a master's degree in professional writing and has more than 15 years of experience writing for national and international entities.

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