Transport-fuel prices are crashing as the coronavirus outbreak shuts down swathes of the world’s economy and limits the movement of people.
U.S. gasoline futures tumbled more than 20% on Monday, to a level close to where the fuel could cost less than the crude it’s made from—and the weakest market since at least 2005. The meltdown extended to jet fuel and diesel as the coronavirus outbreak restricts people’s movement globally. Up until Friday, a slump in oil-refiners’ margins had been cushioned by nosediving crude costs, but that will be almost impossible to sustain if end-user demand keeps collapsing.
With airlines cutting the number of flights daily and a growing number of European countries in lockdown, oil markets are heading for an unprecedented glut. People are driving far less, hitting demand for gasoline and diesel. All the while, Saudi Arabia and Russia are planning to boost crude production as they engage in a price war for market share.
“Demand is going to stay weak at a time when crude oil is just being pumped like mad out of the ground,” said Steve Sawyer, director of refining at Facts Global Energy. “Anything to do with petrol, diesel, jet fuel, obviously, is going to struggle.”
Nymex gasoline was trading at 70.03 cents a gallon by 12:04 p.m. London time. It was almost at parity with West Texas Intermediate crude and briefly dipped below the U.S. benchmark for the first time since 2009. As recently as March 10, Nymex gasoline futures traded at a premium of almost $18 a barrel to WTI.
At the same time, diesel and jet fuel prices in northwest Europe fell to their lowest intraday levels since early 2016. Diesel in Europe was down about 9% on Monday, according to ICE Futures Europe.