Purell Is Now More Valuable Than Oil
If you were tired of hearing about interest rates last week, you'll be tired of hearing about oil this week.
Over the weekend, Saudi Arabia announced it will slash oil prices and increase output, causing oil prices to drop 30% once trading began last night, the largest decline since 1991. Saudi Arabia plans to increase output from 9.7 million barrels per day (bpd) to more than 10 million bpd in April.
Saudi Arabia is essentially kicking off a price war after Russia refused a proposed production cut during last week's Organization of the Petroleum Exporting Countries (OPEC) meeting. OPEC members and other producers hoped to agree on a production cut of 1.5 million bpd to stem falling oil prices as demand deteriorates amidst the coronavirus outbreak.
Russia wasn't interested, with Russian Energy Minister Alexander Novak saying "As from 1 April we are starting to work without minding the quotas or reductions which were in place earlier, but this does not mean that each country would not monitor and analyze market developments."
"We believe the OPEC and Russia oil price war unequivocally started this weekend when Saudi Arabia aggressively cut the relative price at which it sells its crude by the most in at least 20 years," Goldman Sachs analyst Damien Courvalin said in a note Sunday. "The prognosis for the oil market is even more dire than in November 2014, when such a price war last started, as it comes to a head with the significant collapse in oil demand due to the coronavirus."
The move by Saudi Arabia sent shockwaves through markets when trading opened last night. S&P 500 futures fell 5%, hitting limit down, meaning trading was halted with no trades below the limit allowed until markets open this morning. It's the first limit down for the S&P 500 since the financial crisis more than ten years ago. Futures on the Dow Jones Industrial Average and Nasdaq didn't fare much better, with both falling nearly 5%.
With markets across the globe selling off, gold rose above $1,700 per ounce for the first time since 2012. Investors continued to flock to the safety of U.S. treasuries, as they did last week. After falling below 1.0% for the first time ever just last week, yields on the U.S. 10-year Treasury note fell below 0.5% for the first time ever, hitting 0.487% last night. The yield on the 30-year Treasury fell below 1.0% for the first time ever, hitting 0.974%.
With the news out of Saudi Arabia and the coronavirus still spreading, this week is set to be another hectic one. With markets now down nearly 20% from the all-time highs set just a few weeks ago, it may not be long before U.S. Treasury Secretary Steven Mnuchin makes another call to the PPT.
In a striking example of supply and demand, you can now purchase a barrel of Brent crude and WTI crude and still have nearly $20 left for the price of a 1 liter bottle of Purell on Amazon.
Quarantine the cash. The U.S. Federal Reserve is quarantining cash repatriated from Asia over fears the coronavirus could be spread through their circulation. A Fed spokesperson said they will quarantine notes for seven to ten days before distributing them to financial institutions. The World Health Organization even said banknotes may spread the virus and people should use contactless payment methods instead. A 2014 study conducted at New York University found 3,000 types of bacteria on dollar bills.
But sending a car into space isn't? Tesla co-founder and CEO Elon Musk tweeted Friday "The coronavirus panic is dumb." With more than 100,000 people infected with the coronavirus and more than 3,500 dead globally, a lot of people likely disagree with Musk's sentiment. The tweet is hardly the first time Musk has drawn fire on Twitter for speaking his mind and will likely not be the last.
No surprises here. A report from the U.S. House Transportation Committee placed blame on the Federal Aviation Administration and Boeing for the two 737 MAX crashes that killed a combined 346 people. The report called the FAA's review "grossly insufficient," leading to the approval the "doomed" flights. The report said the 737 MAX "was marred by technical design failures, lack of transparency with both regulators and customers, and efforts to obfuscate information about the operation of the aircraft."
Does he get free guac for life? Chipotle founder Steve Ells is walking away from the company he started in 1993, stepping down from the company's board and relinquishing his role as executive chairman. Chipotle's board appointed current CEO Brian Niccol to the role of chairman. "Brian has proven that he is absolutely the right person to lead Chipotle forward and I’ve never been more confident about the future of this great company," Ells said. "I am especially grateful to the employees and our valued customers over the last 27 years who helped make Chipotle the unmatched brand in fast casual dining it is today."
Another retailer prepares for bankruptcy. Sporting goods store Modell's is preparing a Chapter 11 bankruptcy filing, citing "lousy local sports teams," a shorter holiday season and warm winter for its woes. Modell's is reportedly hoping that sportswear retail JackRabbit will acquire the company out of bankruptcy. "A lot of companies are taking a look at us," CEO Mitch Modell said. The company, which was founded in 1889, has 2,900 employees.