Despite numerous market dynamics elevating prices to record-highs in October, downside risks emerged throughout November that ultimately reversed the upward crude oil and diesel price trend and further justified the value of transparency in a volatile marketplace. Concerns of tight oil supply ahead of the implementation of renewed sanctions on Iran subsided in November, with temporary waivers granted to a select group of buyers that alleviated immediate fear of supply pressure and combatted the anticipated upward crude price behavior. Additionally, strong production gains by some of the largest oil producers, global inventory builds, continued international trade tension, and an overarching consensus of weakened economic growth in 2019 caused crude oil to enter a bearish market. These downside risks penetrated the diesel market, leading to substantial savings potential for Breakthrough clients that exemplifies the competitive advantage enabled by fair and accurate transportation fuel reimbursement.
In this month’s edition of the Breakthrough Advisor, the Applied Knowledge team dissects the factors that led to substantial market swings in November, specifically focused on implications of the renewed Iranian sanctions, price impacts of an over-supplied oil market, and economic variables that will influence global commodity markets in the year ahead.
Cost Implications of an Over-Supplied Oil Market
October’s upward price pressure was connected to concerns of tight crude supply, but sentiment has since shifted on indicators of an over-supplied oil market in 2019. Strengthening production in the United States, Russia, and Saudi Arabia – the top three global producers – persistent inventory builds in the US and various Organisation for Economic Co-operation and Development (OECD) nations, and temporary exemptions granted to a select group of Iranian crude importers mitigated some of the supply-based price risk that mounted in the months leading up to the early-November sanctions. The excess supply in the market, consequently, sent crude oil into a bear market, drastically impacting prices and creating an interesting price dynamic for diesel and other refined products in the months ahead.
How did prices respond to November’s market sentiment and what do these recent developments mean for market dynamics going forward? In this month’s edition of the Breakthrough Advisor, learn how these events factored into the broader energy landscape and influenced the costs of fuel used in your transportation supply chain.
OPEC Production and G20 Meeting
The Organization of Petroleum Exporting Countries (OPEC) upcoming meeting on December 6 will likely set the stage for crude production in 2019. The cartel actively voiced their concerns with current market conditions in November, making their decision to reduce production quotas or continue current production parameters evermore crucial to the price environment going forward. Support of the current production environment and price points, particularly by the United States, were challenged by OPEC leader Saudi Arabia, placing more weight on the alliance’s decision at their end-of-year meeting. The political power of the cartel’s oil assets continues to move market prices, exemplifying the value of transparency into daily price volatility facilitated by Breakthrough Fuel Recovery. In terms of trade complexities that could impact global economics, mounting tension between the United States and China’s trade terms will be discussed at the end-of November summit in Argentina. Discussions of additional tariffs being placed on the remainder of Chinese exports, coupled with an increase to the tariffs currently in place, will likely come to a head, potentially creating downside price risk for commodities due to the economic impact of the bilateral decision.
What are the outcomes of the meeting between the two economic superpowers, and how will the result impact global economics in the future? What are the potential outcomes of the OPEC meeting in early December, and what are the potential market impacts given the slate of production possibilities? Gain the industry insight as the Applied Knowledge team discusses these market drivers that ultimately impact the cost of fuel used to move your goods to market.
This edition of the advisor publication provides a detailed analysis of the industry’s most recent news and data-driven insights pertaining to your fuel management strategies. If interested, you can gain further insight into fuel market dynamics and trending topics by signing up for the Breakthrough Advisor Brief or contacting the Applied Knowledge team directly.