Crude Oil Surplus Expected to Dwarf Demand | Weekly News Update

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Crude Oil Surplus Expected to Dwarf Demand

Energy markets are now experiencing two shocks, one of the novel coronavirus (COVID-19) and the other, the breakdown of Russia’s partnership with the Organization of the Petroleum Exporting Countries (OPEC). The threat of the world’s two biggest producers flooding the market with cheap oil when the global oil demand is sharply falling caused Brent crude to cost a mere $33 a barrel on Thursday.

Oil prices also took a hit on Thursday due to an announcement made by President Trump on a 30-day ban on some travel from Europe into the U.S. The announcement caused both Brent and WTI futures prices to drop significantly, both benchmarks have lost almost half of their value in 2020, with most of that drop coming in the past week. This change in the pricing of oil markets represents a shift into what traders call “contango”. Contango means that traders will now buy cheap oil today and lock in a higher price to sell at a later date.

 

Class 8 Truck Sales Fall 22.1% in February

U.S. Class 8 retail truck sales dropped 22.1% in the month of February, a total of 15,460. Last year, Class 8 truck sales came to a total of 19,858, demonstrating that as Covid-19 spreads throughout the U.S. freight markets continue to slowdown. ACT forecasts that 2020 U.S. Class 8 retail sales will drop to 179,000.

Don Ake, Vice President of Commercial Vehicles at FTR stated that “February’s volume wasn’t obviously great.” However, Ake did also elaborate in affirming “It could have been worse. February may have been impacted a little bit by coronavirus fears, but it more reflects the cautiousness of where the market started off for the year.” Meanwhile, expect the second quarter to be tough inside and outside the industry, he said. “On the other hand, goods still have to move. So, trucks are still going to be needed. But we don’t know how confident the customers are going to be to buy them.”

 

Top Energy Stories

WSJ: Saudi Arabia Signals Bigger Oil-Output Boost, Pushing Crude Price Lower

Saudi Arabia fired another salvo in its oil-market war with Russia on Wednesday, unveiling plans to boost its oil-production capacity to a record 13 million barrels a day. The price of crude oil fell more than 3% after the announcement.

OILPRICE: Saudi Arabia Strikes Back At Russia In Key Oil Market

The world’s top oil exporter Saudi Arabia is going after Russia’s oil market share in Europe with deeply discounted Arab Light crude at up to three times the usual volumes, people with knowledge of European refiners’ operations told Bloomberg on Thursday.

Top Freight Transportation Stories

SCD: Union Pacific to tackle emissions reduction with science-based targets

Union Pacific Railroad will set science-based targets for reducing its carbon emissions, the railroad announced in a press release Tuesday. Science-based targets are emissions reduction goals set in line with the level of decarbonization required to keep global temperature increase below 2 degrees Celsius compared to pre-industrial levels.

SCD: XPO to acquire majority of Kuehne + Nagel’s UK logistics assets

XPO is acquiring the majority of Kuehne + Nagel’s non-core logistics assets providing “inbound and outbound distribution, reverse logistics management and inventory management,” services in the U.K., according to a press release issued Monday. The deal is expected to close in the second half of this year and both parties have agreed not to disclose transaction details.

FORBES: Supertanker Prices Spike By Nearly 678% On Oil Market War And Storage Plays

Despite a sobering week for the global crude oil market as the coronavirus or Covid-19 outbreak strangles the global economy, shipping rates for supertankers or very large crude carriers capable of shifting 2 million barrels – have gone through roof.

 

Top Economic Stories

WSJ: Stocks Fall More Than 7% in Dow’s Worst Day Since 2008

U.S. stocks careened lower Monday, with major indexes swinging perilously close to the first bear market in more than a decade as a price war for oil and fallout from the coronavirus frightened investors.  Also see—Stocks Revive After Dow’s Worst Day in 12 Years

Reuters: Trump vows ‘major’ steps to aid U.S. economy amid coronavirus rise

President Donald Trump on Monday said he will be taking “major” steps to gird the economy against the impact of the spreading coronavirus outbreak and will discuss a payroll tax cut with congressional Republicans on Tuesday.

BLOOMBERG: China’s economy isn’t back to normal yet, energy demand shows

Early signs of a pick-up in activity had raised hopes that China could help support raw materials demand as it returned to work after virtually shutting down because of the coronavirus. But as the spread of the pandemic to Europe and the U.S. plunges energy markets deeper into crisis, the latest data are a warning to the world’s commodity producers that China’s road to recovery could be a long one.

 

This weekly publication is designed to highlight relevant industry news to provide professionals in the transportation, supply chain, and energy sectors with up-to-date information in a rapidly changing marketplace. This update is purely a compilation of industry news and as such, does not necessarily reflect the opinion of Breakthrough. We do not warrant or guarantee accuracy or completeness of information. For additional information, please contact us at info@www.breakthroughfuel.com.