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.”
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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.
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.
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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.
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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.
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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
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.
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.