Crude Oil Supply Uncertainty
Uncertainty over crude oil supply has drove heightened volatility in the past month. Anticipation of supply losses from Iranian sanctions that went into effect November 5, paired with the Organization of Petroleum Exporting Countries (OPEC) holding production steady pushed the crude oil market prices upward. The pressure caused West Texas Intermediate (WTI) and Brent prices to hit four year highs at over $76 and $86 per barrel (bbl) respectively. Since then, OPEC decided to adjust their production strategy to “produce as much as you can” mode ahead of the sanctions to balance out the market. The US also saw rising inventories and decided to grant waivers for the Iran sanctions to allow eight countries – including China, India, Greece, Italy, Taiwan, Japan, Turkey, and South Korea – to keep buying crude from Iran. In result, the crude oil market plummeted as WTI dropped to under $61/bbl and Brent decreased nearing $70/bbl.
Surging Transportation Jobs
The US trucking market continues its upward trend as October jobs numbers were released. For-hire trucking companies increased jobs by 2.5 percent year over year. This does not represent only truck drivers, but all employees in trucking companies. When looking at year-to-date numbers, for-hire trucking companies added 31,900 workers, where as in 2017 they added only 4,700 employees in the same period. In August, September, and October the added jobs were 5,800, 6,900, and 2,400 respectively. This is a continuation of a 14-month rally of strong job growth, although the amount of job creation is slowing. Stepping back to look at the entire transportation and logistics sector, the industry added 24,800 jobs in October, which represents roughly 10% of total US job growth. This is mainly to ramp up for holiday peak season as it was the largest monthly gain since December 2017.
In Other News
U.S. sanctions against Iran entered into force after the stroke of midnight on Monday but experts remained divided over whether Washington’s strategy to compel Tehran to pull back from its assertive posture in the Middle East will succeed.
The United States snapped sanctions back in place on Monday to choke off Iran’s oil and shipping industries, while temporarily allowing top customers such as China and India to keep buying crude from the Islamic Republic.
Continuing a 14-month rally in trucking industry job numbers, the for-hire trucking industry added another 2,400 jobs in October. That’s the sixth straight month that total for-hire trucking employment has gained and the 13th month out of the last 14. Also see, Logistics Hiring Contributes 10% of October U.S. Job Growth.
According to new IRU research, technology and automation will define the future of road transportation. IRU is an organization celebrating its 70th anniversary. They were originally founded as Europe was reeling from the devastation of WW2.
North American Class 8 orders hit 43,600 in October, up 21% from a year earlier when the strong current cycle in orders began, ACT Research Co. reported. Also see, With another surge in October, truck orders total a whopping 500K over past 12 months.
From Exxon Mobil Corp. to Phillips 66, energy companies are reaping banner profits by taking cheap oil landlocked in North America and turning it into fuel.
Nikola Motor Co. announced it would begin production within five years in Europe of a heavy-duty, hydrogen-electric truck designed to be compatible with full autonomy as it expands its business beyond North America.
Electronic logs and fleet management platform supplier KeepTruckin announced the launch of a central KeepTruckin App Marketplace. Drivers and fleet manager customers of KeepTruckin can visit the marketplace to “flip the switch” on integrated products that extend functionality of the KeepTruckin platform, says Shoaib Makani, founder and chief executive.
A growing number of manufacturers are trying to cut shipping costs and eliminate bottlenecks by making their supply chains much, much shorter. The largest share of manufacturers in at least a decade is spending to expand facilities, and many are looking to place factories closer to their customers.
The Federal Motor Carrier Safety Administration over the next year plans to expand implementation of its “off-site safety audit” review process from 10 test states to all 50 states, officials said. The off-site audit process has been evaluated for several years in a test pilot to address requirements by Congress that the agency speed up initial audits of new entrant property carriers to 12 months from 18 months.
The data from the Bureau of Labor Statistics employment report indicate for-hire trucking companies added approximately 31,900 workers to their payrolls from Jan. 1 through Oct. 31. In the same period last year, they added only 4,700 employees. In the same period in 2016, the number dropped by 5,900.
Intermodal shipments grew 4.7% in the third quarter as companies stepped up imports ahead of promised U.S. tariffs on foreign goods and domestic shippers shifted from highway to rail in response to rising freight rates and constraints on truck capacity.
Most Western companies and banks pulled out of Iran ahead of new Trump administration sanctions, fearing a loss of access to the U.S. economy. But the rest of the world may be more difficult for American officials to convince.
OPEC is enduring one of the most head-spinning years in its history, swerving from cutting production to boosting it as quickly as possible. It may need to reverse course again. Saudi Arabia and other producers gathering in Abu Dhabi this weekend face a worrying prospect: Even though U.S. sanctions on Iran are removing significant amounts of crude from markets, a fresh surge of American shale oil threatens to unleash a new surplus in 2019.
While the container shipping fundamentals are improving, 2019 holds major challenges for ocean carriers, from the most costly environmental mandate in industry history to heightened geopolitical tension spilling into trade.
Following strong truck order numbers for 2017 and a record 2018, FTR has raised its 2019 forecast for Class 8 trucks and commercial trailers. North American Class 8 factory shipments are now forecast to be 350,000 units in 2019, up 8 percent year-over-year.
An early winner from the latest round of Iranian sanctions is emerging: Russia. The U.S. began enforcing a tough new slate of economic restrictions against Iran on Monday, including a threat to sanction buyers of Iranian crude.
California voters rejected a ballot measure to repeal the recently passed gas tax hike slated for the repair of state roads, bridges and highways, media outlets reported.
While transportation was not a front-of-the-ticket issue for politicians in the midterm elections, there were some significant developments when it came to funding, most notably in California. Also see, Transport Topics: Democrats Gain Control of House While Tom Carper, Other Transportation Policymakers Fend Off Challengers.
Michigan’s next governor may push to shut Enbridge’s 540,000 b/d Line 5 pipeline, an aging system that remains a key route for light crude and NGLs to the US Midwest and Ontario. But in Nebraska, TransCanada’s 830,000 b/d Keystone XL heavy oil pipeline likely got a boost from Tuesday’s election of two supporters to the state’s Public Service Commission.
Saudi Arabia’s top government-funded think tank is studying the possible effects on oil markets of a breakup of OPEC, a remarkable research effort for a country that has dominated the oil cartel for nearly 60 years.
U.S. oil prices entered a bear market, closing at $60.67 a barrel, amid worries over rising U.S. crude inventories and slowing global demand. West Texas Intermediate crude is now down 21% from its Oct. 3 peak. Also see, Oil falls below $70 as U.S. crude enters ‘bear market’.
Mercedes-Benz parent company Daimler and auto supplier Bosch plan to launch a self-driving car pilot for the public in San Jose, Calif., in the second half of 2019. The two German auto companies have been quietly collaborating to deliver advancements in an increasingly competitive global race to make autonomous cars a reality.
Hapag-Lloyd has climbed into the black, but the surge of peak season volume didn’t generate a corresponding increase in profits, underscoring how higher operating costs, namely due to inflated bunker fuel prices, is eroding higher rates on some trades.
For US shippers, struggling to secure truck capacity for 2019, now is the time to act, and the first thing they should think about is time. Capacity is most often measured in drivers, tractors, trailers, containers – all assets – and space, but time is capacity’s hidden dimension. Shippers facing concrete limits in physical capacity need to work with time to create capacity.
A federal judge in Montana on Thursday blocked the Trump administration’s permit allowing the Keystone XL pipeline and barred any construction of the long-delayed project until completion of a supplemental environmental review.