Back to Blog
by Matt Snider
Matt Snider

4 min read

Fuel & Freight Update | Market Turmoil Persists On COVID-19’S Dominance

April 27, 2020

Matt Snider
by Matt Snider

Share:

Energy Market

Record oil production cuts agreed upon by the OPEC+ group and various G20 nations on April 12 have since failed to support oil and diesel prices. The strategy aimed at countering COVID-19’s global demand blow appears increasingly insufficient as strained storage capacity slows producers’ ability to balance the market through supply restraints. Wholesale diesel prices fell to their lowest levels in the nearly 16-year history of Breakthrough at $1.34 per gallon on April 27. DOE Retail-Wholesale margins remain elevated given recent wholesale price behavior. Differing demand patterns have kept diesel commodity prices relatively strong compared to other refined products like jet fuel and gasoline, but the gap between diesel and gasoline recently started to narrow.

International demand projections indicate consumption will decrease more aggressively in 2020—especially in Q2—than the 9.7 mmbd and 7.7 mmbd cuts to be enforced from May through December. Recent economic forecasts also add to the downside pressure. The International Monetary Fund forecasts a 3 percent global contraction in 2020, which would represent the worst recession since the Great Depression. These headlines and the growing supply glut have overwhelmed the market and sent oil prices to about $12 per barrel. This comes one week after prices fell below $0 per barrel for the first time in history.

Fuel & Freight Update | Market Turmoil Persists On COVID-19’S Dominance

Source: IEA, EIA, and OPEC Monthly Reports

Global demand for U.S. fuel exports has also fallen in recent weeks as the need for many transportation fuels continues to falter. This was one factor supporting U.S. refining margins and freeing up available storage capacity. Lower fuel demand in Latin America—the largest buyer of U.S. refined products—presents the newest challenge. Mexico has floated the idea of halting U.S. imports as they also face swelling inventories and port bottlenecks. Over 30 percent of U.S. diesel demand comes from its export markets, with about 7 percent directed at Mexico alone. This exacerbates the downstream supply chain hurdles facing the U.S. energy sector that have ultimately contributed to record-low diesel prices. U.S. refiners are likely to more aggressively scale down operations to eventually tighten the market. A longer-term diesel price rebound, however, remains heavily dependent on COVID-19’s lifespan.

Freight Market

Freight demand in all industries across the Breakthrough Network has returned to more normal levels and has yet to experience a significant downturn. The chart below represents that after freight volumes peaked in late March, freight demand across the Breakthrough Network slowed and came more in line with last year’s volume.

Fuel & Freight Update | Market Turmoil Persists On COVID-19’S Dominance

While the broader Breakthrough Network has seen freight demand come in line with 2019 levels, behavioral differences are emerging across industries.  Freight demand in the consumer packaged goods industry—especially shipments of health and cleaning products—have maintained profound year-over-year growth. Freight demand for non-perishable food & beverage products has shown similar strength.

Some non-durable goods industries—like paper & packaging and retail—are beginning to experience year-over-year declines. The volume patterns of different shippers across industries expose the variable effect of COVID-19 on consumer buying behavior. As expected, freight demand for durable goods extended its downturn through mid-April and has shown no signs of a short-term recovery.

As COVID-19 continues to disrupt the freight marketplace with states creating plans of reopening their economies, it will become more important to monitor trends in both Breakthrough freight data and macroeconomic trends.

View our past market updates in response to COVID-19 and recent OPEC+ dynamics below:

Driving The Future | Advances In Platooning Technology

5 min read

May 31, 2024

Freight Market Trends for the Second Half of 2024

Discover the latest insights on freight volumes to navigate and optimize your freight market strategies effectively.

Read more
Natural Gas | Alternative Energy 101

4 min read

May 30, 2024

Summer Driving Season 2024: Energy Market Expectations

Discover the key transportation energy market drivers affecting gasoline and diesel prices this summer driving season and expectations for prices.

Read more
Unveiling The Tesla Semi

5 min read

May 28, 2024

Unlocking Compounded Value: A Sustainable Fuel and Freight Strategy

Learn how Breakthrough redefines transportation management with integrated, sustainable fuel and freight solutions. Cost savings, efficiency, and decarbonization.

Read more