Oil Cuts Fail to Lift Market Confidence
Crude oil futures were seeing a dip in early Monday trading as a historic agreement by the Organization of the Petroleum Exporting Countries (OPEC) and its allies to cut production failed to give lasting optimism on economic outlook. OPEC+ plans to cut 9.7 million barrels per day while it is anticipated that global oil cuts will amount to more than 20 million barrels per day, or 20 percent of global supply, effective May 1. The plan incorporates contributions from non-members and strategic purchases by the world’s largest consumers.
Despite the historic agreement, the meeting fell short of completely offsetting an estimated 30 million barrels per day drop in worldwide fuel consumption caused by the COVID-19 pandemic. Senior economist at Nomura Securities, Tatsufumi Okoshi said: “In the short term, the WTI may hold above $20 after the deal but it could fall below that level unless all the countries follow up their words with actions.”
Freight Volumes Drop as Panic Buying Subsides
As the number of coronavirus cases increase in the U.S. freight demand has fallen. The stockpiling sprees for household and consumer goods have fared better than other segments during the early onset of the pandemic early last month. However, those market segments are now beginning to feel the squeeze as the ambush of concerned shoppers begins to recede.
Almost 60 percent of carriers with a fleet of 100 trucks or less were surveyed last week reporting a drop-in freight due to coronavirus. Larger carriers with more than 100 trucks are doing slightly better, with 44 percent reporting a decrease. The overall number of carriers reporting a drop-off in loads jumped 15 percent week-over-week while the number of carriers reporting an up-tick in freight last week fell 7 percent.
Top Energy Stories
The Trump administration has discussed a mandated shutdown of oil production in the Gulf of Mexico due to the coronavirus spreading among workers on offshore platforms, according to people familiar with the matter.
The leaders of Russia, Saudi Arabia, and the U.S. each badly miscalculated the pain caused by the collapse in oil prices. Now they are trying to rescue their economies and stave off any political damage at crucial moments for each.
OPEC had expected Friday’s G-20 meeting to show that the U.S., Canada, the U.K. and other producers not allied with the cartel can pull back 4 million barrels a day of output, according to delegates at Thursday’s meeting. OPEC and its allies including Russia are trying to complete a deal that would have them cut 10 million barrels a day.
Top Freight Transportation Stories
The Federal Motor Carrier Safety Administration has extended its Emergency Declaration providing hours-of-service and other regulatory relief to commercial vehicle drivers transporting emergency relief in response to the nationwide COVID-19 outbreak another five weeks, through May 15. The declaration was also further expanded to cover liquefied gases to be used in refrigeration or cooling systems.
Container shipping operators are buckling down for the long haul. Carriers have idled a record 13% of their capacity over the past month, according to maritime data provider Alphaliner. The decision to put ships into storage pulls some 3 million containers’ worth of capacity from seaborne supply chains, and signals that operators are bracing for a lengthy downturn under world-wide lockdowns aimed at halting the spread of the coronavirus.
Mediterranean Shipping Co., the world’s second-largest container line, said Friday it has been hit by a network outage. The company said it hasn’t ruled out the possibility of a cyberattack.
Top Economic Stories
As the source of the outbreak, China is going through stages of the coronavirus crisis before other countries. And although it’s showing signs of recovery, it’s unlikely to offer CFOs trying to model their business’s trajectory much more than a broad indicator of what’s ahead, Andrew Duguay, chief economist at business intelligence company Prevedere, says.
The Labor Department announcement, reflecting last week’s filings for unemployment benefits, meant that more than 16 million people had been put out of work in just three weeks, an unheard-of figure. Two years of job losses from the last recession produced barely half that total.
As the coronavirus changes consumer demand and the world economy at large, intermodal is feeling the brunt. Trucks that are not hauling essential supplies are sidelined and looking to the federal stimulus bill to provide financial relief. Rail is in the midst of a 12% year-over-year drop in carloads. Even lower trade volumes would further compound the lack of business.