OPEC & Allies Agree to Deepen Production Cuts Through March 2020
The Organization of Petroleum Exporting Countries and its allies (OPEC+) agreed to deepen production cuts at their semi-annual meeting in Vienna, Austria on December 5th and 6th. The cartel agreed to cut an additional 500,000 barrels of crude oil production per day from October 2018 output levels. Based on average production levels through November 2019, OPEC+ fell about 180,000 barrels per day below the annual target. Saudi Arabia’s aggressiveness fueled this outcome and mitigated the lack of alignment from other key producers throughout the year, as did disrupted supply resulting from September’s attacks on Saudi oil fields.
Diesel spot market prices closed Thursday, December 5th between $0.005 and $0.01 per gallon higher than the prior day’s close, while WTI and Brent crude oil prices saw increases less than $0.50 per barrel following the agreement among OPEC nations to deepen cuts. We expect wholesale diesel prices to increase just $0.01-$0.02 per gallon in the coming days. This is evidence of the market’s lack of concern of supply pressure stemming from the OPEC+ decision.
Heavy-Duty Truck Orders Wane as Industrial Demand Declines
North American Class 8 heavy-duty truck orders dropped significantly in November, indicating a weak start for what is typically the busiest season for new equipment orders. November preliminary orders data show trucking companies orders 17,300 Class 8 trucks, which is 39 percent down from last year and a 21 percent decrease from October of this year. It represents the lowest order total in 4 years. The lack of orders coming in is forcing manufacturers to scale back production and lay off workers until the demand returns.
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The Organization of Petroleum Exporting Countries and its allies (OPEC+) agreed to deepen production cuts at their semi-annual meeting in Vienna, Austria on December 5th and 6th. The group plans to remove an additional 500,000 barrels of supply per day, increasing the aggregate quota to 1.7 million barrels per day from October 2018 output levels.
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Order books for heavy-duty truck manufacturers are thinning out as a weaker U.S. industrial economy pushes fleet operators to put the brakes on plans to expand freight-carrying capacity.
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