OPEC’s Crude Oil Production Agreement
The week leading up to the meeting between the Organization of Exporting Countries’ members and supporting countries brought uncertainty in energy markets. To start the week, crude and diesel prices rose as Russian and Saudi Arabian leaders agreed to work together to make a production cut and elevate prices, but the amount was not yet determined. OPEC countries met on December 6th to work out an agreement. There was no decision announced following the meeting, which resulted in declining prices. On December 7th, Russia and other supporting countries joined the conversations and met with OPEC members. As the meeting concluded, the collective group decided to agree on a production cut of 1.2 million barrels per day (mmbd).
The production cut will be divided between OPEC and supporting countries. The collective group of OPEC will curb production by 0.8 mmbd. Saudi Arabia, OPEC’s de facto leader who recently increased crude production to record highs, will cut 0.25 mmbd. Iraq, which is OPEC’s second largest producer will be responsible for 0.14 mmbd of the cuts. Russia and supporting countries will be responsible for the remaining 0.4 mmbd, in which Russia will account for 0.23 mmbd. Iran, Venezuela, Libya, and Nigeria all received exemptions from the cuts. For more information on the agreed production cuts, please see our Advisor Pulse.
Heavy-Duty Truck Orders Hit the Brakes in November
In November, orders for heavy duty trucks declined month-over-month for the first time this year. Orders reached 27,900 for new class 8 heavy duty vehicles. That is down 36% from October, which consisted of 43,600 orders. The five consecutive months prior to November numbers all reached over 40,000 orders, with orders peaking at 53,040 in August. The decline in orders paired with slowing demand indicates the freight market is slowing.
In Other News
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Saudi Arabia started off Thursday’s OPEC meeting with a sputter, warning that there’s no agreement on a cut yet and that a reduction of 1 million barrels a day would be sufficient to balance the market. Oil prices have not responded well.
Preliminary Class 8 truck orders in North America totaled 27,500 in November, according to FTR, with the market winding down after five consecutive months topping 40,000 orders. November’s order total was the lowest of the year and the lowest since September 2017, but FTR says the dip was expected. Also see, Heavy-Duty Truck Orders Hit the Brakes in November.
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OPEC and Russia agreed to join in a production cut that would mop up a burgeoning global oil-supply glut. The Organization of the Petroleum Exporting Countries, along with Russia and its allies, will curb oil output by a collective 1.2 million barrels a day. OPEC nations would cut 800,000 barrels and the Russia-led group would handle the remainder. Also see, OPEC, Russia agree to slash oil output despite Trump pressure.