OPEC Production Cuts & Truck Order Declines | Weekly News Update

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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

12/3

WSJ: Trump: China to ‘Reduce and Remove’ Tariffs on American Cars

China has agreed to cut tariffs on American-made cars, President Trump said on Twitter, apparently signaling Beijing’s readiness to make concessions to prevent further escalating trade tensions.

Reuters: Gas-focused Qatar to exit OPEC in swipe at Saudi influence

Qatar said it will quit OPEC to focus on gas in a swipe at Saudi Arabia, the de facto leader of the oil exporting group which is trying to show unity in tackling an oil price slide.  Qatar to Leave OPEC as Cartel Pressured to Cut Production

WSJ: China ‘Is the Only One in the Race’ to Make Electric Buses, Taxis and Trucks

The global race toward electric trucks, taxis and buses begins and ends in China. A national project to replace millions of gasoline-fueled vehicles with electric models is boosting China’s ambitions to lead the global shift to battery-powered transportation, and the impact is already showing up on roads around the world.

Transport Topics: Manufacturers Urge New Congress to ‘Start with Infrastructure’

The Association of Equipment Manufacturers is launching a new digital ad campaign to remind Congress and the Trump administration of the bipartisan support for upgrading U.S. public works and urging them to “start with infrastructure” in 2019.

WSJ: Shell to Link Carbon Emissions Targets to Executive Pay

Royal Dutch Shell PLC plans to set short-term carbon-emissions targets and link them to executive pay, the company said Monday, capitulating to months of investor pressure.

The decision marks a step toward delivering on ambitious long-term climate goals by one of the world’s biggest oil companies, though details of Shell’s exact plans remain vague.

WSJ: Canada’s Heavy Crude Prices Jump After Alberta Orders Production Cuts

Prices for Canada’s heavy crude surged Monday in the wake of a decision by the province of Alberta to mandate output cuts from the country’s largest oil producers.  The spot price for Western Canadian Select, the Canadian benchmark, jumped to $32.91 a barrel Monday afternoon, up almost $11 from Friday.

12/4

FreightWaves: Railroads Should Have Seat at the Autonomous Vehicle Table, AAR Says

The Association of American Railroads today called on the federal government to “include our industry” in the national conversation over the future of autonomous vehicles, saying the Department of Transportation’s efforts to develop policies governing the safety of AVs should be extended to the rails.

Platts: Iran’s Rouhani threatens to block Hormuz Strait if US tightens oil sanctions

Iranian President Hassan Rouhani on Tuesday threatened to block all oil shipments through the Strait of Hormuz if the US tightens sanctions that squeeze Iran’s exports down to zero.

NY Times: COP24, the New Round of Global Climate Talks, Has Begun.

With the world still struggling to get global warming under control, diplomats from nearly 200 countries are scheduled to meet in Poland over the next two weeks to try to put global climate negotiations back on track.

Transport Topics: G-20 Summit Brings Two Significant Trade Developments for Trucking Industry

Steps taken by the Trump administration at last week’s G-20 summit in Buenos Aires, Argentina, could have significant effects for the trucking and port industries as the president continues to revamp global trade policy for the United States.

Reuters: Exxon, Chevron Seek to Exit Azerbaijan’s Oil After 25 Years

Exxon Mobil and Chevron are seeking to sell their stakes in Azerbaijan’s largest oilfield, marking the retreat of the U.S. majors from the former Soviet state after 25 years as they re-focus on domestic production.

WSJ: U.S. Senators Conclude the Saudi Crown Prince Ordered Journalist’s Killing

Senators emerged from a meeting Tuesday with Central Intelligence Agency Director Gina Haspel saying they had no doubt that Saudi Arabia’s crown prince was responsible for the killing of journalist Jamal Khashoggi.

WSJ: Saudi-Russia Ties Raise Concerns Among OPEC Members

Members of the Organization of the Petroleum Exporting Countries are bristling at the close ties between Saudi Arabia and Russia as the group looks to cut output to offset falling crude prices.  Delegates say they are growing increasingly concerned that Saudi Arabia is giving nonmember Russia too much leverage over prices.

WSJ: Mexico Postpones Clean-Energy Auction

The Mexican government on Tuesday suspended a planned auction of long-term clean-energy contracts as the new administration of President Andrés Manuel López Obrador reviews the plan.

12/5

WSJ: Business’s Climate Challenge: Getting Customers to Pay

Truck manufacturers are walking an economic tightrope on climate change. Engine-maker Cummins Inc. is committed to reducing greenhouse gas emissions from heavy duty trucks, the WSJ’s Greg Ip reports, but trucking operators won’t invest in the technology unless it pays for itself within 18 months. It’s a strict measure that highlights the balance between economic and environmental concerns in a sector central to climate concerns.

FreightWaves: Oil Producers Face Multiple Challenges in December

The end of 2018 has demonstrated the continued volatility in the crude oil market.  Experts predicted a return of $100 barrel by 2020 due to prices surpassing $86.76 in October.  However, throughout October and November prices tumbled to just under $58.71.  As the world’s attention gravitated to the G20 Conference in Buenos Aires, the price of Brent crude futures jumped over the weekend to $60.82 for February 2019.

FreightWaves: Stocks Sink Back as Trump Threatens China, Reignites Anxiety

As far as investors are concerned, the trade war is effectively back on. Stocks sank on Tuesday as President Trump threatened China with further tariffs, just days after the two countries agreed to a 90-day ceasefire in their escalating economic conflict.

Reuters: Waymo unveils self-driving taxi service in Arizona for paying customers

Waymo on Wednesday launched a significant development in its costly, decade-long quest for autonomous transportation: self-driving taxis that generate fares.

12/6

WSJ: Oil Drops as OPEC Agreement on Output Cuts Remains Elusive

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.

CCJ: Truck Orders Dipped in November, Build Backlog Remains at Record

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

NGT News: Volvo Trucks Unveils New Efficiency Packages

Volvo Trucks is furthering its focus on freight efficiency by offering new Payload Plus packages.

The new packages for the Volvo VNR and VNL series provide significant weight savings, helping to maximize payload and fuel efficiency in weight-sensitive tanker, bulk-haul, and specific dry van and refrigerated applications.

Transport Topics: US Becomes Net Oil Exporter for First Time in 75 Years

America turned into a net oil exporter the week of Nov. 26, breaking 75 years of continued dependence on foreign oil and marking a pivotal — even if likely brief — moment toward what President Donald Trump has branded as “energy independence.”

Transport Topics: Suppliers See Opportunities with Electric Trucks

Developers of aerodynamic and other equipment that helps fleets curtail fuel use in diesel-powered trucks say they see similar opportunities with electrified vehicles.

WSJ: Low Oil Prices Present Latest Shock to Canadian Economy

Low oil prices in western Canada are the most important new shock facing the Canadian economy and will be the subject of targeted conversations with the energy industry ahead of the Bank of Canada’s January interest-rate decision, Governor Stephen Poloz said Thursday.

12/7

WSJ: OPEC, Russia Strike Deal to Cut Oil Production

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.

This weekly publication is designed to highlight relevant industry news to provide professionals in the transportation, supply chain, and energy sectors with up-to-date information in a rapidly changing marketplace. This update is purely a compilation of industry news and as such, does not necessarily reflect the opinion of Breakthrough. We do not warrant or guarantee accuracy or completeness of information. For additional information, please contact us at info@breakthroughfuel.com.

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