Saudi Arabia and Russia Pricing War Backfires | Weekly News Update

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Wholesale diesel prices experienced continued downward price pressure last week closing out at 174.22¢ per gallon, which is 17.93¢ lower than the prior week’s close. As more cities and states encourage citizens to quarantine themselves to prevent the spread of COVID-19, product demand is expected to show losses. Last week the DOE Index fell 8.10¢ per gallon, but it was not enough to prevent the highest DOE to Wholesale spreads in Breakthrough history. Spreads averaged a staggering 97.13¢ per gallon and experienced the highest spread to date on Thursday of 105.82¢ per gallon.

Saudi Arabia and Russia Pricing War Backfires

After breaking up a three-year-long relationship aimed at pushing up oil prices Saudi Arabia and Russia are beginning to count the cost of severing ties. With the expectation of sharp drops in oil revenues in the near term, the two countries are being forced to adjust government spending. This is partially due to Brent crude barely hanging onto the $30 per barrel mark, but also the coronavirus pandemic leading to global demand destruction.

Analysts currently argue that Russia is in a better fiscal, financial and political leadership position than their counter parts Saudi Arabia, to win a price war. However, there is no dispute that there will be economic pain felt on both sides. The price war has already claimed its first collateral victims—U.S. shale, Canada’s oil industry, and the UK’s offshore oil and gas sector.

Maersk Suspends 2020 Earning Guidance

On Friday, CEO of Maersk Søren​ Skou, ​opted to suspend its 2020 earnings guidance due to a “lack of visibility” related to global demand for container transport. The response is in light of the havoc that COVID-19 has caused to the global economy. While the carrier plans to uphold their previous stated guidance for 2020 volume, they plan to reissue full-year earnings guidance as soon as they have more clarity around the current situation.

Top Energy Stories

REUTERS: Few U.S. shale firms can withstand prolonged oil price war

The oil market has left most shale firms facing prices below their costs of production. The Organization of the Petroleum Exporting Countries (OPEC) and major oil producers including Russia have turned on each other to launch a price war that threatens to sink shale companies burdened with higher costs.

WSJ: Some U.S. Energy Officials Want Saudis to Ditch OPEC

A group of Energy Department officials are pushing the Trump administration to forge an oil alliance with Saudi Arabia, a partnership supporters say could join the world’s two largest oil-producing nations and pave the way for the Saudis to leave OPEC, according to people familiar with the situation.

WSJ: OPEC, U.S. Shale Producers Open Talks Amid Oil Rout

U.S. oil industry regulators opened a dialogue with OPEC in talks that could help foster a truce between the world’s three largest oil producers and potentially resolve a Saudi-Russian price war that has devastated oil markets in recent weeks, according to people familiar with the matter.

Top Freight Transportation Stories

Business Insider: The Trump administration Suspended an 82-year-old Road Safety Law for Some Truck Drivers

The hours-of-service laws, which mandate how many hours a truck driver may work and have been in place for truck drivers since 1938, are suspended at a federal level for the first time in history.  As of Friday evening, truck drivers who are moving medical supplies and consumer goods like masks and hand sanitizer do not have to follow HOS.]

WSJ: Truckers Facing Coronavirus Hurdles in Keeping Supply Chains Moving

Truckers are trying to navigate growing challenges on highways and at loading docks as they seek to keep supply chains running to meet surging coronavirus-driven demand for consumer staples and medical equipment.

WSJ: U.S. Suspends Truck-Driving Limits to Speed Coronavirus Shipments

U.S. highway-safety regulators are suspending rules that limit daily driving hours for truck drivers moving emergency supplies such as medical equipment, hand sanitizer and food in response to the nationwide coronavirus outbreak.

Top Economic Stories

WSJ: Fed Cuts Rates to Near Zero and Will Relaunch Bond-Buying Program

The Federal Reserve slashed its benchmark interest rate to near zero Sunday and said it would buy $700 billion in Treasury and mortgage-backed securities in an urgent response to the new coronavirus pandemic.

WSJ: China Shipping Exports Rebound, Just as Western Ports Cope With Coronavirus Downturn

Two months after a near complete standstill in China that rattled global supply chains, the country’s ports are again pushing out thousands of containers that were stranded at the onset of the coronavirus outbreak.

 

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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