Diesel price volatility in September was largely tied to the geopolitical landscape. An attack on Saudi Arabian oil infrastructure sent energy markets into a short-term phase of panic, though the event’s price influence was relatively short-lived. However, this event elevates the price risk tied to heightened uncertainty in the Middle East for the extended time horizon and has briefly masked the energy market’s current downside risks.
In this edition of the Breakthrough Advisor, the Applied Knowledge Team provides a detailed analysis of what drove this behavior, while offering an updated outlook and forecast that accounts for the oil market’s recent developments. Additionally, the team will discuss their perception of how the global economy and supply and demand fundamentals will progressively influence diesel prices through June 2021.
Saudi Arabian Oil Attacks Take Centerstage
Read the most up-to-date information about the implications of these attacks here.
Iran has remained at the focal point of controversy in the Middle East in recent months, ultimately placing an imminent level of risk on crude oil and, therefore, diesel prices. The Iran-led attack on key Saudi Arabian oil assets halted roughly 6 percent of global crude oil production, leaving the market concerned with an immediate supply shortage. Initial reports indicated that Saudi Arabian production capacity could be stalled for weeks or even months, triggering significant crude oil and diesel price increases in the days following the attacks. This event was considered one of the most severe, ever.
Since the event sentiment has shifted and price turbulence has largely subsided as the OPEC leader’s production is expected to return to normal faster than expected. This event reinforces the interdependency of the global market and the sheer reliance some of the world’s major economies have on Saudi Arabian oil production, while simultaneously emphasizing the severity of the current geopolitical climate.
How did this event influence energy prices, and what is truly at stake from a supply perspective if the situation escalates? Gain further insight in the October edition of the Breakthrough Advisor.
Other Market Forces Continue to Weigh on Energy Prices
The demand implications of economic uncertainty – especially as they relate to the U.S.-China trade war – still linger. Both parties have taken a “wait and see” approach as of late, albeit still appear committed to reaching a deal soon. The demand implications of this potential decision have noticeably influenced energy price volatility over the past year and will continue to act as one of the market’s most significant influences moving forward.
Additionally, hurricane season is in full force in the U.S., leaving lucrative energy infrastructure in the U.S. Gulf Coast region at risk of disruption. Fortunately, the U.S. refining hub has avoided any significant damage thus far in 2019. A tropical storm did cause some of the worst floodings in the U.S. Gulf Coast since Hurricane Harvey in September, further exposing the risk tied to U.S. energy infrastructure through the summer months.
What were the price implications of these market events, and how did they fare against the Saudi Arabian attacks? Learn how the Advisor Team accounts for the myriad of diesel price drivers in their updated outlook and forecast in the October edition of the Breakthrough Advisor.
This edition of the Breakthrough Advisor publication provides a detailed synopsis of the energy market’s most pressing news, events, and data-driven insights concerning shippers’ fuel management strategies. If interested, you can gain further details on rapidly changing market dynamics and industry trends by signing up for the Breakthrough Advisor Brief or contacting the Applied Knowledge Team directly.