Strong Economic Growth for 2018 | Weekly News Update

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US Diesel prices increased last week, and safety measures are showing unintended impacts on the rails. As capacity continues a topic of discussion, the environment shifts more in favor of drivers. OPEC members are cooperating and plan to endure this successful partnership throughout the duration of 2018.

US Diesel Prices Increase on Refreshed 2018 Outlook

US diesel prices moved higher this past week, breaking the tight 3.24¢/gallon range of the prior three weeks that opened 2018.  A slight weekly decline in US crude oil and refined products inventories helped the increase, but the main impact came from news on the global oil supply-demand fundamentals of 2018.

The International Monetary Fund (IMF) released its economic growth forecast, which showed improving outlooks for 2018 and 2019.  The IMF showed broad-based improvement for the United States, Europe, and the majority of Asia to a global growth forecast of 3.9% for each of the next two years.  This forecast is 0.2% higher than the previous IMF outlook and would exceed the growth in recent years of 3.2% in 2016 and 3.7% in 2017.  Strong economic growth is closely correlated to strong oil demand growth, which bodes well for oil prices.  The strong economic growth of 2017 played a major part in oil demand outweighing supply, which ultimately propped up oil prices (especially in the latter part of the year).

On the supply side of the equation, Saudi Arabia hit the newswire as Saudi Energy Minister Khalid al-Falih stated that global oil market rebalancing may not occur until 2019 and that OPEC is willing to continue cooperation beyond their current 2018 quotas.  OPEC is responsible for roughly one-third of overall global oil supply, making their continued cooperation to curb oil production a significant market indicator.

The Union Pacific is Reporting Operating Issues with PTC

Positive Train Control (PTC) has been a topic in the railroad industry for quite some time.  The purpose of PTC is to automatically control trains to avoid major incidences, like train-to-train collisions or derailments from excessive speeds.  In 2008, Congress passed legislation that included the mandate of PTC for all rail lines by 2015.  An extension bill was passed in 2015 to push the deadline to December 31st 2018 for PTC compliance.

The CEO of the Union Pacific Railway, Lance Fritz, reported that PTC also comes with some growing pains, as the railway’s Q4 2017 performance was impacted by the new technology.  According to Fritz, trains ran 5% slower and spent 12% more time at terminals in the most recent quarter, as PTC brought about operational changes.  He added that tweaks to their system will allow the railway to improve efficiency as they work through PTC implementation.  As of Oct. 31, the UP had installed PTC technology on one-third of their locomotives.

In Other News

1/20

WSJ: Trucking Companies Race to Add Capacity, Drivers as Market Heats Up

Trucking fleets are charging higher prices to move freight around the country. But it is an open question whether the companies or their drivers will reap the windfall.

1/22

Argus Media: EIA to temporarily stay open during shutdown

The US Energy Information Administration (EIA) will continue releasing energy reports and collecting data during the partial US government shutdown but only for a “short period.”  Many federal agencies closed and thousands of workers were furloughed on 20 January after the US Congress failed to agree on a short-term funding agreement. But some government offices have remained open by tap                      ping into unspent funds.

Reuters: Oil rises as Saudi Arabia says producers will cooperate beyond 2018

Crude futures edged higher on Monday, propped up by comments from Saudi Arabia that cooperation between oil producers who have cut production to boost prices would continue beyond 2018.

BBC News: IMF: Global economic outlook is bright

Prospects for the global economy are looking brighter, according to the International Monetary Fund (IMF).   The new global forecast has growth of 3.9% this year and next. That represents an upgrade of 0.2% for each year. It also constitutes faster expansion than previous years (3.7% in 2017; 3.2% in 2016).

1/23

DAT: Van and Flatbed Rates Show Slight Decline

A decline in spot market freight last week was followed by lower national averages for both van and flatbed rates. So far, the rate of decline has been slow compared to the rapid rate increases that followed the ELD mandate in mid-December, so prices remain elevated.

1/24

Reuters: Mexico’s drug cartels, now hooked on fuel, cripple the country’s refineries

Drug gangs pressure refinery workers to tap the lifeblood of Mexico’s oil industry.  Fuel theft is fast becoming one of Mexico’s most pressing economic and security dilemmas, sapping more than $1 billion in annual revenue from state coffers, terrorizing workers and deterring private investment in aging refineries that the government.

1/25

WSJ: Union Pacific CEO: Train Braking Technology Is Clogging the Railway

Union Pacific Corp. says new technology meant to prevent train accidents is causing congestion on the railway.

Bloomberg: Aramco Targets Thriftier Engines to Defuse Electric-Car Threat

Saudi Aramco, the world’s biggest oil exporter, is investing in developing more efficient gasoline-powered engines and testing new methods of turning a barrel of crude directly into petrochemicals. The goal: To prolong the global demand for petroleum for decades to come by making engines and chemicals more cost-effective, even as electric vehicles and alternative sources of energy nibble away at crude’s market share.

NGT News: N.C. Center Offers Clean Fuel Project Funding

The North Carolina Clean Energy Technology Center (NCCETC) at N.C. State University has announced a call for projects through the Clean Fuel Advanced Technology (CFAT) Project.  The 2018 $5.6 million initiative, focused on reducing transportation-related emissions in the state, is supported with federal Congestion Mitigation Air Quality funding from the North Carolina Department of Transportation (DOT).

1/26

Reuters: Shell buying spree cranks up race for clean energy

Royal Dutch Shell (RDSa.L) has spent over $400 million on a range of acquisitions in recent weeks, from solar power to electric car charging points, cranking up its drive to expand beyond its oil and gas business and reduce its carbon footprint.

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®Fuel. 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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