Fuel price volatility in August was a direct byproduct of developments in the world oil market, global economy, and overarching geopolitical risk landscape. A few key economic storylines and sentiment concerning energy demand uncertainty, however, emerged as the main inducers of fuel price turbulence. This erratic price behavior reinforces the distortion that exists in traditional retail-based fuel reimbursement practices, considering DOE retail price changes paled in comparison to the wholesale market. In this edition of the Breakthrough Advisor, the Applied Knowledge Team offers their in-depth analysis of what triggered August’s price swings, in addition to providing an updated outlook and forecast based on the market’s recent events.
The Applied Knowledge Team leverages a data-driven approach to present shippers with actionable insights into what will influence energy prices for the extended time horizon. Staying ahead of the inevitable change in the global energy market strategically positions company stakeholders to understand transportation fuel spend and its inherent volatility.
Unpredictable US-China Trade Timeline
Ongoing trade discussions between the world’s two largest economies seem never-ending. Through this dialogue comes the hopes of reaching an accord soon, with tariffs proving the most prevalent mechanism to encourage gradual advancement. As a result, updates on the global trade front have simultaneously rattled energy and commodities markets, creating notable price swings for crude oil and diesel since the US-China trade war’s escalation. A new round of levies was introduced by both nations in August, leading to further price turbulence that undoubtedly impacted shippers’ total cost of fuel. Recent sentiment indicates both nations may be interested in easing the aggressiveness of their tariff strategies, though all signs still lead to an unknown end to the trade war. This elevates the level of uncertainty for the world economy, international energy demand, and fuel prices.
What were the fuel price implications of foreign trade developments in August? How do the fundamentals of supply and demand factor into current and forecasted the diesel price environment? Gain further insight in the September edition of the Breakthrough Advisor.
Uncertain Supply and Demand Outlook?
As the third quarter comes to an end and summer season wraps up in the next few weeks, demand for refined products is expected to slow. This, paired with the already lingering projections of slowing demand as a result of recent economic sentiment, raises questions about the future of energy prices. While US-China trade talks have created downside price pressure for crude oil and diesel in recent months, a few upside market drivers have quietly lingered. Canada deciding to extend its oil production cuts, Saudi Arabia strategically lowering its oil exports to the US to buoy prices, and the effect of IMO 2020 on over-the-road diesel all offer upside price pressure that could mitigate a portion of the foreseen demand softness. Learn more about the current and future balance of supply and demand – including its drivers – in the September edition of the Breakthrough Advisor.
This edition of the Breakthrough Advisor publication provides a detailed analysis of the energy market’s most relevant news and data-driven insights concerning shippers’ fuel management strategies. If interested, you can gain further details on rapidly changing energy market dynamics and industry trends by signing up for the Breakthrough Advisor Brief or contacting the Applied Knowledge Team directly.