As many of us are focused on our plans for the Thanksgiving holiday, we need to be aware of market-moving headlines in December that could create a volatile price market – similar to last year. Let’s review some of the events which could present an opportunity to take advantage of market movement and protect your fuel budgets.
Firstly, OPEC + convenes its 2 day meeting on December 5th in Vienna, Austria. The oil producers (including Russia) are expected to continue current oil production output levels – their current deal ends in March. If they decide to deviate from the expectation of keeping production the same, expect some market volatility.
Secondly, the International Maritime Organization (IMO) regulation requiring all international vessels to consume 0.5% sulfur diesel fuel begins on January 1st, 2020. This directive is designed to reduce sulfur emissions as the vessels can currently consume 3.5% sulfur in their diesel fuel. The regulation and enforcement date was announced in late 2016, so the international market has had plenty of time to prepare, but it appears that much of the demand is going to the New York Harbor. Current New York Harbor diesel inventories are below 5 year historical levels; this validates that vessels are loading 0.5% or less sulfur diesel here compared to the international market – a sign that the international refineries are not producing enough low sulfur diesel. Over the next few weeks, we will enter the stretch run where vessels will need to have 0.5% sulfur diesel in their tanks; if not, many will come to load it in the New York Harbor, which could lower inventories and subsequently increase regional diesel prices.
Finally, for weeks the U.S. and Chinese governments have been trying to get a “phase one” trade deal done. This trade deal negotiation has been going on since 2018 and has involved multiple rounds of tariffs imposed on the other countries’ exported goods. The next tariff deadline is December 15th. The U.S. is scheduled to levy additional tariffs on Chinese exports. There has been recent headlines that a “phase one” deal would include a rollback of these scheduled tariffs. However, if they are not rolled back, a potential setback for both equity and oil markets could be triggered and thus invoke volatility in oil markets.
In sum, there are multiple headlining events to be aware of as we kick start this holiday season. These events could create an opportunity to protect your fuel costs at attractive levels. Please call your Guttman Energy representative to learn more.