FUELSNews 360° – Executive Summary

The past several months have been tumultuous for oil prices, seeing prices rise from multi-year highs of $76/bbl to annual lows of $50/bbl in just a few short weeks. July through November brought a broad spectrum of market events: geopolitical conflict, supply outages, midterm elections, hurricanes and more. This latest edition of FN360 is packed with analysis to help fleet managers and procurement teams prepare for 2019.

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Oil Market Summary

The past several months have been tumultuous for oil economics, seeing prices fluctuate from multi-year highs of $76/bbl to annual lows of $50/bbl in just a few short weeks. July through November brought a broad spectrum of market events: geopolitical conflict, supply outages, midterm elections, and hurricanes, to name a few.

Throughout the period, markets were most focused on Iran sanctions, which dominated news headlines and analyst forecasts. Although Trump issued waivers to several countries, markets fear the supply impacts in 2019. But the tightening of global supplies was not enough to counteract escalating U.S.-China trade threats, which put a damper on global fuel demand prospects and has pushed prices lower.

Looking ahead to 2019, anything seems possible. With prices trading near 52-week lows, a reversion higher seems likely; but markets could stubbornly remain lower through the winter. Supply balances seem comfortable now, with little prospects for change before Jan 1. With Iran sanctions and OPEC cuts expected in 2019, though, expect markets to tighten, or even flip to under-supplied next year.

Regional Summary

Regionally, the outlook was more positive for consumers. Regional fuel prices across the board have trended lower relative to NYMEX prices.

Chicago has become a core area to monitor for fuel price trends. Cheap Canadian crude shipped from Alberta is processed near Chicago, creating favorable economics for refineries and allowing them to discount their fuel prices. Strong crack spreads kept PADD 2 refinery utilization rates elevated during maintenance season, as Nate Kovacevich covers on page 31.

Chicago refineries, seeking a home for their cheap fuel, continue pushing their products eastward. At the crux of the fight is the Laurel Pipeline in Pennsylvania, which some would switch to a bidirectional flow to allow Chicago fuel to reach Pittsburgh. Learn more on the northeast’s on-going supply debate on page 30.

With abundant supplies in the northeast, many Gulf Coast refiners have stopped sending product north and instead are sending it south to Mexico. On January 1st, Mexican suppliers will need to switch from high-sulfur diesel to ULSD, forcing further reliance on American refineries. With Texas oil production booming and Gulf Coast demand already high, Mexico’s thirst for ULSD could cause supply strain in the southern U.S. Gabe Aucar explains more on page 28.

Market Insights

As we move into the winter season, many fleets are preparing to protect their assets from gelling. Last year brought fuel quality concerns in certain areas, causing above-average gelling activity. How can fleet operators prepare this year? Turn to page 40 to learn about winter weather solutions to prepare for cold snaps.

Next year’s fuel prices are more of a mystery than ever, with analysts saying prices could remain as low as $50/bbl or could surpass $100/bbl. In the context of this uncertainty, is your company’s budget at risk? Learn from risk analysis expert Mac Cullens the four reasons why consumers choose to lock in their fuel prices.

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