FUELSNews 360° – Executive Summary

Oil prices have been on a roller coaster ride for the past nine months, and the ups and downs of Q2 yielded little insights into where the market will ultimately land. Any upward momentum in prices was accompanied by two steps in the opposite direction, resulting in a wide trading range that has come to characterize markets.

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Oil Market Summary

The recent WTI crude oil narrative cycle starts with the bull run beginning in 2016 and lasting until October 2018, when prices fell from $75 to $45 in just a handful of weeks. The new year started with a return to higher prices, and prices snapped back to $65 by the end of Q1 2019. But Q2 brought more volatility, and prices sank back towards $50 again, only to rise again at the end of the quarter to nearly $60.

Demand concerns have been the preeminent market driver for some time. With the US economy now officially in the longest expansionary period in American history, many are waiting for the inevitable slowdown in growth. Trade is at the heart of concerns—many expect the US-China trade war to be the key factor in whether global markets sink into recession in the next two years.

Considerably less focus is on the supply side, though that remains the other import factor for markets. US supply has been rising incessantly for years, but in Q2 output seemed to tumble a bit. Whether this represents an upward resistance point—or merely a hiccup on the otherwise solid march higher—is yet to be seen.

OPEC is doing its best to offset rising US output. As Q2 ended, the organization opted to extend their production cuts for 9 months, lasting until the end of Q1 2020. While cuts will help whittle down excessive global crude inventories, much work remains ahead if OPEC wants to make a path for US crude growth.

Looking ahead to the balance of the year, prices have become remarkably difficult to predict. Assuming the economy endures trade war concerns and does not dip into a recession, OPEC’s cuts ought to keep steady pressure on oil prices. In this scenario, a rise of WTI oil prices above $60 seems quite likely.

On the other hand, an all-out economic downturn could easily send prices tumbling—at least temporarily—into the $40’s. Time will tell what the future of oil prices will hold.

Regional Fuel Overview

At the regional fuel level, Q2 brought some severe supply concerns in several areas.

The quarter opened with severe supply shortages in California, and the impacts quickly extended into Arizona. A number of factors were at play, including pipeline issues, summer fuel specification changes and refinery downtime. Sara Bonario explains the shortage on page 23.

In the Midwest, pervasive severe flooding disrupted transportation and forced some refinery shutdowns in Oklahoma and Arkansas. Gasoline prices gained 15 cents during this time, though by the end of the quarter prices had cooled. Nate Kovacevich explains how this has impacted consumers on page 21.

On the East Coast, a massive fire at the Philadelphia Energy Solutions refinery bankrupted the 330 kbpd facility, leaving significant uncertainty about future Northeast supplies. Markets are currently weighing their options, which include importing more European fuels, increasing shipments from the Southeast on the Colonial Pipeline, or even reversing the Laurel Pipeline to allow fuel from Chicago refineries to move east.


Installing a fuel tank in your backyard can be a financially prudent move, but the upkeep required to keep the tank running efficiently can be time-consuming. By instituting a simple weekly inspection, you can extend the life of your equipment while maintaining optimal fuel quality. Jim Kincaid lists the key items to inspect on page 30.

Many fuel buyers purchase their fuel from a contracted supplier, but sometimes there are perks to maintaining purchasing flexibility. Contract-free spot quotes are one way to develop useful market intelligence while optimizing your fuel prices. On page 32, Della Richardson explains how to determine when spot fuel purchases are right for you.

The driver shortage affects everyone in the transportation industry, but the FMCSA is working on a solution that could help bring new talent into the industry. The group is coordinating with the military to allow drivers under the age of 21 to obtain their CDL for interstate commerce if they have experience driving military equipment. The program aims to bring in young talent to the career that has recently seen an aging population. Nikki Booth discusses the new program on page 29.

FUELSNews 360 Quarterly Report - Q2 2019 Cover

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