Today’s Pickup: Oil supply crunch as Saudi Arabia halts shipments across Bab El-Mandeb Strait

Good day,

The issue with oil is that the majority of its production is linked to countries that are marred with geopolitical tussles, autocratic and unstable governments, or countries with an imploding economy. This brings in uncertainty to oil production and available volume, and thus heavy volatility to the fuel prices. 

Since the OPEC meeting in Vienna, there have been many signs on a possible shortage of oil supply across the world – as Venezuelan oil production has been going down since the onset of its civil uprising, potential sanctions on Iranian oil, and a war raging in the Middle East between Saudi Arabia and the Houthi rebels. 

Aramco had recently stated that it would be temporarily halting oil shipments through the Bab El-Mandeb Strait, the area around which Saudi oil tankers were attacked. This move could lead to another jump in oil prices, as 1.2 million bpd of Saudi oil pass through the strait.

Did you know?

For the fourteenth election cycle in a row, trucking industry campaign contributions favor Republicans over Democrats, according to data from the Center for Responsive Politics. For the upcoming midterm elections, campaign donations to Republican candidates from trucking-associated contributors totals $3.16 million, compared to $644,886 in donations to Democrats.

Quotable:

“So far, it seems like Trump’s heavy fist on tariffs hasn’t yet dampened imports. However, in reality, many importers are trying to expedite imports to beat tariff implementation, which may mean an earlier and more tempered peak season.”

– Zvi Schreiber, CEO of Freightos

In other news:

Returns: Record-breaking Prime Day’s aftermath

Suppliers and retailers must prepare for a surge in consumers returning goods — or risk products turning into “dead money.” (Supply Chain Dive)

New rules push up Russian trucking costs

Unlike rail and ocean transportation, Russian auto transport, which accounts for almost 75 percent of all container cargo delivered in Russia, is very non-transparent, with limited statistics available, and that has led to criticism by shippers. (JOC)

China’s Economic Growth Stimulus Could Boost Oil Demand

China’s growth stimulus measures are likely to boost demand for various commodities, including crude oil and products. (Oilprice)

DHL GF, Ethiopian Airlines launch JV to build logistics infrastructure in Africa

DHL Global Forwarding and Ethiopian Airlines have entered a joint venture that will serve the entire continent of Africa based from Ethiopia – with Ethiopian Airlines holding a majority stake in the venture. (Air Cargo World)

Trade Logistics Gap Persists Between Developed and Developing Countries

As international trade becomes dispersed through global value chains, small disruptions to a supply chain can spread rapidly to other countries and regions. (MH&L)

Final Thoughts

The U.S. and the European Union are finally looking to work towards creating zero tariffs, a decision taken after Jean-Claude Juncker, the President of the EU Commission visited the White House this week. This would be done by an Executive Working Group that would work towards reducing trade barriers and looking at revamping existing tariffs. 

The joint statement released by the two parties also highlighted their intention in resolving the steel and aluminium tariff issues that have been stoked over this year. Following its announcement, the shares of European automakers surged with Fiat Chrysler trading up 5.2%, BMW up 3.5%, Volkswagen up 3.4% and Daimler up 2.6%. 

Hammer down everyone!

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