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Today’s pickup: mostly bearish quotes out of Morgan Stanley; the tough road facing OPEC

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Good day,

Morgan Stanley releases its index each week to measure sentiment in the trucking sector. Most notable about this week’s reports were three quotes released in conjunction with the report: From a carrier: “I expect rates to increase and capacity to stay tight in 2019. Perhaps not at the levels of 2018, but still very much in the carriers’ favor.” From a shipper: “Market was much looser in 2018 over the Thanksgiving holiday than in 2017. Will be interesting to see the recovery and carry over through the Christmas/New Year’s weekends.” From a category listed as “broker/other”: “Demand appears to be waning. Carrier comment around lack of capital goods shipments meeting expected volumes was interesting, even if only one data point. Carriers unwilling to negotiate on price earlier in the year have been more agreeable as of late.” Clearly not particularly bullish sentiment being expressed.

Did you know?

LTL carrier Saia released a fourth quarter update on its operations earlier this week. It reported that tonnage moved in October was up 1.5% year on year, but the November tonnage carrier was down 0.2%. Shipments weights were unchanged and was down just slightly for November. As Deutsche Bank noted in its comments on the numbers, year-on-year comparisons this quarter to the fourth quarter of 2017 are not going to look particularly strong because the bullish freight market of today got its start a year ago.


“I-81 is more than 40 years old in most sections and close to 50 in others. The roadbed is wearing out and costs of maintaining the road will grow annually. I-81 was built for a planned average annual daily traffic of 25,000 vehicles. Today’s traffic volumes range from 45,000-60,000. I-81 was built for an annual truck share of 10 percent; today trucks can make up 50 percent or more of the vehicles on the road. The use of both passenger vehicles and trucks is forecast to grow significantly, with truck traffic more than doubling in the next 30 years. Clearly, I-81 was not built for the volume of traffic and the type of vehicles that use the roadway today, not to mention the future. The entire highway needs to be replaced and widened. That includes rebuilding the structure from the roadbed up, widening the facility to 6-8 lanes, extending acceleration and deceleration lanes, and adding truck climbing lanes.”

Reason’s Baruch Feigenbaum in the latest issue of the organization’s newsletter on surface transportation,  in a piece criticizing Virginia’s plans for interstate 81.

In other news:

Farmers get a break on training, and the move is criticized

Canadian Trucking Alliance rips decision by Saskatchewan government (CBC News)

The farmer and the trucker should be friends…in Brazil

Two sides team up to fight new freight railroad (Mongabay)

2020 remains a ways off; lots could happen

Shippers are pushing back against charges already laid out for dealing with IMO2020 (The Loadstar)

Woman at the heart of NY Times story on XPO speaks up

Memphis warehouse worker speaks to local newspaper (Commercial Appeal)

Amazon Air is a growing threat to Big Parcel

Analysts warn that the small operation now will get a lot bigger (AirCargo News)

Final Thoughts

There is little reason to see any sort of upturn in oil prices in the short or even medium term. The cuts that look likely to come out of the OPEC meeting in Vienna, regardless of what the organization chooses to do (undecided as this was published), even if combined with the surprise reductions ordered in Alberta, are almost certain to leave oil markets oversupplied. Data on oil can be overwhelming, and it’s hard to know which numbers to study if you don’t have hours to do so. But one of the more revealing is the OPEC call. It’s a number that you get by taking estimated global oil demand, subtracting estimated non-OPEC output, OPEC production of a form of petroleum known as LPGs, and what you are left with is the amount of oil OPEC needs to produce to balance. Current OPEC production, according to S&P Global Platts, is just over 32 million b/d. The call for all of 2019 is less than 31 million b/d. That points to continuing weakness. That’s good news for shippers and carriers, but not great news for transport tied to the growing U.S. industry, whether it’s truckers out in the Permian or rail companies hauling frack sand to facilities that might need to shutter if prices continue to slide.


Hammer down everyone!


John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.