No easy solutions and the problem may last for a long time
One of the best things I read this weekend was a Medium post
from a trucker describing what’s happening in US shipping on the ground and why it won’t be fixed any time soon.
- Crushing wait times at ports
- Shortage of shipping container chassis
- Containers are being stored wherever they can find space, just so they can unload the next ship
- Warehouse unloading is also a snag due to poor worker pay and shortages
- Consumers will be hit next with delays
He highlights how it’s a problem right from the port through trucking incentives and at warehouses.
This is the scary part:
“What is going to compel the shippers and carriers to invest in the needed infrastructure? The owners of these companies can theoretically not change anything and their business will still be at full capacity because of the backlog of containers. The backlog of containers doesn’t hurt them. It hurts anyone paying shipping costs – that is, manufacturers selling products and consumers buying products. But it doesn’t hurt the owners of the transportation business.”
WTI trades back up to above $84 on the day
There has been some exhaustion to the upside momentum but buyers are not exactly letting up either, keeping a defense at the recent lows around $80.79 last week before seizing back near-term control now on a push above its key hourly moving averages:
The $85 mark still poses a modest resistance point on the daily chart but the fundamentals continue to look solid for oil as we look towards next year.
A Bloomberg report highlighted that China’s stockpiles are down to their lowest since February 2020 and that creates more headaches for local authorities who are already needing to deal with the power crunch amid shortages of coal and natural gas.
As such, that could see state enterprises come in to replenish inventories even as prices are at elevated levels i.e. underscoring added demand for crude stocks.
OPEC+ will also be meeting later this week so there’s that to factor into consideration but I doubt the bloc will do much to shake up the status quo for the time being.
Remarks by US Treasury secretary, Janet Yellen
- But eventually lowering tariffs in a reciprocal way could be a desirable outcome
- Lowering tariffs could have “disinflationary” effect
- Current inflation surge is a result of supply bottlenecks, higher energy prices
- Inflation should ease in 2H 2022
This seems more aimed at easing the burden for businesses and consumers as inflation continues to pose a major problem across multiple sectors/industries. If they want to, they could but don’t expect China to budge on trade commitments. The deal has and always be one that is just for show. They know that, we know that.
An energy analyst at KPMG says OPEC+ is most likely to stick with the earlier agreed top plan of a 400,000 barrel per day increase.
But the group may ponder increasing the amount “marginally, or more substantially,”
- by 600,000 barrels to 1 million barrels per day
Countering the argument OPEC+ may consider boosting output above 400k barrels are reports over the weekend (vai Bloomberg) that the OPEC+ Joint Technical Committee (JTC) significantly downgraded expectations of a market deficit at their meeting last week:
- now expects the oil market to show a deficit of just 300,000 barrels per day in Q4, down from initial expectations of a 1.1m bpd deficit
- The role of the JTC is to monitor the market, the JTC meets ahead of every ministerial meeting of OPEC+. The JTC met last Thursday.
The Organization of the Petroleum Exporting Countries and allies, OPEC+, hold their monthly ministerial meeting on Thursday.