Diesel stockpiles reached a 25-day low as: domestic output has decreased over the past couple of years, Russian oil sanctions remain, and US seasonal demand for diesel reached its highest level since 2007.
The Northeast region consumes more diesel for residential heating than anywhere in the US. Currently, their reserves are a third of where they typically need to be.
Backwardation or the result of higher spot market costs than prices trading in the futures market, is encouraging suppliers to sell as opposed to holding onto inventories out of fear of losing $0.30 to $0.40 a gallon, if they wait until November. In a traditional market, the opposite of backwardation occurs during the summer months. This creates an opportunity for dealers to build up inventories well in advance of fall.
Typically, mid-October through December marks a season of above average TL demand as shippers and retailers begin shuffling seasonal items in preparation for the greatest consumer spending season of the year. Based on the current consumer sentiment, continued inflationary pressures, exceptionally low rejection rates, abysmal import bookings, and TL volumes well below 2020 and 2021 levels it’s beginning to seem as though we’re in for a peak-less season.
On a more positive note, initial jobless claims or a request for unemployment filed by an individual after separation from an employer fell by 12,000 last week to 214,000. The previous week was also revised down 2k to 226,000. This time last year claims were sitting at 314,000, that’s a 31% increase from where they sit currently.
Claims are one important precursor to future economic stability as history has proven an employed consumer helps keep spending elevated. And while consumer loan debt has greatly surpassed pre-pandemic levels, delinquency rates remain well below where they were in Q1 2020.
The high-level of debt has kept upward pressure on the labor force participation rate and is keeping creditors at bay for the moment.
This has been your Bridge Logistics Market Update for the week of October 24th, 2022.