Pipelines and Oil Prices

I’ve mentioned the glut of oil at the Cushing, OK oil reserve a few times in the past. This glut is a main reason why the price gap between West Texas Intermediate (the domestic benchmark used to set oil futures prices at the Chicago Mercantile Exchange) and Brent (the European benchmark used to set prices at the InterContinental Exchange) began to increase in late 2010. As you may have heard, the new owner of a major pipeline running from the Gulf to Cushing is about to reverse the flow of crude in the pipeline. Imported oil that had been running from the Gulf to Cushing will be replaced with domestic oil running from Cushing to refineries in the Gulf. This is a major development for the following reasons: - The supply at Cushing will be greatly reduced, which would theoretically apply upward pressure to WTI prices. - US refineries will need to purchase less foreign oil, which would theoretically apply downward pressure to refined products (gas, diesel, etc). - The Keystone XL pipelin ...

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US Industry Continues Upward Trend

Industrial Production figures released yesterday show continued upward movement in all the segments relevant to trucking. October IP overall was up 0.7% vs. September. This figure represents a level 5.3% below the pre-recession 2007 average, but is up 3.9% from October, 2010. The critical automotive industry posted a 3.1% increase vs. last month. Unfortunately, just as the Japanese manufacturers returned to 100% production, flooding in Taiwan may have a slight to moderate negative impact on output for November. Consumer products were up overall, with durables (automotive products, furniture, appliances, etc.) up 2.1%. Nondurables (food, clothing, paper products, etc.) were flat. Looking at larger trends, specifically capacity utilization for the three stage-of-process groups, we see that output at the crude stage is 3.5% above its historical average. The primary and semifinished stage is 7.3% below the historic average, and the finished stage is 0.1% below. The increase at the crude level is encou ...

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Medium Duty Auction Performance

The first graph below traces performance of the Class 3-4 Cabover and Class 6 Conventional segments in the auction environment for each month of 2011. Data is adjusted for mileage. The second graph compares auction price of 3-6 year old trucks for the third quarter of 2011 vs. the third quarter of 2010. Trucks included are 2009-2006 model year for calendar year 2011, and 2008-2005 model year for calendar year 2010. Average mileage for each group is listed above its column. The graphs paint a mixed picture of each segment. We don’t see much movement in 2011, but year-over-year comparisons look favorable. Considering the higher mileage for both segments in the 2011 period, the higher selling prices are encouraging. The Class 3-4 Cabover segment plays mainly in the urban delivery market, which is heavily dependent on retail consumer activity. That activity has been flat to slightly improving, which could partially explain a price increase. The Class 6 Conventional segment is exposed to a much m ...

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November 2011 Commercial Truck Guidelines!

With the complete third quarter of 2011 in the database, now is a good time for a year-over-year review.

3rd Quarter 2011 vs. 3rd Quarter 2010 comparisons show retail and wholesale selling prices up dramatically and Dealer sales volume was the highest of the year in September.

Download the November 2011 Guidelines now to read on!

September Data Results

We have finalized our September retail database, and the results are below. The graphs should be self-explanatory.

Cliff’s Notes:
- The sleeper market overall continued its upward climb despite another hefty increase in average mileage.
- The age of the average sleeper tractor sold was 71 months.
- Four-year-old sleeper tractors continue to fluctuate in the mid-$60’s, this time down by about $900 as average mileage nears 500K.
- Sales per dealership hit their best month of the year.

Stay tuned for the complete analysis in the November GuideLines to be published late this week.


The Retail Market Continues to Impress

While the wholesale market flattens out, the retail market continues its upward trajectory. With over 90% of our September retail data in our database, it appears that both price and mileage hit another milestone. In addition, the sales per dealership measure is on track to hit its best month of the year.

Look for actual numbers in our full Guidelines report the second week of November. In the meantime, the graphs below illustrate the basics. Nothing like a little good news to close out the month.

Wholesale Pricing Trends Revisited

The graph below reflects averaged sales reported to NADA of all sleeper tractors with under 1,000,000 miles from our auction and dealer wholesale sources. I’ve recently mentioned that the steady upward price trend in the wholesale markets of the past two years may be flattening out. Observation of price and mileage data strongly suggests that price resistance becomes strong as mileage nears the 650K mark. With over 90% of our September wholesale (auction and dealer) data received, we see that this trend continues. Mileage and price again moved in opposite directions. Statistically, the correlation between price and mileage since January, 2011 is -0.91. This is a strong negative relationship, and is convincing evidence that price is returning to its traditional inverse relationship with mileage (as opposed to its independent upward movement prior to January). The takeaway? It’s becoming pretty obvious that the 650,000 mile mark is a good rule of thumb for when to expect a truck to start losin ...

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US Industrial Output Remains Steady

Domestic industrial output continued to shrug off the turmoil in the world’s financial markets. September Industrial Production overall was essentially flat, with a 0.2% increase over August.

Consumer durables were up overall, with gains in electronic and automotive products more than offsetting declines in furniture, carpeting, and appliances.

The critical automotive sector was up 0.7% as the Japanese manufacturers neared 100% capacity.

In general, September’s numbers suggest Manufacturing will continue to drive the economy. With new truck orders up over the last two months, the trucking industry seems confident this will continue to be the case.

October 2011 Commercial Truck Guidelines

The commercial truck market and industrial producion is a good indicator of the health of the economy, which isn't as bleak as it may seem. The domestic industry has weathered the economic turmoil quite well. With August's Used Truck sales more than expected, plus an uptick in August and September new truck orders, the truck industry is proving the economic naysayers wrong.

To download the full Commerical Truck Guidelines for October, click here.

Truck Industry Ignores Economic Chatter

A recent Transport Topics article sheds some light on general sentiment about the health of the economy from those who actually have an impact on it. My takeaway is that the industry is starting to get used to the presence of vague economic “threats” in the form of stock market swings, and has decided that these threats are not great enough to prevent investing in new equipment. In a larger sense, the decisionmakers who drive our economy are tired of sitting on their hands. They’ve watched the stock markets swing up and down, and noted that those swings have had little effect on industrial output data. As I stated in the latest Guidelines, “There are constant challenges to the world’s stock markets based on real and existential factors, but the nuts and bolts of the US economy as measured by Industrial Production continue to soldier onward more or less steadily in the face of this turmoil.” Domestic industry has ignored the “fear and doom” style of reporting popular with mainstream news source ...

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