Slowdowns in trade, fuel prices impacting transportation

The slump in commodity prices over the last few months, combined with an economy in China which is leaning towards recession have combined to decrease shipments of manufactured items and raw materials around the globe. World trade volumes increased by only 1.5 percent from September to November compared with the same window in 2015. It's clear that volume growth has been significantly weaker during the current economic expansion than during previous cycles, but it has slowed even more since early 2015.

This decrease in trade volume is impacting demand for all types of logistics and freight serices, including intermodal, LTL, full truckload and air freight. Ocean freight lines have been impacted by the same reduced demand, but large new vessels coming online has made their capacity swell even further. Sluggish growth in global trade is in turn hitting the demand for fuel.

Most freight moves using fuels derived from the middle and bottom of the distillation column: jet fuel, diesel and heavy fuel oil.

These freight-related fuels are currently showing the weakest demand, biggest increase in stocks and weakest prices around the world.

For example, U.S. stocks of jet fuel, distillate fuel oil and residual fuel oil are 15 percent, 20 percent and 33 percent higher than at the same time last year, while gasoline stocks have risen by less than 2 percent.

Stocks of jet fuel, distillate and residual fuel oil are up by 5 million, 28 million and 11 million barrels respectively, while gasoline stocks are just 4 million barrels higher, according to the U.S. Energy Information Administration.

The oversupply of medium and heavy fuels, which are also used for space heating, is being made worse by El Nino, which has resulted in a much warmer than usual winter across most of the northern hemisphere.

Oversupply has pushed refining margins for middle distillates to the lowest since 2010, when the global economy was just emerging from the aftermath of the financial crisis