It’s official – 45,000 members of the International Longshoremen’s Association decided to go on strike when their deal expired at midnight and while I am for the union's right to strike, the demand by the Union to not allow ever the right of the ports to use automation is unrealistic and harmful to the long-term health of the US economy.
While the longshoremen want to use their stranglehold over the US economy to try to save future jobs, the history of economy and efficiency will mean that the Union’s ability to face reality will only hasten their descent into the dust heap of history. They instead should be preparing to adapt to the future as opposed to the past. For example, what if the Teamsters tried to force companies to only use horse and buggies, where would the US Economy and the Teamsters be today?
In the meantime, the strike by the Longshoremen is bearish for oil but that bearishness is being offset a bit by the fact that Israel has launched a ground war in Lebanon. The biggest hit to oil from the dockworkers strike will be on demand. Oil tankers and LNG will not be impacted as the Longshoremen strike is impacting container ships but when those ships don’t’ move they will not burn oil. The possibility that factories may shut down because of the strike will also reduce demand for oil and could lead to a larger US recession further hampering demand.
The Conference Board (CB)estimated that the strike has a huge risk to damage business and consumer rights before the peak holiday shopping season—and five weeks out from the election. CB said that ‘The sheer size of the combined 36 East and Gulf Coast ports makes them critical to both US and global trade and limits alternative supply chain options for US businesses. A one-week strike could cost the economy $3.78 billion and increase the cost of consumer goods, putting pressure on inflation. The president could force a resolution by using the Taft-Hartley Act, but this would be a political minefield so close to the election according to the CB.
As we know Biden said he would not intervene because he does not believe in Taft-Hartly. He also believed that inflation was transitory, and that the Afghanistan withdrawal was a success, that the border was secure, and that he did a good job as President.
If the strike lingers, it will provide a hit to US oil demand even as we see signs that US oil demand is rocking while supplies are below average and Strategic Petroleum Reserves are just above a 40-year low.
John Kemp pointed out that the EIA reported that U.S. Gasoline demand based on products supplied to the domestic market accelerated to 9.3 million barrels per day (b/d) in July, the highest for the time of year since 2021, and up by more than 3.5% compared with the same month a year earlier. He also points out that seasonal fuel supplies of both gasoline and distillates were robust in July after being very low in June.
For the last couple of years, Mother Nature has been kind to Europe. It has bailed them out of their shortsighted energy policies and the threat to supply because of the Russia-Ukraine war. But for diesel and natural gas traders this year they might not be that lucky. Bloomberg is reporting that Europe’s winter is forecast to be colder than last year — Germany’s third mildest on record — as a weakened La Niña finally arrives, but it will still be warmer than longer-term averages. Stay tuned.
The stock market has held up pretty well considering the strike threat which may be a sign that the stock market believes that the strike will not last very long. Still, the volatility should present good opportunities for swing traders across the commodity spectrum.
Major dips in oil should be a great hedging opportunity. More than likely as we head into winter prices are going to go higher.
Going into the OPEC meeting we’re hearing talk that OPEC members could be open to delaying their production increase that was the comments from Russia and other OPEC members are suggesting that as well the rumored breakdown of trust between Saudi Arabia and the rest of the members seems to have been greatly exaggerated.
The devastation from Hurricane Helene is heartbreaking. Sadly, there may be more challenges to come. Fox Weather reported that the “death toll from Hurricane Helene continues to climb as rescue efforts persist across the Southeast. Hard-hit regions, including parts of western North Carolina, are receiving aid from various states as emergency crews work to reach isolated communities devastated by catastrophic flooding.
The death toll attributed to Helene’s impacts has been steadily climbing, with at least 128 people now confirmed dead in six states – Florida, Georgia, South Carolina, North Carolina, Virginia and Tennessee.”
The good news is that Fox Weather reports, “In what may be a sigh of relief for Gulf Coast states, tropical development chances are now decreasing – which is good news for those trying to recover from Helene.
Over the weekend forecast models were showing a new tropical system developing this week in the Gulf, impacting storm-weary Gulf Coast states late in the week.”