PFL Railcar Report 7-25-2022

“You never really learn much from hearing yourself speak.”

― George Clooney

Jobs Update

• Initial jobless claims for the week ending July 16th, 2022 came in at 251,000, up 7,000 people week-over-week.

• Continuing claims came in at 1.384 million people, versus the adjusted number of 1.333 million people from the week prior, up 51,000 people week over week.

Stocks closed lower on Friday of last week but up week over week

The DOW closed lower on Friday of last week, down -137.61 points (-0.43%), closing out the week at 31,899.29, up 611.03 points week over week. The S&P 500 closed lower on Friday of last week, down -37.32 (-0.93%) and closed out the week at 3,961.63, up 98.47 points week over week. The NASDAQ closed lower on Friday of last week, down -225.50 points (-1.87%) and closed the week at 11,834.11 points, up 381.69 points week over week.

Crude closed lower on Friday and mixed week over week.

Crude prices traded down on Friday of last week with US crude settling below $95 for the first time since April, in another choppy session. WTI is lower week over the week for the third straight week after data showed gasoline demand down 8% year over year. The EU is adjusting sanctions on Russia, allowing Rosneft and Gazprom to ship oil to third party countries in a bid to limit the risks to global energy security.  Under tweaks to sanctions on Russia that came into force on Friday of last week payments related to purchases of Russian seaborne crude oil by EU companies would not be banned. Companies like Vitol and Total can now buy Russian seaborne crude and export it to third countries. A negative for crude at least in the short term.  We always said Russian crude would make it to market; it never was going to get shut in.   WTI traded down $1.65 or -1.71% to close at $94.70. Brent traded down $.26 or -.25% to close at $101.60. Oil saw another hugely volatile week of trading, which saw prices at one point wipe out all of their gains since Russia invaded Ukraine. Earlier last week, a report showed that U.S. inflation rose to its highest in four decades while high U.S. gasoline prices are starting to take their toll on consumption.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 400,000 barrels week over week. At 426.6 million barrels, U.S. crude oil inventories are 6% below the five-year average for this time of year.

Total motor gasoline inventories increased by 3.5 million barrels week over week and are 3% below the five-year average for this time of year.

Distillate fuel inventories decreased by 1.3 million barrels week over week and are 23% below the five-year average for this time of year.

Propane/propylene inventories increased by 1.4 million barrels week over week and are 16% below the five-year average for this time of year.

Propane closed out the week at $1.14 per gallon down 3 cents per gallon week over week but up 4 cents per gallon year over year.  Propane prices have been trending lower since they peaked in March 2022.

Overall, total commercial petroleum inventories increased by 1.1 million barrels week over week.

U.S. crude oil imports averaged 6.5 million barrels per day during the week ending July 15th, 2022, a decrease of  200,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged 6.5 million barrels per day, 1.7% more than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) averaged 865,000 barrels per day, and distillate fuel imports averaged 122,000 barrels per day for the week ending July 15th, 2022.

U.S. crude oil refinery inputs averaged 16.3 million barrels per day during the week ending July 15, 2022 which was 321,000 barrels per day less than the previous week’s average.

As of the writing of this report, WTI is poised to open at $99.87, up $2.28 per barrel from Friday’s close.

North American Rail Traffic

Week Ending July 16th, 2022.

Total North American weekly rail volumes were down -3.3% in week 29 compared with the same week last year. Total carloads for the week ending July 16th were 325,524, down -0.9% compared with the same week in 2021, while US Weekly intermodal volume was 347,775, down -5.5% compared to 2021. 6 of the AAR’s 11 major traffic categories posted year-over-year declines with the most significant decreases coming from Grain (-13.5%) and Other (-7.6%). The largest increase was from Coal (4.7%) and Nonmetallic Minerals (4.4%).

In the east, CSX’s total volumes were flat year over year, with the largest decrease coming from Chemicals (15.89%) and the largest increase from Petroleum and Petroleum Products (+6.02%). Norfolk Southern’s total volumes were up 0.54%, with the largest decrease stemming from Food and Forest Products (-10.21%) and the largest increase from Grain (+30.75%).

In the west, BN’s total volumes were down -8.45%, with the largest decrease stemming from Other (-15.07%) and Grain (-12.29%), the largest increase from Nonmetallic Minerals and Products (10.39%) UP’s total rail volumes were up 3.25% with the largest decrease stemming from Nonmetallic Minerals and Products (-18.49%) and the largest increase from Coal (+39.16%).

In Canada CN’s total rail volumes were up down -1% with the largest decrease stemming from Metallic Ores and Metals (-15.38%) and the largest increase from Grain (+101.5%).  CP’s total rail volumes were up 7.6% with the largest decrease stemming from Metallic Ores and Minerals (-21.66%) and the largest increase from Nonmetallic Minerals and Products (62.64%).

KCS’s total rail volumes were up 11.74% with the largest decrease from Motor Vehicles and Parts (-29.85%) and the largest increase from Chemicals (68.18%).

Source Data : AAR – PFL Analytics

Rig Count

North American rig count was up 6 rigs week over week. U.S. rig count was up 2 rigs week-over-week and up by 267 rigs year over year. The U.S. currently has 758 active rigs. Canada’s rig count was up by 4 rigs week-over-week, and up by 46 rigs year-over-year. Canada’s overall rig count is 195 active rigs.  Overall, year over year, we are up 313 rigs collectively.

North American Rig Count Summary

A few things we are keeping an eye on:

We are eying Petroleum Carloads

 The four-week rolling average of petroleum carloads carried on the six largest North American railroads rose to 24,567 from 24,460, which was a gain of 107 railcars week-over-week. This was the four week of consecutive gains. Canadian volumes were mixed. CN’s shipments were up by 11% and CP volumes were down by 4.4%.  U.S. shipments were mostly higher.  The CSX had the largest percentage increase, up by 14.5%, and the BN had the only decrease clocking in at -8.8%.

 We are eying Crude by Rail Out of Canada

The Canadian Energy Regulator (“CER”) updated its monthly crude by rail numbers on July 20, 2022.  For May 2022, Canada exported 173,122 barrels per day by rail, up 28,953 barrels per day month over month (up nearly 25% year over year)  a nice little uptick from April and its largest showing since March of 2021, but still only 42% of its peak volume delivered in February of 2020.  We are heading in the right direction folks, and expect to see crude by rail pick up slowly, but surely.   Crude by rail out of Alberta has been popular of late for raw Bitumen (no diluent added) as it can be shipped as a non-hazmat product resulting in lower shipping costs that are competitive with pipelines.  Crude by rail is also popular for off-spec products that can be blended here in the United States and in areas where there is no pipeline access.  Before crude by rail out of Canada can come back in a meaningful way, supply needs to exceed pipeline capacity and we need to see a much wider basis.  We are starting to see that, folks, but is it sustainable? WCS versus WTI closed out the trading day on Friday of last week at –US$25 per barrel on Friday of last week.  With TC Energy declaring Force Majeure on some deliveries out of Alberta last week due to pumping station issues out of South Dakota as a result of extreme heat the raged havoc on compressor and pumping stations in that state, we should see inventories build in Canada that will eventually cause basis to widen even further making commercial plays viable.

We are eying Natural Gas

 Nearly 70% of all voters support increasing NatGas Production.  A nationwide poll conducted by Democratic polling firm Impact Research reveals that most Americans view natural gas as an affordable and reliable alternative to coal that will help address climate change and support increasing natural gas production. The survey was commissioned by EQT Corporation (NYSE: EQT), the largest producer of natural gas in the United States. It also found that, after hearing about natural gas’s benefits, strong majorities of both parties are in favor of building new natural gas pipeline infrastructure to support increased production.

 “Americans are recognizing the tremendous impact natural gas can make in our efforts to provide the world with energy security, lower energy prices and inflation and address climate change,” said Toby Z. Rice, President and Chief Executive Officer of EQT. “These poll results demonstrate that Americans want more natural gas production and support the infrastructure needed to make it a reality.” The nationwide poll of registered voters found that a bipartisan majority of Americans support expanding natural gas infrastructure to reduce emissions as part of a larger, steady energy transition.  Well that would be good news for our pocket books if they allowed pipelines to be built to transport natural gas to the nations key markets coupled with encouraging investment.  We certainly need it and so does Europe, although Russia did resume the flow of natural gas through the Nord Stream 1 pipeline to Europe on Thursday of last week after a 10-day interruption for maintenance.  Klaus Mueller, head of Germany’s energy regulator, tweeted that gas flows had reached 40% of capacity, the same level as before the shutdown.  Russia’s state-owned Gazprom blamed the reduction on the absence of a gas turbine being repaired in Canada.  Russian President Vladimir Putin has insisted Gazprom would meet its delivery obligations, while warning that work on another turbine later this month could bring more reductions.  Below is the latest and greatest U.S. storage numbers:

Increased natural gas production naturally here in the U.S. leads to increased rail activity by virtue of the processing of natural gas to meet pipeline quality specifications by the stripping of LPG’s such as propane ethane and natural gasoline that typically move in rail to markets here in the U.S. or terminal for loading to be exported.

We are eyeing Whitehouse “Hypocrisy”

 What would a Monday morning be like if we did not point out the hypocrisy of the current Whitehouse Administration?  Folks there is so much material to work with each week – here is the latest and greatest.  While families are struggling to make ends meet and Biden flies all over the world begging foreign countries to increase oil production (most of it produced in an environmentally unfriendly way) for us, the administration has not let up punishing oil companies here at home!  The Biden administration plans to crack down on smog in the oil-rich Permian Basin and threatens to curb crude production while gasoline prices are near record highs and energy scarcity grips the globe.  The plan is to re-designate drilling hotbeds in Texas and New Mexico as violating ozone air quality standards.  The ramifications are unknown how this will be dealt with but is part of the “Climate Emergency” agenda – can’t make this stuff up folks.

We are eying the EIA – (July Energy update) – Forecast Highlights

• The spot price of Brent crude oil averaged $71 per barrel in 2021, EIA forecasts the Brent price will average $104/b in 2022 and $94/b in 2023.
• Global oil inventories are forecasted to rise by 800,000 barrels per day (b/d) in 2022 and remain unchanged in 2023.
• EIA expects global consumption of liquid fuels will grow by 2.2 million b/d in 2022 and by 2.0 million b/d in 2023.
• EIA forecasts that OPEC crude oil production will rise by 2.4 million b/d to average 28.7 million b/d in 2022 and will further increase to 29.3 million b/d in 2023. Crude oil production from OPEC members averaged 26.3 million b/d in 2021.
• EIA forecasts U.S. crude oil production will average 11.9 million b/d in 2022 and 12.8 million b/d in 2023
• EIA forecasts gasoline prices at the pump will average $4.05/gal in 2022 and $3.57/gal in 2023. EIA forecasts U.S. diesel prices at the pump will average $4.73/gal in 2022 and $4.07/gal in 2023.
• EIA forecasts that U.S. refineries will maintain a high utilization rate of 94% or greater for the foreseeable future.
• The spot price of natural gas at Henry Hub averaged $6.07 per million British thermal units (MMBtu) in the first half of 2022 (1H22). The average price increased in each month from January through May, when it reached $8.14/MMBtu before declining to $7.70/MMBtu in June. EIA expects the spot price at Henry will average $5.97/MMBtu in 2H22 and average $4.76/MMBtu in 2023.
• EIA expects LNG exports to average 10.9 Bcf/d in 2022 and 12.7 Bcf/d in 2023. They expect the Freeport LNG export facility in Texas will return to near full operations in January 2023.
• EIA forecasts that U.S. dry natural gas production will average 96.2 Bcf/d in 2022, up 2.7 Bcf/d (+3%) year over year and production will increase to 100.0 Bcf/d in 2023.
• EIA forecasts consumption of electricity will increase by 2.3% in 2022 and 0.6% in 2023.
• EIA forecasts the U.S. residential electricity price will average 14.4 cents per kilowatt-hour in 2022, up 5.3% year over year.

 O’ Boy problems in Oakland, California – Container Traffic soon to be affected.

450 protesters opposing AB5 were blocking all of the terminal gates at the Port of Oakland, forcing TraPac and the largest terminal operator, Oakland International Container Terminal, also known as SSA, to close operations on Wednesday of last week.

The protesters’ message to California Gov. Gavin Newsom on Wednesday of last week was: “The cargo won’t flow until AB5 goes. Newsom signed Assembly Bill 5 — a controversial state law that seeks to limit the use of independent contractors and largely classify them as employee drivers — into law nearly three years ago. However, legal challenges prevented the law from going into effect in January 2020.  That all changed when the U.S. Supreme Court refused to hear the California Trucking Association’s challenge to AB5 in late June, returning the case to the 9th U.S. Circuit Court of Appeals. Now, truckers say Newsom and the California legislature could exempt trucking from AB5 as they have done for other industries, including lawyers, real estate agents and accountants. Proposition 22, which passed in November 2020, exempted app-based ride-share companies Uber and Lyft from AB5.  The protests are ongoing. We will see what happens with this one folks – stay tuned to PFL for further updates.

The Beginning of the End for the $U.S. as the World’s Reserve Currency? Some think so!

The China–Russia alliance is developing a global reserve currency to counter the U.S. dollar.

Russia and China are reportedly working together to develop a new global reserve currency to challenge the dominance of the U.S. dollar.

Russian President Vladimir Putin signaled recently that the new reserve currency would be based on a basket of currencies from so-called BRICS nations—an alliance that includes Brazil, Russia, India, China and South Africa.

“The matter of creating the international reserve currency based on the basket of currencies of our countries is under review,” Putin said on Wednesday of last week at the BRICS Business Forum. “We are ready to openly work with all fair partners.”The dollar has long been seen as the world’s reserve currency, but its dominance has been waning in recent years as central banks look to diversify their holdings in currencies like the Chinese yuan.  The recent sanctions against Russia have put the efforts to the forefront of Russian politics.

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We have been extremely busy at PFL with return on lease programs involving rail car storage instead of returning cars to a shop.  A quick turnaround is what we all want and need.   Railcar storage in general has been extremely active.  Please call PFL now at 239-390-2885 if you are looking for rail car storage, want to troubleshoot a return on lease scenario, or have storage availability.  Whether you are a car owner, lessor or lessee, or even a class 1 that wants to help out a customer we are here to “help you help your customer!”

Leasing and Subleasing has been brisk as economic activity picks up. Inquiries have continued to be brisk and strong Call PFL Today for all your rail car needs 239-390-2885

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PFL is seeking:

• 25 Fuel Ethanol cars needed ASAP for short or long term in Midwest
• Various Hoppers 286 GRL 4200-7000 CU FT in several locations negotiable
• 10-20 propane cars in North Dakota ASAP for 2-3 months
• 50 117Js with magrods in the east – 10 for immediate trip lease – 40 for longer term
• 50 6350 covered hoppers in the midwest with most class ones for DDG
• Up to 40 5500 Covered Gons 286 unlined CSX/NS preferred but will consider other
• 4 Lined tanks for glycerin to run from Arkansas to Georgia 1-3 years
• 30 boxcars on UP or CP for 3 years to run from TX to Edmonton – negotiable
• 6-10 Open top 4200 gons for hauling scrap NS in Ohio for 1-3 years
• 100, 2480 CU-FT Ag Gons needed in Texas off of the UP for 1-3 Years.
• 50, 30K+ Tank cars are needed in several locations. Can take in various locations off various Class 1’s. Can have prior Ethanol heel or Gasoline heel.
• 300 5800 Covered hoppers needed for plastic – 5-year lease – negotiable
• 50, 5800cuft or larger Covered Hopper for use in DDG needed in the Midwest for 3-4 years. Immediate need.
• 10-20 Covered hopper grain cars in the midwest 5200-5500 2-3 years
• 20-30, 19K Tank Cars for Caustic Soda needed in Texas off of the UP or BN.
• 100 Moulton Sulfur cars for purchase – any location – negotiable
• 50 Ag Gons 2500-2800cuft 286k GRL in the east CSX for 5 years negotiable
• 100 15K Tanks 286 for Molten Sulfur in the Northeast CSX/NS for 6 months negotiable
• 100, 5800 Covered Hoppers 286 can be West or East for Plastic 3-5 years
• 70, 117R or J needed for Ethanol for 3 years.  Can take in the South.
• 50, 6500+ cu-ft Mill Gon or Open Top Hopper for wood chips in the Southeast for 5 Years.
• 20, 19,000 Gal Stainless cars in Louisiana UP for nitric acid 1-3 years – Oct negotiable
• 10, 6,300CF or greater covered hoppers are needed in the Midwest.

PFL is offering:

• Various tank cars for lease with dirty to dirty service including, nitric acid, gasoline, diesel, crude oil, Lease terms negotiable, clean service also available in various tanks and locations including Rs 111s, and Js – Selection is Dwindling. Call Today!
• 200 Clean C/I 25.5K 117J in Texas. Brand New Cars!
• 150 25.5 111’s in the midwest for sale – Negotiable
• Up to 150 sand cars for sale at various locations and class ones – Great Price!
• 150 117R’s 31.8 clean for lease in Texas KCS – negotiable
• 31.8K Tank Cars last in Diesel. Dirty to dirty in Texas
• 200 117Js 29K OK and TX Clean and brand new – Lined- lease negotiable
• 100 117Rs dirty last in Gasoline in Texas for lease Negotiable
• 90 117Rs 30K located in Alberta CN or CP Refined Products Dirty – negotiable
• 99 340W Pressure Cars various locations Butane and Propane dirty negotiable
• 100 29K C/I 1232 cars for lease. Dirty in Heavy Crude and can be returned dirty.
• 50 29K 117Js in Nebraska for sale or lease clean last in crude
• 100 117Rs 29K clean last used in crude Washington State – price negotiable sale or lease
• 100 111s of various volumes and locations last in fuel oil dirty price negotiable
• Various Hoppers for lease 3000-6250 CF 263 and 268 multiple locations negotiable

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Call PFL today to discuss your needs and our availability and market reach. Whether you are looking to lease cars, lease out cars, buy cars or sell cars call PFL today at 239-390-2885

PFL offers turn-key solutions to maximize your profitability. Our goal is to provide a win/win scenario for all and we can handle virtually all of your railcar needs. Whether it’s loaded storage, empty storage, subleasing or leasing excess cars, filling orders for cars wanted, mobile railcar cleaning, blasting, mobile railcar repair, or scrapping at strategic partner sites, PFL will do its best to assist you. PFL also assists fleets and lessors with leases and sales and offers Total Fleet Evaluation Services. We will analyze your current leases, storage, and company objectives to draw up a plan of action. We will save Lessor and Lessee the headache and aggravation of navigating through this rapidly changing landscape.

PFL IS READY TO CLEAN CARS TODAY ON A MOBILE BASIS WE ARE CURRENTLY IN EAST TEXAS

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