How Is Recent Oil Price Recovery Affecting US Truck Sales?



Recovery in oil prices

As of August 1, WTI (West Texas Intermediate) crude oil futures are trading at $48.78 per barrel. Oil prices witnessed a sharp rise of about 9.0% in July 2017 but have fallen 9.2% on a year-to-date basis.

In January 2017, WTI crude oil futures were trading at their highest since August 2015. In March 2017, a sharp fall began in crude oil prices primarily due to global inventories and increased US production.

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Key technical levels

Currently, technical indicators are suggesting positive sentiment in crude oil prices. On the upside, an immediate horizontal resistance lies near $51.50, and only a violation of this could lead to fresh buying.

WTI crude oil prices could find an immediate support near the $47.10 level on the downside. On July 26, the EIA (Energy Information Administration) released crude oil inventories, which fell by 7.2 MMbbls (million barrels). Analysts were expecting these inventories to fall by 3.3 MMbbls. These lower-than-expected inventories could drive weakness in oil prices going forward.

Could it hurt the US truck sales?

In the last few years, higher demand for pickup trucks and utility vehicles has been evident in the US auto market. The sales growth of heavyweight vehicles such as trucks outperformed sales growth in the lightweight car segment.

Low crude oil prices have been one of the key factors behind this sales trend. However, the recent rebound in crude oil prices could hurt the demand for heavyweight vehicles in 3H17.

Heavyweight vehicles such as pickup trucks and utility vehicles tend to yield higher margins for automakers as compared to margins from small cars. A higher demand for trucks and utility vehicles improves the profitability of automakers (VCR) including General Motors (GM), Fiat Chrysler (FCAU), Ford (F), and Toyota (TM).


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