OPEC, North Korea, Hurricanes, US Production, and the FED

Good morning,

Well, we have a whirlwind of info coming our way that is affecting crude prices. WTI price closed over $50/barrel this week and then immediately fell back, only to regain strength yesterday. WTI has a chance to close above $50/barrel for the week. Now a lot of events are percolating causing these swings. OPEC is meeting today to discuss extending cuts. Many countries, including now Iraq, are calling for an extension. Iraq has always been reluctant to join in more cuts and has also cheated along the way. But nevertheless, their statements are making waves. In addition, Nigeria and Libya are invited to the OPEC meeting. These two countries are a swing in the cut. If they join the cut, then we have a situation for true production cuts. However, I would expect other countries to cheat if Nigeria and Libya join, plus the chances of these two joining are slim. Saudi Arabia has cut their exports to the lowest level in years, but is also in line with yearly production cuts. I don’t expect Saudi Arabia to continue at their current levels for longer than 3-6 months.

Also this week, tensions with North Korea continued to increase as President Trump and Kim from North Korea exchange heated words. Kim is also making plans to potentially test a H bomb in the Pacific which is making everyone nervous. And speaking of oceans, the never ending train of hurricanes seems to be continuing and causing all sorts of production issues and demand erosion. Since the hurricanes have subsided in the U.S., production is back to normal and has increased since last month.

The U.S. is now producing over 9.5M barrels/day in crude and advances in technology and efficiency are allowing most energy companies to make money at $35/barrel WTI. So with the U.S. at the highest level of production and profits coming in at lower levels in price of crude, the U.S. has truly become the swing producer of the world. Time will tell how crude plays out in the true supply/demand market, but I am still hesitant based on economics to call crude moving above $55/barrel in the next 6 months. And the icing on the cake was the FED announcing the unwinding of the balance sheet which is finally putting some strength into the dollar trade. The stronger dollar will help curb any unrealistic breakouts in WTI pricing.

Propane inventories have peaked around 80MM barrels versus over 100MM barrels last year. We used about 60MM barrels of propane last year. So if demand, exports, and corn drying are about the same, we will be ok. But if we see upticks in demand, corn drying, and exports, we could be in trouble. However, propane prices are trading at about 75% value to WTI versus 50% value last year. So some are thinking propane could be over bought at these numbers. Producers locking in at these numbers gives them good hedging to keep producing at high levels going into the winter. So hopefully production continues at high levels throughout the winter.

In local retail news, gasoline prices have eased a bit from the Labor Day highs, but are still all over the board as the market finds its footing. In addition, a refinery issue in Chicago caused another price spike in gasoline, so any further downside movement has been capped temporarily. Diesel prices have been more stable but are still at the highest levels of the year. Depending on how all the previous situations described play out, retail prices will hopefully be capped for the year. Propane prices have surged over 25 cents in the last month. I have been writing that this was going to happen since back in May. Although contract and rack prices are higher, I would still recommend locking in your price at these levels since there is more risk for upside movement than downside.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards

Jon Crawford – Pres.
Crawford Oil and Propane

WTI Breaks $50/Barrel

Good morning,

I hope everyone enjoyed their week and is ready for a beautiful weekend. Crude prices and refined products were very volatile this week. With refining capacity coming back online from the hurricanes, crude started a mini rally midweek. The rally continued its run after OPEC released their monthly report showing a true cut in production for the first time in months, coupled with talks of extending cuts until June 2018. And then, out of nowhere, the IEA releases a statement saying that they underestimated demand growth in the US and Europe. Toss in anther missile launch from North Korea and we have ourselves a nice little crude rally. Now WTI crude has broken $50/barrel earlier in the year on what I would call even more bullish situations. So I am not convinced that this rally is going to take off on a long run. China has been purchasing a lot of crude to replenish their inventories, but they are almost full. In addition, IEA changes their position on a dime throughout the year, so I don’t put much stock in their “demand forecasting”. The EIA Inventory report was still all over the board due to the hurricanes. So I’m waiting to see what the report looks like next week. But the interesting inventory data was in propane this week. Exports were practically closed last week from hurricanes. The expectations were for over a 3M barrel build and the number came in at 2.3M barrels. Peak inventory is going to be under 90M barrels which is very low, especially with exports, corn drying demand forecasting high, and a potential for a cold winter. Propane prices have jumped dramatically over the last two weeks.

In local retail news, gasoline and diesel prices are all over the place. With costs fluctuating and inventories all over the map from the run up in price, I expect retail prices to have high spreads between locations for another week or so. As I stated early, propane prices have risen dramatically and I expect the trend to continue, especially if corn drying demand becomes strong. Although spot prices and contract prices have increased, I still recommend that if you have not locked in your price to please call and do so.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

Post Harvey and Pre Irma

Good morning,

Our thoughts and prayers are with everyone affected by Harvey and the upcoming Irma. The hurricanes have caused massive outages and production delays. Prices spikes over 30 cents on gas and diesel. Prices are starting to calm down and hopefully we have peaked at retail. The North Korea and other geo-political events seem to be not affecting the oil markets at this time. The national inventory reports are mostly skewed due to the hurricanes and post holiday weekend. I expect the inventories and markets to be back to normal operations by the end of September. I will give more detailed analysis of the refined markets once these hurricanes have past.

In the meantime, if you have not contracted propane, I would highly recommend doing so. Please call the office for current prices.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

Hurricane Causes Price Spike… But Be Patient…

Good morning,

First of all, our thoughts and prayers are with everyone in the Houston area affected by hurricane Harvey. The damages are severe and all petroleum production and exporting has ceased. The hurricane has caused a massive spike in the cost of gasoline and diesel fuel. We are expecting to see prices rise about 30+ cents on each product. But be patient. Although some geopolitical issues are at play with North Korea and Venezuela, crude prices have dropped because crude inventories should start to build in the U.S. and OPEC is cheating. In addition, at the end of September, we go into historical low crude consumption. And, the future hedge positions jumped to over 500k contracts last month, the highest in years. Basically, the traders are betting on higher crude that I don’t think is going to happen. Therefore, I think that once Houston refineries come back online at the end of September, we are going to see a massive drop in gas and diesel by early to mid-October. And, I also think that some traders will exit their positions at the end of September knowing the changes of not making out in positive territory going through Q4. I wouldn’t be surprised to see crude fall to the low $40’s by Thanksgiving. The EIA Inventory report showed a surprise drop in crude of 5.4MM barrels (I think this will adjust next week), no change in gasoline inventories, a 700k barrel build in distillates, and a 1.7MM barrel build in propane. Since the hurricane has stopped propane exports, propane inventories are starting to build. With a high corn drying demand being predicted, these builds are taking some pressure off of massive propane spikes this year. I am still calling for propane prices to climb, but hopefully not as high due to the unforeseen shutdown of exports from the hurricane.

Local retail prices on gas and diesel will continue to rise. Gas costs are increasing by almost 5 cents/day, so you will see street prices all over the place. I expect gasoline retail prices to hit almost $2.49/gallon by Labor Day and diesel retail prices will climb to $2.59/gallon. Propane prices climbed nearly 15 cents/gallon in August just as I predicted. I hope to see propane hold around these current prices going into September. If you have not contracted your propane for the heating season, please do so. After September 1st, propane contracts have the option of increasing in price.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

Thank You

Good morning,

I just wanted to say a quick thank you to all customers who came out and attended our Customer Appreciation Day at the Fort Bp in Portage. We have the best customers and could not be happier! Almost 500 people enjoyed a free pulled pork lunch with chips and cookies! Kids enjoyed the bouncy houses and the magician was a hit! Great fun was had by everyone. Thank you also to the employees who helped out and worked very hard to put on an enjoyable experience.

I wish everyone an enjoyable rest of the summer and we look forward to providing another year of excellent service to all of our customers!

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

WTI Unable to Hold Above $50

Good morning,

Crude oil continues it’s trend of volatility. Crude recently closed at it’s highest price since May. WTI experienced a rise from $43/barrel to $50/barrel based on weak dollar, OPEC future cutting, and a sprinkle of geopolitical issues. Oh, and not to mention the large amount of long calls from speculators that entered the market a couple weeks ago. After today’s weekly inventory report, crude is back below $49/barrel and not moving much. I believe that many market makers were able to buy in quick on the rally at the end of July and sell in August. Positions left the market yesterday, so clearly some short-term profit making to boost financials was on the agenda. In addition, OPEC’s numbers came out and compliance has eroded to below 75%/, down from 90% at the beginning of the year. Even with a proposed deeper cut from Saudi Arabia, it’s not big enough to truly cut into the glut. Basically it’s enough to hold the status quo. Although the amount of rigs coming online seems to be slowing up, we are still at peak production here in the U.S. I am still calling $45-50/barrel crude for the rest of 2017. Now here’s the potential geopolitical issues that could spike crude. Oil sanctions against Venezuela, conflict with North Korea, breakdown with China, sanctions on Iran, and overall supply disruptions from political unrest. However, I feel that these issues are already baked into the price of crude right now. In other words, we will continue to ride this bumpy tight trading range around $5 for some more time. The weekly EIA Inventory Report showed a 1.5MM barrel draw in crude (not that surprising), a 2.5MM barrel draw in gasoline (not that much for this time of year), a 200k draw of distillates (this is very small for this time of year), and a 1.7MM barrel increase in propane inventory (which still puts us at peak propane levels about 20MM barrels below last year).

In retail news, gasoline and diesel costs have risen dramatically due to the rise in crude. Gasoline retail is averaging around $2.21/gallon and diesel around $2.49/gallon. I expect diesel prices to climb at least 10 cents and gasoline another 5 cents in the coming days before the weekend.

The propane situation is still not pretty. Supplies are not building and prices are rising. Retail prices have risen and will continue to rise. As I have been saying since May, please fill your tanks now and contract your winter usage. This propane season is continuing to look like a bad year for price spikes.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

Inventories Fall, But the FED Pushes Dollar to the Positive

Good morning,

The crude oil picture continues to be interesting. OPEC has continued to push exporting of refined products with little drawdown in inventory, showing that the glut of crude is not curtailing as quickly as planned. However, the U.S. production is starting to peak and inventories of crude fell for the second straight week causing a knee-jerk rally earlier today after the sell-off Friday on the news of more rigs added into production. But then the dollar, which has been pounded recently, started to rally hard on news from Janet Yellen that rate hikes are going to continue to come. In other words; volatility, volatility, volatility. I still believe that we are going to see crude trade in the $42-48 range for the remainder of the year.

The weekly EIA Inventory report showed a 7.6MM barrel draw in crude inventories, a surprise build of 3.1MM barrels of distillates, a small draw of 1.6MM barrels of gasoline, and a less than stellar build of 1.7MM barrels of propane. As I stated earlier, and bullish reaction to this report has been capped by the FED reporting. The important number is the propane build. The build is still very weak in terms of the past week and holiday. Unless a surprise large build comes next week, I am holding firm on a future price spike in propane and supply tightness.

In local retail news, gasoline prices averaged around $2.15/gallon and diesel prices around $2.39/gal. Our summer-fill program has started for propane and we are currently at the lowest prices of the year! Please call now to have your tank filled and sign up for one of our contract options. I highly recommend everyone contracting this year due to limited supplies and the potential for large price spike.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

Propane Heating Contracts Released, Petroleum Prices Steady

Good afternoon,

I hope everyone enjoyed their 4th of July celebration and was safe. With a short week in trading and many traders on vacation, the markets were very out of balance the past seven days due to light volumes. However, news hit the airwaves that many OPEC countries, including Saudi Arabia increased exports in June. There is a delicate balance between the continued increase in exports and the production cuts. In addition, the U.S. seems to be hitting a peak in production and I think will be taking a breather for a bit. I don’t think we will see much change in the oil rig counts until we get through summer. The EIA released it’s weekly inventory report today, and although the results look bullish on the surface, crude oil gave back all the initial gains by the day’s end. The national crude oil inventories decreased 6.3MM barrels, gasoline decreased by 3.7MM barrels, distillates decreased by 1.9MM barrels, and propane inventories increased by 2.1MM barrels. The only disappointment in my opinion was the propane build. I was hoping with the holiday week, we might have seen that number closer to 2.5MM barrels. As propane inventories continue to lag, the crop drying situation continues to point more towards higher demand this fall. With inventories at historical lows based on demand, I am still calling for a price spike in propane this year regardless of price in crude.

In local news, gasoline prices have averaged out to about $2.15/gallon and diesel prices around $2.39/gallon. Propane summer fill is in full swing. I am highly recommending that everyone fill their tanks this summer. The current price is very attractive compared to future contract pricing. We also have released our contracts for next year. Please call the office now for current prices on summer fill and heating contracts.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

Short Covering But Market Dynamics Showing Headwinds

Good afternoon,

After weeks of downward momentum, crude oil finally found some support in the last couple of days on a falling dollar and draw in U.S. petroleum inventories. The data caused some traders to cover some short positions and in doing so has developed some support for crude prices. I am reluctant to call a “bottom”. Summer demand is in full swing and consumption has not been stellar. In addition, storage facilities on the East Coast are filling up and the oil rig count continues to rise. In addition, Nigeria and Libya increased production in June and even Saudi Arabia increased exports in June. Unfortunately, I am not seeing where demand is outstripping the glut of crude we continue to keep on hand. Therefore, I am calling the last few days as a short covering rally and nothing to be too excited about. I am still calling that we will not see crude above $50 by the end of summer. The EIA reported national crude inventory draws of 1.3MM barrels, gasoline draws of 900k barrels, distillate draws of 200k barrels, and propane builds of 3.9MM barrels. The draws were all in line with expectations and better than some. Propane’s large build was mainly offset by the tropical storm in the south. All exports were shut off due to the storm last week. So if you take that into account, the build in propane inventory was modest at best and still leaving us well behind the inventory levels needed for winter. I am still calling for a quick rally in propane prices at some point in the next two months.

In local retail news, gasoline prices are holding around $2.17/gallon and diesel prices are around $2.39/gallon. Propane is at the lowest price of the year. I recommend that everyone fill up their propane tanks this summer. I also recommend that everyone lock in their price for next year. There is a major risk of propane price spikes in 2017-2018 due to low inventories and the potential for larger than average crop drying demand.

As always, if you have any questions, comments, or concerns, please feel free to give me a call.

Best regards,

Jon Crawford – Pres.