Tanking Dollar Causing Crude to Rise

Good morning,

WTI crude oil prices continue to rally on a tanking dollar thanks to the inconsistent comments by US Treasury Secretary Steve Mnuchin. The comments caused one the largest one-day drops in dollar value yesterday which in turn caused WTI crude to rally over $1. As the strength of our dollar declines, commodities such as WTI crude will rise in cost causing higher prices at the pump for gasoline and diesel. In addition to the tanking dollar, U.S. crude oil inventories declined for the 9th straight week. But there is much more to that story. U.S. inventory levels of gasoline and diesel are staying at high levels. Our exporting of crude is staying consistent at 1M barrels/day, but our production is increasing. Basically, we are warming up for a potential snap in crude inventories. If OPEC breaks from cuts or Venezuela ramps up production, there is not enough demand in the world to clean up the surplus. Pair that with the MOST hedge fund long positions EVER in WTI futures history, and we are setting ourselves up for a massive pop. I think $70/barrel on WTI will be the breaking point unless something happens sooner. The entire crude market feels like a boiling pot of water ready to boil over. Looking at technicals, I’m still seeing WTI crude around the $55/barrel mark. I am still holding my position that it’s only a matter of time before the hedge fund managers ring the cash register and move their money somewhere else.

In local retail news, as stated before, the tanking dollar is causing gasoline and diesel prices to rise. Diesel prices with proper winter blending are holding above $3.00/gallon, and gasoline prices are holding above $2.45/gallon on average. Unfortunately, I do not see any give on these prices until the dollar recovers or the futures positions exit the market.

Propane is on course to see lower prices in February if the temperatures stay warm. Right now prices are still well above contracts, so customers who contracted are saving money so far this winter. We are not making any predictions on propane prices for summer or fall of 2018 until we see some direction on the dollar and WTI.

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

Jon Crawford – Pres.

Same Old, Same Old

Good morning,

Well, not much has changed since last week. The news on the open market is fairly calm. However, hedge fund managers are enjoying making their predictions of where WTI might head this year. My feelings are that WTI is over bought. There has not been this much hedge fund money on long position in the crude market since 2013. No wonder all the news is trying to “push” the market higher! I’m not sure without a major even there is much steam left in the crude rally. Russia is starting to float the idea of leaving the OPEC deal. When that event would occur is up in the air. Possibly at the June meeting or sooner is my guess. Now that prices of crude have gone higher than anticipated, I am watching for someone in OPEC to start the old fashioned cheating game. In addition, if we can make some moves to get the strength of our dollar moving positive, crude will also face another headwind. Even though crude inventories continue to fall in the U.S., production is starting to grow again. Finished product inventories are above average, and I expect to see some builds in crude inventories soon. I’m just not sold that we are truly at these prices based on current market conditions. I guess time will tell!

In local news, gasoline prices bumped up a smidge due to local Chicago market differential jumps. Diesel prices have continued to remain in a tight range. Propane prices ended up climbing a small amount due to some unanticipated supply disruptions. However, due to the warmer weather and forced allocations, supply is starting to ease back to normal. I am thinking that we are at about the peak price for the year. As I have said before, if warm weather continues into February, I expect to see propane prices fall. Exports of propane are not holding up to what was expected and demand is actually off a bit.

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

Best regards,

Jon Crawford – Pres.

Crude Exuberance

Good morning,

Well, the stock market exuberance bug seems to have found its way into the crude oil market. Crude prices continue to climb with bearish fundamentals forming. At the moment, geopolitical tensions have eased in major oil production areas. Asia has cut imports on crude due to high costs. This will cause imports of refined product to increase, but the world is very rich with refined product at the moment due to great refining margins from the U.S in particular. The U.S. continues to move in the direction of more production and increasing refining capacity. Also, the fundamentals on the crude oil charts are shaping up exactly as they did in September 2014 right before the November bloodbath sell off. The ratio of long positions versus short has hit levels not seen since 2014. Therefore, the recent rise in price is based somewhat on an emotional movement. We all know that OPEC will not extend cuts any further. And some members are starting to complain that prices are now TOO high. Imagine that! So the first person to blink in the coming weeks could trigger up to a 15% sell-off in my opinion. Personally, I believe that WTI crude oil is about $10/barrel over bought. I’m thinking that February could be an interesting month. More to come on this in the following weeks and month.

As crude prices continue to climb, prices at the pump are following. Since the start of the year, base cost on gasoline has increased almost 9% causing gasoline prices to move towards $2.39-2.49/gallon. Diesel retail prices have also climbed, especially as winter blending elements such as #1 ULSD have increased in premium. Diesel retail prices for the most part are over $3.00/gallon.

Propane prices have steadied since the three week cold snap. Propane exports are looking to dry up in February due to cost fundamentals and lack of demand in Europe. There is now a possibility of seeing propane retail prices drop in February. It’s amazing how fast the propane situation can change since we now can export up to 1MM barrels/day of propane. If the exports dry up, we can build inventory quite quickly if the winter is mild. The exporting game has become quite the wild card in the U.S. propane trade.

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

There is NO Propane Shortage in Wisconsin

Good morning,

There was an announcement late last week from the Governor’s office issuing an Executive Order lifting the Hours of Service limits on drivers delivering propane due to a shortage. The information released was not true. The press releases misunderstood the actually problem. The problem we are facing is a transportation issue, not a shortage of propane issue. Due to the high volume demand from the longer than expected cold snap, most propane terminals have put customers on allocation to make sure that all Wisconsin companies have steady access to propane. With allocations in place and some terminal areas running low, long lines can form at these terminals. A driver’s logged hours include the wait time to load. Under these circumstances, most drivers fill their log book waiting in line and not delivering propane. So the Executive Order lifts the hours mandate so drivers can deliver the propane after waiting in line. Lifting these restrictions also allows companies such as Crawford Oil and Propane to deliver extra hours at night and on the weekends. We delivered over the weekend last weekend and we will probably do so this weekend in order to stay on top of all our orders and take care of our customers.

I have also included a link below to an article from the Wisconsin Propane Gas Association retracting the information in regards to a “shortage”.

http://wxpr.org/post/no-shortage-propane-driver-shortage-led-walker-order#stream/0

We have received many phones calls about a potential shortage. The media coverage on the issue has also spurred additional “panic buying”. I wanted to make sure you all knew that the current situation is transportation and logistically due to high demand, and not a shortage of propane coming to Wisconsin. Please keep this in mind as you order. Our crew is extremely busy and working overtime to meet the demand of this cold snap and panic buying based on news of a false shortage. We are meeting all demands of our customers at this time and see no issue with access to product. We expect to be all caught up by the end of the weekend.

Once again, thank you for your business and 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

Happy New Year!

Good morning,

I just wanted to take a quick moment and thank everyone again for their business in 2017. The year had a lot of up’s and down’s, but overall turned out pretty well with all things considered. I am optimistic looking into 2018 and feel prepared to take on the potential challenges. I wish you all a safe and happy New Year celebration, and I look forward to servicing and helping our customers achieve a successful 2018!

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

The Grinch Who Stole Christmas Gas Prices

Merry Christmas everyone!

Geopolitical news has been very quiet going into the end of the year. Crude prices rallied a little with the shutdown of the Forties Pipeline in England that carries 400k barrel/day. The tax cut bill from Congress really ate up the news cycle of this week. But as predicted last week, retail prices were falling and stabilizing to the lowest of the last 2 months. We were seeing lower prices coming for Christmas which always makes for better holidays. In fact, historically prices usually fall before Christmas.

But unfortunately the Grinch showed up this Christmas…

http://peoriapublicradio.org/post/high-gas-prices-greet-holiday-motorists#stream/0

Please read the article posted above. In Chicago, the Exxon/Mobil and Marathon refineries went down and were unable to be fixed. The issues are being kept very secret. However, from the contacts that I have in Chicago, the outages are expected to remain for the first couple weeks of 2018. These issues sent the spot price of gasoline rocketing up 30 cents/gallon in Wisconsin, Michigan, Illinois, Indiana, and Ohio. So unfortunately, the Christmas gift of cheaper fuel as in years past was stolen by Exxon/Mobil and Marathon.

I expect retail gas prices to edge up closer to $2.49/gallon and diesel prices near $3.00/gallon. These prices could hold for up to two to three more weeks. Once Exxon/Mobil and Marathon are back on line, gasoline spot prices will drop fast. I will keep you updated as information is released.

Propane prices are very stable due to the overall lack of winter demand in the country. Here in our neck of the woods, we are a bit colder than last year. However, we are still not that cold in comparison to four or five years ago. For now supplies and prices are stable which makes the delivery logistics much easier for the industry.

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

U.S. Crude Production Predicted to Surge in 2018

Good morning,

Happy Thursday. Oh, what a difference a week makes. For the past few weeks the markets have been digesting the OPEC cut extension set to move through 2018. These cuts are looking to remove a giant glut of crude in the world marketplace and bring the fundamentals back into a shortfall scenario. The “fly in in the ointment” is non-OPEC production in 2018, and most importantly the United States. The IEA came out with a bearish report for crude going through 2018. The IEA predicts that the non-OPEC supply of crude will rise to 1.6MM barrels/day versus the 600k in 2017! This incredible surge in production could potentially wipe out the cuts from OPEC by mid-year in 2018. OPEC concurred that the non-OPEC production, particularly from the U.S. is of concern. One potential scenario is that if crude grows to surplus inventory again, Saudi Arabia and Russia will go toe-to-toe. Russia will want to increase production to flood the market and wipe out future production for the U.S., and Saudi Arabia will threaten to cut as much as Russia over-produces to keep the market in balance. Saudi Arabia likes the current crude price for their IPO offering in 2018, and Russia does not like this price because the U.S. is starting to take their customers.

In local inventory news, the EIA showed another dramatic drop in U.S. crude inventories, but an incredible build in gasoline. The offset displays the robust refining margins on the current crack spread for WTI and the WTI/Brent spread for export. Propane inventories actually showed a small increase during one of the highest potential demand months of the year. Propane markets are starting to sell off a bit due to the lack of demand events that were predicted. We are not in the “falling knife” scenario yet, but if January doesn’t get cold, I expect propane prices to fall dramatically.

In local news, gasoline prices continue to remain stable and fall slightly averaging around $2.25-2.29/gallon. Diesel prices remain below $3/gallon, even though most sites are using winter additive and #1 oil for winter blending which increases costs. I predict gasoline to be around $2.25/gallon for Christmas. Propane prices are starting to move downward, but still well above contracted prices. Therefore, all customers who have contracted their fuel have done very well in the first half of winter. January through March is yet to be determined as demand has yet to show itself due to warmer temperatures.

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

OPEC and Russia

Good afternoon,

Well the buildup is finally over. OPEC and Russia met today and decided to extend production cuts through 2018. After days of potential pullout from Russia, everyone came to the table and announced the agreement today. The markets did not react with any positive bounce. In fact, the extension sort of holds a “business as usual” tone. The extension agreement has been baked into crude prices for some weeks now. Now had OPEC and Russia cut more, you would have seen WTI jump through $60/barrel. Based on the results of the meeting today, I am now calling for WTI to trade in the $55-60/barrel range through June of next year. The US had large builds in gasoline and diesel inventories after a drop in crude inventories. The build in finished product is showing that refinery runs are good and the US is going to be going to market with product. So Russia and OPEC are going to have to concede market share to the U.S. I am hesitant that Russia will hold these cuts for the entire year. Russian oil companies will struggle to lose customers to the U.S. for a long period of time.

In local news, the Keystone Pipeline restarted and Chicago refineries all came back online. These announcements caused a massive drop in spot prices in Chicago as we moved to the next refinery cycle timing. I would expect to see diesel prices average around $2.85 and gasoline get down to $2.30/gallon very soon. Hopefully these will hold and we can all save some money during the Christmas and New Year’s travel season.

Propane prices have been holding steady. Supplies are in better condition with pipelines reopened and a drawdown in corn drying demand. Propane inventories had a smaller than expected draw today which surprised the market. The weather is going to truly dictate the price movement in propane. Any drop in crude prices will not affect propane if temperatures drop back to normal. As a reminder, please call in your propane order when your tank is at 30% or higher to ensure we have up to five days to get there during the busy season.

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

Happy Thanksgiving!

Good morning!

Crawford Oil and Propane hopes everyone had a safe and enjoyable Thanksgiving! We are so thankful for all of our customers and a safe delivery season in 2017. We look forward to another safe and successful year in 2018!

Jon Crawford – Pres.
Crawford Oil and Propane

Some Cold Water on the Rally

Good afternoon,

Last week crude oil prices skyrocketed based on Saudi Arabia causing unrest in the Middle East, the OPEC forecast for increased demand in 2018, drop in U.S. inventories, and talk of OPEC keeping the current cuts on the book until the end of 2018. Long positions on crude entered the market last week in record numbers and caused panic buying to push WTI price above $57/barrel. Most of the news agencies and pundits called for $60/barrel by the end of the year. I was a bit skeptical of how fast we moved, but I did write that if what was discussed last week were true, then yes, $53/barrel in WTI might be then new bottom action for price. Well, what a difference a week makes. This week, the IEA came out with their demand forecast. Their numbers are 600k barrels/day lower than OPEC’s forecast! The discrepancy is very notable and put many investors on their heels. In addition, the U.S. incurred over a 5MM barrel build in crude oil. I was concerned that possibly we were still catching up on post hurricane production. Clearly, we were still catching up. Also, the U.S. added more rigs to the production picture and will probably break the daily barrel/day production level record by year’s end. The IEA does not see where demand will outstrip production in the first half of 2018, even with current cuts in place from OPEC. That being said, even if OPEC continues with cuts as is, future prices will not be greatly affected. The news this week put a quick cooling to the rally. In fact, WTI has the potential to fall back below the support price of $55.barrel by week’s end! OPEC now has some major thinking to do because just extending cuts might not be enough to keep Brent above $60/barrel.

In local retail news, gasoline prices have finally eased back below $2.49/gallon. Diesel prices are now well below $2.99/gallon. The Chicago market is continuing to give back it’s earlier gains from supply disruptions. I expect to see prices fall a little bit more into next week, which is good news for the Thanksgiving travel week.

Propane prices have actually climbed a bit in the past week. With current cold weather and the highest demand for corn drying in five years, propane supplies were tight and prices followed suit. We are now at the highest delivery price in over two years. If warm weather and crude prices ease by month’s end, we could see a little relief on price in this recent propane rally.

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