Crude Oil Confusion

Good afternoon,

After retail prices touched the highest level since 2014, the crude oil rally has decided to take a breather. Saudi Arabia, Russia, and Iraq have all pledged to maybe relax production cuts because of sanctions on Iran and Venezuela. In addition, Iran is trying to work a deal the EU and China to keep the nuclear agreement in place without the U.S. Higher prices are starting to put a little dent on demand and crude inventory levels rose sharply in the U.S. last week. The U.S. also added another rig to the overall count and increased daily crude production to over 10.7MM barrels/day. And Trump’s talk of continued trade war with China is spooking the hot markets right now. On the bullish side, we are entering high volume driving season and geopolitical tensions with N. Korea and Iran are a bit unsettling. But from true supply and demand fundamentals, a surplus in crude production could be on the way which could wipe out $5-7/barrel on WTI.

Local retail gasoline prices have climbed over 2.84/gallon and diesel prices are approaching $3.19/gallon. These prices are getting people talking and we could not be more disappointed at the timing of these increases. Although based on the previous paragraph, hopefully these are the highest prices for summer and we go down from here.

Propane prices are very steady and we are recommending that everyone fill their propane tanks when they can. Based on inventory levels in the country, we don’t expect to see much of a price drop in propane prices this summer. Next season heating contracts will be out closer to the end of June. Please stay tuned for more info.

Have a safe and happy Memorial Day weekend!

Best regards,

Jon Crawford – Pres.

Buckle Up…

Good morning,

Well, the fear of Trump leaving the Iran deal and issuing sanctions became a reality this Tuesday. The fear of crude supply constraint, further Middle East tensions between Iran, Israel, and Saudi Arabia, and a potential for future war sent crude oil and refined product prices through the roof. Many analysts believe we might have at least $3-7/barrel more to go which would well push our retail price of gasoline over $3/gallon. I wish I had some good news to share or some optimism in regards to the coming weeks, but I do not. Expect prices to increase from where they are at until at least the OPEC meeting in the middle of June. By the time OPEC meets, we should have some understanding on the upcoming sanctions and their potential affects on the markets. For now, get ready to spend a lot more money at the pump for the summer.

Retail prices of gasoline and diesel continue to rise. I expect to see gasoline prices near $3/gallon in the coming weeks and the potential for diesel fuel to approach $3.50/gallon. These prices come at the biggest demand season in our country for farming and travel.

Propane prices have surprisingly stayed calm during this storm. Prices have gone up, but not at the same percentage as gasoline or diesel. I do believe that our current retail pricing is probably going to be close to summer fill prices, and next season’s contracts will be about 15 cents/gallon more than last year. Considering that crude and refined product prices have gone up 47% in price compared to last year, the increase in propane seasonal contract price is potentially only 13%. Therefore, propane heating contracts are offering good value in comparison to other refined products. Contract prices will be released in June or early July.

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

Best regards,

Jon Crawford – Pres.

Waiting Game

Good morning,

The crude markets are now in a “wait and see” pattern. Little bits of info here and there are moving WTI prices above and below $67/barrel with no clear direction until Trump makes up his mind on the Iran nuclear deal. Missiles in Syria again, as well as small attacks in Saudi Arabia caused a small uptick price, but then the continued increase in U.S. production put the brakes on the rally. We are seeing the highest prices at the pump prior to the last crude oil market collapse in 2014. Therefore, we are going to need a major event to take us higher, but any jitters to cause selling could move WTI prices down over $5/barrel. The market is so fragile right now and rattling with anticipation looking towards the middle of May. So for now, it’s a waiting game and we are all going to pay more at the pump in the meantime.

Retail gasoline prices are approaching $2.70/gallon and diesel prices are around $3.09/gallon. I expect to see these prices continue for at least two to three weeks.

Propane has been unable to really build any inventory due to the cold April. Therefore prices are not dropping as much as expected with the warmer weather on the way. In addition to the lack of building inventory, exports continue to be healthy. Comparing current propane prices to crude prices past, propane currently has good value. Therefore, I don’t think that summer fill prices will be much lower than today’s retail price unless we see WTI crude prices collapse back down to near $60/barrel. Summer fills and next season’s contracts will be released in a couple months. Stay tuned for more info.

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

Changes in Behavior

Good morning,

I’m going to keep this short and sweet so you can get back outside and enjoy the spring weather that finally arrived!

Crude prices are continuing to stay at the highest levels since 2014 and WTI is preparing to break through $70/barrel. Gasoline retail prices are now over $2.50/gallon and diesel retail prices are over $3.00/gallon. Historically, these prices mean that customers start to consider changing behaviors. The amount of “free spending” money that has been sucked out of the economy due to these price increases is staggering. Based on the amount of gasoline gallons sold per day (this does not even include diesel fuel), $300,000,000/day additional is now being spent on gasoline compared to when gasoline prices were at $2.00/gallon! The increase in money spent on fuel is going to catch up quickly to consumer spending behaviors. Right now the risk premium is still on for crude. We need about $8/barrel to come off of crude prices to get cost back in line with consumer sentiment. But I don’t see a possibility of that happening until we get through the Iran nuclear deal deadline in the middle of May. So for now, be prepared to spend your extra cash on gasoline.

Propane prices have skyrocketed in the last week due to do increased demand in April and lack of building inventory. I don’t expect to see retail prices go much lower, if at all, over the coming two months. Next year’s contract pricing will be released probably in June. Summer fills are probably going to be very close to today’s prices. More information will continue to be released and updated.

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

$70 WTI By End of April?

Good morning,

Crude oil prices have been on an absolute run this week. Continuing from the Syria attacks, crude prices continue to find bullish support in geopolitical tensions. Traders are worried that Trump will pull out of the Iran deal and cause 500k barrels of crude to come off the table which would put the market into deficit by end of summer. In addition, physical inventories in the U.S. dropped to four year lows this week. Then after WTI broke through $67/barrel, Saudi Arabia came out and said that they would love to push WTI crude past $70/barrel towards $80/barrel. Seems like no matter what anyone says that can be interpreted as bullish for crude, traders are finding tread to grind prices higher. An interesting fact though is that the U.S. increased production to another record and is now pumping 10.6M barrels/day of crude. We are getting very close to over taking Russia and our increase in production is happening much faster than expected. At these rates, without any change in supply disruptions from the Middle East or Venezuela, the world crude oil market will start to move into surplus inventory building by the end of the year or sooner. In other words, a major correction could be on the horizon towards the end of the year. I just don’t see what has drastically changed in true physical crude fundamentals to cause a $10/barrel spike in prices. But for now, we are holding on tight until the end of the month.

In local news, spreads in gasoline prices are all over the marketplace. The fact is that gasoline and diesel prices have gone up. I expect to see gasoline prices well above $2.49 gallon, and diesel prices above $2.89/gallon.

Propane has steadied out due to the massive increase in demand for April. We are officially experiencing the coldest April on record which is very supportive of propane prices. Like crude oil, we are hanging on tight until the end of the month and then reevaluating. Information on summer fill and next season’s contracts will follow at some point in June.

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

Syria Premium in WTI

Hello,

As the trade war potential with China was cooling and putting a little floor on WTI around $61/barrel, President Trump tweeted aggressive responses in Syria and taunted Russia. With stability in Syria being very fragile at the moment, the tweets from President Trump caused an immediate $5 premium to be added on to both WTI and Brent, along with a 20 cent per gallon increase in cost of both gasoline and diesel. Until we hear what the U.S. is going to do in Syria, we will hold these numbers. If we decide to not escalate the situation any further, traders will sell the news and back down towards $60 WTI we will go. Regardless, for right not it’s sit tight until maybe the end of the month.

In local news, retail cost of gasoline and diesel both increased near 20 cents/gallon, so I would expect to see retail prices climb.

Propane prices are nearing the lowest of the last six months. However, demand has been very high this April. I would expect to see summer fill prices not start until towards the end of May at this rate. More info to come over the coming weeks.

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

Jon Crawford – Pres.

Trade War and Geo-Political Tensions

Good morning,

Well, the game of Ping-Pong continues on the crude market. This week, due to the fears of a trade war with China, WTI crude took a dip to it’s lowest close in almost six weeks. In addition, geo-political concerns in the Middle East and North Korea seem to have taken a back seat to the talks on Chinese tariffs and NAFTA. Like the DOW, WTI has been very volatile this week. WTI seems to have a bit more momentum to push back towards $60, but there are still a lot of long positions on crude that would need to unwind. Also, a cooling of the economy coupled with a week dollar will put the crude trade in an interesting position now the China is trying to push crude purchases using the Yuan. If demand erodes and the dollar tanks, it will be interesting to see how crude reacts.

Retail prices on gasoline have stabilized for now. Summer pricing for gasoline is now baked in to our cost. So now we should see retail move more based on crude. Diesel is done with winter blending so pricing will be most affected based on demand going into planting season whenever this cold weather ends.

Propane futures hit an excellent entry point and most suppliers entered positions for next winter. As I’ve stated before, so far we are seeing contract prices for next heating season very close to this season’s prices. Please make sure to check your tank if you are on will-call delivery service with us. This cold weather has caused a late season demand that most people were not prepared for. Summer fill and next season’s contracts will be out in a couple of months. More info to come.

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 Easter!

Good morning,

I would like to wish everyone a safe and happy Easter weekend. I know the weather is colder but I hope family time is fun and enjoyable.

As far as the markets go, WTI crude has settled down. The geopolitical issues have relaxed and WTI closed below $65/barrel this week. Whew!… I hope that we have peaked on crude pricing going into the spring. With the close of Q1, we will see if there is some profit taking on the WTI trade starting in April. Crude inventories did increase this last week. And although refinery maintenance has been minimal keep utilization high, crude production ticked up another 100k barrels/day last week. Right now the U.S. has Russia production levels in their sites. We might be able to surpass Russia by the end of the year which could put the OPEC deals in jeopardy.

In local news, gasoline prices have peaked going into the Easter weekend. Diesel prices have remained somewhat flat. With the change in RVP to summer on gasoline, I don’t expect to see prices come down on gasoline until WTI drops in price.

Propane prices have been steady due to the cold weather. I am expecting to see good demand yet through mid-April. Hopefully we will see some more price relief on propane going into May. More info on summer fills and next year’s heating contracts will be coming out in few months.

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

Best regards,

Jon Crawford – Pres.

Geopolitical Nightmare

Good morning,

I was out of the office for a week and it’s amazing how volatile the crude market is right now. Two weeks ago we were just about to break back down below $60/barrel on WTI. Two weeks later we are sitting above $65/barrel! In fact, the last three trading sessions were the largest increases on WTI in trading since November of 2017. Most of this was driven by a surprise drawdown in crude inventory here in the U.S. as well as geopolitical tensions in the Middle East. Right now Saudi Arabia is demanding that Iran be curbed further from nuclear development or else they will develop a nuke. The Crown Prince is meeting with Trump to decide how to proceed with Iran. Some are thinking that the tensions could lead to sanctions on Iran and diminish Iran’s output causing world levels of crude inventory to go into deficit, riding the back of Venezuela’s significant decline. However, I do not believe that Iran’s customers would follow through with sanctions, considering that they like the current deal with Iran. Since Iran was agreed upon to open its doors for crude sales, China, India, and Europe are now buying more crude from Iran than ever before. With Iran’s steep discounts and trying to gain market share if possible, I do not see these countries following a lead by the U.S. in calling for sanctions. This is the largest geopolitical development since the middle of the Syria conflict when Russia and the U.S. got involved. Although I think this is significant news, I do not think there is enough “news” to push crude much higher. The inventory projections from both the EIA and IAA change every week. I agree with the thought that WTI crude will continue to trade in the $60-65/barrel range. However, my call of a “calm spring” for planting season is now a bit shaken. I am now urging some to cover costs in spring just a bit to be safe. And the last bit to remember is that we are coming to the end of Q1 and if crude prices hold, some traders might “ring the register” on a nice start of the year bump in profit and move money elsewhere. That would not be the first time we see the “selling in March” scenario.

In local retail news, gasoline prices have spike due to the change in RVP for summer. I believe that the retail price of $2.49/gallon will be about the peak for now. Where we go from here will all depend upon crude pricing. Diesel prices are jumping all over due to market volatility and street price volatility unwinding from winter blends. As with gasoline, the current prices will probably hold unless crude can find some legs and break out to the highest close of the year.

Propane has bounced back up off its lows with the increase in crude. We are still hoping to be able to lock in prices for next heating season very close to what we were at this year. Right now there is not much value in future prices until the market can digest this recent uptick in crude prices and the unwinding of winter heating demand. More information to come in the following months.

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

Almost Back Below $60

Good morning,

Not too much to report this week. WTI crude oil is dancing with breaking back down below $60/barrel. A stronger dollar and continued increases in crude production and products in the U.S. is putting pressure on prices. Although OPEC is really pushing the success of their agreed upon agenda, I am skeptical the agreement will hold for the rest of the year. The good news is that if we continue on this path, we will have descent retail prices across the country for the year which is good for the economy. I think that we are back in a pattern where any bit of news is going to push us either to $59/barrel or $64/barrel on WTI. So until anything drastically changes, we are going to dance back and forth for a while.

In local news, we are seeing diesel prices starting to fall with the price of crude as well as major winter blending components coming out of the market. Gasoline prices are holding a bit steady with a small concern on supply going into spring with refinery maintenance. I don’t see any major price spikes in gasoline ahead, just not as big of a drop as expected in relation to crude.

Propane prices are continuing to drop with the winter starting to wind down and major deep freezes behind us. I expect contract prices and board prices to even up by the middle of April. As far as next year goes, we are seeing prices for next winter being very good in comparison to this year. Contract information and summer fill prices will be released sometime after June. More to come.

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

Best regards,

Jon Crawford – Pres.