Good morning,

Happy Friday! Crude oil prices are on track to close their second consecutive week with a loss. Inflation remains a concern in the U.S., prompting the Federal Reserve to maintain its pause on interest rate cuts. Surveys from major banks now indicate a 25% chance of a potential rate increase. This decision has kept the dollar firm, helping stabilize crude oil prices.

The continued price decline this week is largely driven by concerns over weakening demand in China and the impact of Trump’s proposed tariffs on the global economy. Additionally, Trump has reiterated his commitment to keeping crude oil prices low by any means necessary. However, crude oil prices leveled off toward the end of the week as bullish data entered the market. Kazakhstan announced that OPEC should remain united and resist engaging in a price war for market share. A price war could drive crude oil prices down significantly, creating a scenario where no country benefits. If energy companies start losing money on crude oil production, they may attempt to recover losses by increasing the price of gasoline and diesel. If these fuel prices rise globally, the risk of a recession increases, which could further reduce crude oil demand and force companies to raise finished product prices even higher. In short, a supply war for crude oil market share could create turmoil in the global economy.

In other news, Ukraine continues to target Russian refineries, raising concerns about potential export disruptions. Meanwhile, Trump is considering imposing tariffs on Canadian crude oil imports. If enacted, these tariffs could increase Midwest refining costs by 25%, likely leading to higher gasoline and diesel prices. Trump is also weighing the possibility of placing a 25% tariff on Mexican crude oil, revoking Chevron’s license to operate in Venezuela, and imposing sanctions on Venezuelan crude oil. These actions would have a significant impact on Gulf Coast refineries, which rely on imported heavy crude. The shale oil produced in the Permian Basin does not meet refining specifications for these facilities, just as Bakken crude oil is not compatible with Chicago-area refineries that serve the Midwest. If these tariffs and sanctions move forward, refiners east of the Rockies may struggle to secure the appropriate crude oil imports to maintain production levels. As a result, gasoline and diesel prices could rise. For now, the industry is in a holding pattern, awaiting Trump’s final decision expected tomorrow.

In local news, gasoline prices increased slightly as refiners prepare for potential tariffs during the upcoming peak demand season in spring and summer. However, I do not anticipate significant price fluctuations at the retail level, as margins have remained strong amid ongoing volatility and market uncertainty. Diesel inventories have declined, yet diesel prices have dropped over the past week due to tariff concerns. While tariffs could increase costs, many traders expect that higher prices will reduce demand. A slight decline in diesel retail prices is possible, but any movement is likely to be minimal.

Propane prices continue to trend lower as supply disruptions east of the Rockies improve. The extreme winter weather, which drove demand spikes as far south as New Orleans, had caused spot price basis to rise dramatically. However, with basis levels shrinking, I expect retail propane prices to decrease in the coming week. As always, please ensure your driveway is free of snow and ice and that there is a clear path to your propane tank. This will help our drivers make safe and efficient deliveries when you need a refill.

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

Best regards,

Jon Crawford

Good morning!

Happy Friday! The big news this week was the inauguration of the 47th President, Donald Trump. Wasting no time, President Trump began implementing his agenda, which includes expanding access to American fossil fuels. Following the inauguration, WTI crude oil prices dipped below $75 per barrel for the first time in several weeks. Many traders sold on the news, influenced by indications that Trump may impose fewer tariffs on China and other countries than initially expected. His stated approach is to limit tariffs wherever possible while keeping the option to increase them if necessary. Trump also called on OPEC+ to increase production, though the request seemed to fall on deaf ears. Geopolitical developments added to the mix, with the Houthi rebels announcing they would cease attacks on ships in the Red Sea and Iran stating they will no longer pursue nuclear weapons. Additionally, China expressed a willingness to negotiate with the Trump administration. Trump has also prioritized refilling the U.S. Strategic Petroleum Reserves and increasing petroleum product exports. Overall, the tone in the crude oil market is leaning bearish. Chinese demand remains weak, and while NATO and Trump disagree on the best approach to ending the war in Ukraine, there is an increasing sense of urgency to bring Putin to the negotiating table. However, negotiations with both China and Russia are expected to be more challenging this term, as their economies have become more interconnected under the pressure of global sanctions on Russia. For now, crude oil prices are stabilizing and have shifted into a “wait-and-see” mode.

The Chicago spot market mirrored the dip in crude oil prices this week. As a result, I expect retail prices of gasoline and diesel at the pump to decrease slightly. However, with lingering uncertainty in the market, any decreases may happen gradually.

Propane prices saw a spike during the recent cold snap due to increased index prices from suppliers. Thankfully, supply distribution is beginning to improve across the East of the Rockies. I anticipate propane prices could ease in February as January contracts expire, distribution issues improve, and temperatures return to normal winter levels. As always, we kindly ask that you keep your driveway clear of ice and snow and ensure there is an accessible path to your propane tank. This helps our drivers make safe and efficient deliveries.

If you have any questions, comments, or concerns, please don’t hesitate to give us a call. Have a great weekend!

Best regards,

Jon Crawford

Happy Friday!

Today I felt like paying respect to the loss of “Mr. Baseball”, Bob Uecker this week. Ueck was a pillar of Wisconsin his entire life of 90 years. Wisconsin and baseball in general will never be the same. Thank you “Mr. Baseball” for amazing memories my entire life. His famous line, “juuuuuusssst a bit outside” fits in perfectly with the crude oil trade this week. WTI crude oil prices continued their frothy run higher and look to close the week on a continued four-week gain. WTI broke through the psychological ceiling of $80/barrel for a brief moment. But the rally above $80/barrel seems to be “juuuuusssst a bit outside.” Although sanctions on Iran and Russia look to tighten, the amount of crude oil trading in the market is still long. China announced that their yearly GDP of 5% was right in line for 2024. I do not believe any economic data that comes out of China. A survey released this week announced that most citizens in China feel worse off today than two years ago. China also decreased refining of diesel fuel in 2024. The decrease is a strong signal of recession. China continues to announce large economic stimulus into renewable energies. The plan is that if the cost of energy continues to decline, the low cost will spur economic development. Under the upcoming Trump administration, there is a reluctance to allow China to do business in America, as well as strict guidelines for US companies doing business in China. For example, TikTok looks to be shutdown this Sunday. Trump is taking security measures against China very seriously. In summary, I do not believe that China is firing on all cylinders. Therefore the decline in Russian crude oil purchases due to sanctions from the US is sort of irrelevant.

Israel and Hamas announced a ceasefire deal this week along with some prisoner swaps. Yemen piggybacked on the deal and stopped attacking ships in the Red Sea. Geopolitical events seem to be taking a break as Trump takes office on Jan 20th. My belief is that the “Trump trade” is in a bit of caution. Traders and big banks alike are taking a pause and biting their nails as announced policies from Trump on day one are jumping all over the place. Next week is going to be very interesting to say the least. I honestly have no prediction on commodities for next week. I do believe that most trades will move on emotions rather than economics. Again, I would like to reiterate that I believe the world will move to “surplus crude oil” in 2025.

In local news, Chicago spot basis continued to jump all around this week. In good news, spot basis in Chicago compared to Group spot basis has balanced out. Diesel in Chicago spot is over 30 cents/gallon cheaper than the NYMEX Heating Oil Contract. Therefore, that means Chicago is very long on diesel. However, that did not stop diesel prices from rallying much higher along with the price of crude oil this week. Gasoline prices also followed diesel prices higher this week in Chicago. Unfortunately, I do expect to see retail prices of gasoline and diesel at the pump move higher next week. Our area is expected to have extreme cold next week. In my opinion, if you are running diesel trucks over the road, a winter-blended diesel with some #1 oil will be needed. Monday will truly be a test to see which companies and gas stations blended their diesel properly over the past week.

Propane prices have soared higher. The extreme cold across most of the East of Rockies has caused a bit of supply disruptions. There is not any shortage of propane. There are just distribution issues on pipelines and railroads. The spike in price should be short lived once the colder than average temperatures leave the area. I expect to see these higher prices through mid-February. Again, please make sure to keep your driveway free of snow and ice, and have a clear path to your propane tank. Also, if you are a will-call customer, please keep an eye on your tank over the coming seven days. We want to try and ensure that everyone stays safe and warm next week.

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

Best regards,

Jon Crawford

Good afternoon,

Prices of crude oil surged today, with WTI breaking through the psychological ceiling of $75 per barrel. Since the start of the year, options on crude have shifted from predominantly short positions to long ones. Interestingly, market fundamentals remain largely unchanged since the beginning of the year. This rapid shift in trading sentiment raises the possibility of a quick profit-taking rally followed by a subsequent price correction.

The recent momentum in crude oil prices is being fueled by geopolitical factors and speculative activity. The Biden administration has imposed the toughest sanctions yet on Russian oil flows, with Trump signaling support for these sanctions and potentially even tougher measures. However, the reported drop in Russian exports last month was due to infrastructure issues, not demand shortages. Russian crude oil will likely continue reaching markets, particularly in China and India, as it has for the past two years. Despite trader optimism, China’s economic data remains weak. Efforts to stimulate the housing market are faltering as consumer demand for housing remains low. Reports suggest China’s GDP growth may be closer to 2.5% rather than the officially stated 5%. This indicates that crude oil demand from China may not increase as traders are hoping.

Trump’s threats of a 25% tariff on Canadian commodities, including oil, could cause gasoline, diesel, and propane prices to spike for about one-third of the U.S. market. However, Canada’s ability to sell these products overseas makes such tariffs unlikely. It’s more probable that this issue will be resolved diplomatically. Trump has also proposed unprecedented sanctions on Venezuela and Iran, with plans to request Saudi Arabia to fill any gaps in supply. This could create tensions within OPEC+, as UAE and Iraq are poised to increase production. If Saudi Arabia moves to pump more oil, it may encourage other OPEC+ members to do the same, potentially offsetting any supply concerns.

From a broader perspective, this appears to be a psychological bull run. I believe those who exercise patience will benefit, as market fundamentals do not currently justify a sustained upward trajectory. If energy costs were to rise significantly, it could lead to political backlash and further complicate the situation.

In our local Chicago spot market, the spot basis has dropped slightly, but the rise in crude oil prices has pushed costs higher overall. After today’s rally, I expect pump prices to remain stable in the coming week. With potentially extreme cold weather in the forecast at any moment during a Wisconsin winter, ensure your diesel fuel is properly treated to handle Wisconsin’s unpredictable winter conditions.

Propane cost rose this week, prompting an increase in retail prices. While the market has stabilized for now, we will monitor developments closely and hope to avoid additional retail price increases next week. As a reminder, please ensure your driveway is clear of snow and ice and that there is a safe path to your propane tank. This allows us to make deliveries safely and efficiently.

As always, if you have any questions, please don’t hesitate to reach out.

Have a great weekend!

Best regards,

Jon Crawford

Good afternoon,

I hope everyone had a safe and enjoyable holiday season!

With most traders back to work, the markets are starting to pick up, though liquidity remains relatively low. WTI crude prices closed 2024 lower than where they began the year, and many traders are now buying in, hoping to capitalize on a short-term uptick to start 2025.

Headlines at the beginning of the year are attempting to push crude oil prices higher with claims that:

• Chinese demand is poised to surge.
• Trump-era economic policies will boost U.S. demand.
• Potential sanctions on Iran and Venezuela will tighten the market further.
• However, I remain skeptical of these narratives for several reasons:

While China is implementing policies to spur demand, the country’s crude oil reserves are already full. Even if demand rises, it will take time before imports increase significantly.
U.S. Production: The U.S. is currently producing 13 million barrels per day (bpd) and has the potential to add another 3 million bpd in 2025.  OPEC+ Spare Capacity: OPEC+ is holding back nearly 10 million bpd, with Saudi Arabia accounting for 6 million bpd. If needed, these reserves could quickly be brought back to market.

There is also the discussion of sanctions on Venezuela and Iran.  Both countries have found ways to navigate sanctions effectively, similar to Russia’s strategies over the past two years.  In addition, both the EIA and IEA have downgraded demand forecasts for 2025 due to global economic uncertainties, including tariff volatility and reduced consumer spending power, particularly in the U.S.

Looking ahead, I see a significant possibility of a supply-driven price drop, potentially pushing crude oil prices closer to $60 per barrel. Even if a supply shock pushes prices higher briefly, Saudi Arabia could respond quickly by increasing production, stabilizing the market. From a broader perspective, there’s little evidence to suggest a prolonged upward trajectory for crude prices as we start the year.

Chicago basis is weakening, and with the holiday travel season behind us, I anticipate a small decline in gasoline prices at the pump.  Diesel prices are unlikely to drop due to the upcoming extreme cold weather. Proper blending with #1 diesel will be critical for ensuring functionality during the subzero temperatures expected throughout January. Diesel customers should confirm blending practices with their supplier, whether it’s a distributor or a gas station, to avoid issues.

Propane prices are starting to rise as extreme cold weather is predicted across the U.S. Additionally, propane pipelines are operating at full capacity. This could lead to wholesalers increasing basis costs to suppliers like us. While we hope the cold spell is short-lived and basis costs remain manageable, it’s important to prepare. A reminder for safe deliveries:  Please ensure driveways are clear of snow and ice.  Make sure there is a clear path to your propane tank.  If we cannot safely complete a delivery, we will notify the customer to reschedule. Your cooperation helps ensure safe and efficient service during these challenging weather conditions.

As always, if you have any questions, comments, or concerns, please don’t hesitate to give us a call.

Best regards,
Jon Crawford