Monthly Archives: May 2025

A Little Topsy-Turvy

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Good morning!

Happy Friday! Crude oil prices are closing out the final week of May in a bit of a slide, with traders trying to make sense of a whirlwind of geopolitical events, supply shifts, and the ever-changing outlook for global demand. While some of the news out there could push prices up, we’re seeing more downward pressure—at least for now.  One of the big drivers this week was chatter around OPEC+ hinting at a larger production increase starting in July. The increase, possibly over 400,000 barrels per day, would come sooner than expected and, if finalized, would be a major step toward rolling back pandemic-era cuts. The market responded fast—just the idea of more barrels coming into play was enough to send prices lower.  Globally, we saw a split in demand forecasts. The International Energy Agency is calling for demand to hit 104 million barrels per day in 2025, while OPEC is still expecting closer to 105 million. That gap in outlooks is making traders second-guess where prices might head next.

At the same time, the U.S. tossed another curveball into the mix. Early in the week, we saw prices climb briefly after a trade court ruled that some Trump-era tariffs were illegal. But that bounce didn’t last long. A federal appeals court stepped in and put the tariffs back in place—at least for now—reigniting market worries and pulling prices down more than one percent in a single day. The uncertainty around trade policy continues to rattle investors and oil markets alike.  Looking at domestic numbers, crude oil fundamentals in the U.S. remained fairly strong. The EIA reported a 2.8 million barrel draw in commercial inventories, bringing the total down to about 440 million barrels, which is six percent below the five-year average. Production is holding up, with the four-week average running at just over 13.3 million barrels per day—well above where we were this time last year. Refiners are still busy, although we saw a slight dip in utilization, now just above 90 percent. Imports bumped up to 6.4 million barrels per day, but on average are still running more than ten percent below 2024 levels. Exports are holding steady too, sitting just over 4.3 million barrels per day, keeping the U.S. in its role as a major supplier to the world.

China added some weight to the bearish outlook this week. A new forecast from CNPC has China’s oil demand peaking in 2025, a full five years earlier than previous estimates. This change is driven by the country’s shift toward electric vehicles and other clean energy sources. They’re expecting demand to top out at 770 million tons this year, before falling steadily over the coming decades. The long-term implications are huge—not just for oil demand in China, but for the entire global energy landscape.

Despite all that, gasoline and diesel numbers offered a little relief. Gasoline inventories dropped by 2.4 million barrels and are now about three percent below normal. Production was strong at 9.8 million barrels per day, and demand looked healthy with supplied product just over 9 million barrels. Diesel and heating oil also showed signs of tightening. Inventories fell again and are now 17 percent below the five-year average. Demand was strong here too, with a four-week average just under 3.7 million barrels per day—still being driven by industrial and ag sectors.

All in all, the past week in crude markets was marked by a balancing act. On one side, you’ve got decent domestic demand and falling inventories helping to keep things steady. On the other, you’ve got rising global production, mixed demand forecasts, and a huge amount of trade and policy uncertainty dragging things down. As we move into June, eyes will stay focused on OPEC’s production decisions, how the U.S. handles its trade policy, and what kind of ripple effects come from the global energy transition.

In local news, as crude oil prices dropped, the Chicago spot market experienced a decline in refined prices as well.  The current contract-trading month moved to July this past week and the spot market moved lower.  The price signal lower on out months means that the Chicago spot market is possibly oversupplied going into high demand season.  Or the markets are predicting weaker demand this summer.  I expect to see prices of both gasoline and diesel drop at the pump in the coming week.

Propane prices continue to trade very narrowly.  Conway propane storage is not building at a fast enough rate to push inventories above the 10-year average for this time of year.  Although there is weakness with crude oil prices, I don’t expect to see propane spot prices drop hard during the summer.  I would recommend topping off your tank by September if you can and contracting some propane for the upcoming heating season.  Our contracts are out, and you can call the office today to sign up!

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

Best regards,

Jon Crawford

Have A Great Memorial Day Weekend!

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Good morning!

Happy Friday!  I hope everyone is ready to enjoy a safe and relaxing Memorial Day weekend. Crude oil prices are looking to close lower for the first time in weeks, with this being the first weekly decline since April. Despite the drop, the price action this week was narrow considering all of the geopolitical and economic headlines that could have sent the market sharply in either direction.  The main drivers of higher price speculation continue to come from the Middle East. Israel appears to be preparing for possible attacks on Iranian nuclear sites. In response, Iran has threatened to shut down the Strait of Hormuz if Israel follows through. The Strait of Hormuz is the most critical shipping corridor for crude oil in the world. At the same time, discussions between Russia and Ukraine have stalled again. Although Russian oil continues to flow, China and India are buying cheap Russian barrels and storing as much as possible while prices remain low.

Back in the U.S., Trump is threading the needle on foreign policy and economic deals in the Middle East. The administration is actively cutting deals with both allies and adversaries. If these agreements are successful, they could reduce regional tensions and bring major economic benefits to the U.S.  Additionally, there is growing chatter that the U.S. may not renew leases in Venezuela that allow Chevron to export crude to U.S. Gulf Coast refineries. If these leases are not renewed, the loss of Venezuelan crude would be a blow to the southern U.S. refining sector.  The one piece of geopolitical news that pushed crude lower was progress on trade negotiations between the U.S. and China. Both countries are making strides toward a deal, and any agreement would likely increase economic activity and boost crude demand.

On the supply and demand front, bearish news mostly dominated the week. Crude inventories in the U.S. continue to grow, but demand is expected to rise heading into summer, which could balance out the market. The U.S. government is also continuing to refill the Strategic Petroleum Reserve. Meanwhile, refining margins remain strong, giving oil companies incentive to keep buying crude and produce refined products for domestic use and export.  Looking ahead, OPEC meets on June 1st and is expected to announce a significant increase in global exports. If OPEC does indeed bring more barrels to market, a surplus becomes a real possibility. That said, U.S. drillers are continuing to shut down rigs at a quick pace, which could help offset the potential surplus from OPEC and keep the market balanced.  Adding to the market’s volatility are continued tensions in Gaza, new tariffs aimed at pressuring Apple to manufacture iPhones in the U.S., additional sanctions on the European Union, and the upcoming hurricane season. Summer demand in the U.S. is also set to pick up soon, which could add further pressure to prices.

Even though crude oil is closing lower this week, I still don’t see prices falling too much further. We may briefly dip into the upper $50s per barrel, but I don’t believe prices at that level would hold for long.

In local news, gasoline and diesel supplies are finally balancing out in the Chicago market. I expect to see both products move lower in price next week. Thankfully, refinery maintenance on gasoline production is wrapping up just in time for the summer driving season. The Chicago Spot Market continues to trade cheaper than the Group, but the spread is not wide enough to cause Group buyers to switch over to Chicago barrels. That said, the discount is helping to keep inventories in our region at healthy levels.

Propane prices remain stubbornly firm as Midwest inventories continue to lag about 20% behind the five-year average. I don’t expect much of a drop in price from here. My recommendation remains the same: top off your tanks now and consider locking in some gallons for next heating season. Contract pricing for next year has been released, and it’s the same as last year! With the cost of nearly everything else continuing to rise, it’s great to be able to offer customers good value on something as essential as home heat.

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

Best regards,

Jon Crawford

First Gain In Weeks

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Crude oil prices are set to close with a weekly gain for the first time in several weeks. A combination of geopolitical tensions and economic developments contributed to the move higher. The week began with a fairly steep sell-off after OPEC officially announced over the weekend that it would ramp up production in June by 400,000 barrels per day—nearly double what was initially agreed upon. At this pace, OPEC could return to pre-cut production levels by the end of November 2025, a full year ahead of schedule.  However, after a day of digestion, the market stabilized when shale producers in the U.S. announced immediate production cuts. Unlike in the past—when cutting production in the Permian Basin led to economic strain—today’s higher drilling costs and lower crude prices are leading Permian producers to prioritize margin over volume. Many companies are now content to pump less if they can maintain profitability through the downturn.

Tensions in the Middle East also fueled bullish sentiment. Trump announced a ceasefire agreement with the Houthis in Yemen, but no vessels have yet moved through the Red Sea due to lingering distrust. Meanwhile, Israel continued bombing Gaza and confirmed plans to fully occupy the region. In a major geopolitical surprise, India responded to a May 25 terrorist attack from Pakistan by striking six Pakistani cities. Pakistan retaliated by shooting down Indian fighter jets with both drones and its own aircraft. The escalation caught global attention, especially as Pakistan used Chinese-made jets and India used French-made ones. The episode raised alarms over China’s growing advancements in military aviation.

Sanctions remained in place against Iran, Venezuela, and Russia. The UK issued new sanctions against a Russian oligarch operating a fleet of 100 shadow vessels transporting crude oil to China. While the U.S., UK, and EU continue to ramp up pressure, oil flows from these sanctioned nations have persisted.

Trade tensions took a more optimistic turn this week. The U.S. and UK finalized a deal on Thursday—though the impact is more symbolic since the U.S. already runs a trade surplus with the UK. The bigger negotiations are yet to come. Both the U.S. and China have announced a willingness to lower tariffs in an effort to reach a deal, with talks set to begin this weekend in Switzerland. The announcement followed news that China experienced its largest drop in exports to the U.S. in April. In response, China continues to roll out monetary easing policies to maintain positive economic growth. India also said it is open to reducing tariffs to secure a deal with the U.S. I believe we’ll see a flurry of trade agreements being completed in the months ahead.

The EIA reported a crude inventory draw this week, driven mostly by gasoline production from US refiners in preparation for summer demand. Diesel inventories remain below the five-year average, but refiners are showing new discipline. They’ve signaled a willingness to limit output in order to maintain profitability, rather than chasing market share by selling gasoline and diesel at low profitability or a loss. That discipline is helping to create price stability across the refined product spectrum.

In local markets, diesel prices bottomed out in the Chicago spot market earlier this week before rebounding quickly to close out the week. I expect to see retail diesel prices move higher next week as a result. Gasoline prices continue to hold steady. Demand for gasoline hasn’t surged yet, and the Chicago market remains well-supplied. Diesel inventory remains somewhat tight, but conditions are improving and not currently affecting prices.

Propane prices also appear to have bottomed this week. Futures pricing saw some upward momentum as expectations for strong propane exports from the U.S. increase into the second half of 2025 and throughout 2026. Midwest propane inventories remain below the 10-year average, and we’ll need to build storage through the end of September to stay on track. If crude oil prices remain in the $60/barrel range, we should be able to close the gap and reach the five-year average by fall. I strongly recommend topping off your tank by the end of August and locking in propane contracts for the upcoming heating season. We’ll be releasing next year’s contract prices within the next two weeks—stay tuned.

As always, 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

Global Crude Oil Price War Brewing?

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Happy Friday!

This week brought a more tempered level of volatility in the crude oil markets compared to prior weeks, but there was still no shortage of impactful news. The biggest driver of crude oil prices continues to be the evolving trade relationship between the United States and China, along with economic data released from both countries.  China reported stronger-than-expected GDP growth for Q1 of 2025, showing a 5.4% year-over-year increase. On the surface, this appeared to be a bullish signal for oil demand, especially considering China’s status as one of the world’s largest crude importers. However, the story beneath the headline was less encouraging. Many analysts attributed the growth to a temporary “pre-tariff” export rush. Ongoing deflationary pressure, weak domestic consumption, and a shaky property sector still threaten China’s ability to sustain growth through the rest of the year.  In contrast, the U.S. economy contracted by 0.3% in Q1, marking the first quarterly decline since 2022. The contraction was largely driven by a surge in imports ahead of anticipated tariffs, combined with slowing consumer spending and government cutbacks. Although one quarter of negative GDP growth does not technically define a recession, many economists raised red flags. The IMF pegged the probability of a U.S. recession at 40%, and J.P. Morgan raised their call to 60%.

However, things shifted slightly on May 2 when China’s Ministry of Commerce publicly acknowledged that they are assessing proposals from the U.S. to reopen trade talks. This was the first recognition from China that negotiations might be on the table since the latest escalation in tariffs. According to officials, the U.S. has expressed interest in dialogue, and China is evaluating the sincerity of these efforts. But Beijing also made it clear: the U.S. must first remove unilateral tariff hikes before any formal talks can begin. The statement was seen as an olive branch, but it came with conditions. While the path forward is uncertain, this is the most constructive tone we’ve heard in weeks.

In terms of supply-side news, crude oil prices were under pressure this week due to a 3.76 million barrel build in U.S. crude inventories. OPEC+ signaled that they may move to increase production again in June. Saudi Arabia specifically indicated that they are comfortable with lower prices and may support a faster pace of output increases. That comment caused a quick drop in oil prices as some traders began to price in the possibility of a price war. OPEC+ will meet next week, so we should have more clarity then.  Then, in a surprise geopolitical turn, President Trump announced on May 1 that secondary sanctions would be applied to any country or company purchasing Iranian crude or petrochemical products. The threat sent crude oil prices sharply higher mid-week. The market’s concern is that this could disrupt a significant portion of Iranian crude going to China, which remains Iran’s top customer. Traders reacted quickly, and the spike reminded everyone how sensitive the energy markets remain to any shifts in foreign policy or geopolitical risk.

In local markets, the CME spot market moved slightly lower along with crude oil. Gasoline and diesel supplies remain tight across much of the Midwest. Although refinery maintenance is starting to wind down, the supply chain is still trying to rebalance. I don’t expect much movement at the pump next week. If anything, we could see a small drop in retail prices as supply stabilizes.

Propane prices in the spot market also moved a bit lower this week. However, the forward curve has remained steady. Midwest inventories are still running below the five-year average, and if U.S. oil companies slow drilling to defend price, propane price could begin to decouple from crude oil. On top of that, lower inventories in the Midwest could increase our dependence on Canadian imports. And with trade tensions still brewing, the threat of tariffs on Canadian propane remains real. If tariffs are imposed, we could see a major price increase later this year. Right now, the current retail price of propane holds good value. Although we could see a small dip, I don’t expect a dramatic drop unless WTI crude drops below $55/barrel. Heating contracts for next season will be available soon. I recommend topping off your tank in the next few months and locking in some propane fixed-price gallons for next winter, especially with ongoing uncertainty around trade with Canada.

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