Good morning!

Happy Friday!  This past week, crude oil prices are on track to close at their highest level in over three months.  On Friday WTI shot through the psychological barrier of $65/barrel.  A mix of geopolitical developments and economic data, both domestic and global, pushed prices higher.

The biggest news came from President Trump, who shifted his stance on Ukraine. He now believes Ukraine can fully reclaim its lost territory and win the war. That rhetoric rattled oil markets on fears of a potential cutoff of Russian crude and refined products from the global market.  Russia added fuel to those concerns by officially announcing a ban on diesel exports. Ukrainian drone strikes have knocked out roughly 25% of Russia’s diesel production capacity. At the same time, tensions are rising as drones continue to cross into Polish airspace, prompting worries of potential NATO involvement. Any expansion of the conflict beyond Russia and Ukraine would be extremely bullish for oil prices.

On the global supply side, the Kurdistan oil export pipeline in Iraq officially restarted, adding about 200,000 barrels per day of crude. OPEC has asked Iraq to cut production since most spare capacity rests with Saudi Arabia and the UAE, but Iraq has resisted and continues to pump above quota.  India surprised the market by increasing exports of gasoline and diesel, though much of this appears to be offsetting Russia’s lost exports, leaving global balances little changed. ExxonMobil also announced it is doubling down on Guyana, with production there expected to reach 1.7 million barrels per day by 2030. Meanwhile, Iran’s exports remain strong even though China cut its purchases nearly in half.

The only notably bullish global supply headline this week came from Chevron, which can now export only half of its normal quota from Venezuela. Overall, while most supply data leaned bearish, the market is beginning to shift toward expectations of stronger world demand ahead.

As the world’s largest consumer of oil, U.S. data was interpreted as supportive for crude prices, though I remain cautious. Q2 consumer spending was revised higher, though much of that came from inflation caused by tariffs rather than true growth. Traders continue to price in additional Fed rate cuts to stimulate the economy.  At the same time, jobless claims dropped, while inflation moved higher—signs of potential stagflation, where growth slows but inflation persists. This scenario could keep energy prices elevated. Looming in the background is also the risk of a U.S. government shutdown.  On the US supply side, the EIA reported a smaller-than-expected decline in crude inventories, though it was still a draw. Diesel prices are steadily climbing as Midwest harvest demand ramps up and the Northeast begins storing heating oil barrels for winter heating. With Russian diesel exports banned, traders are adding further upward pressure.

Locally, the Chicago Spot Market rolled to the November contract. Diesel prices rose modestly on increased harvest demand, while gasoline prices held relatively steady. I expect retail gasoline prices to remain stable, but diesel prices at the pump are likely to move higher in the coming weeks.  Unfortunately, I believe we will see diesel prices elevated while demand in the US remains strong and the global supply of diesel gets direction.

Propane prices continue to trade sideways despite the rise in crude oil prices. The EIA reported a smaller-than-expected build in inventories, but usage reports for crop drying remain inconsistent. By mid-October, demand trends should become clearer.  Weather forecasts have also shifted—October is now expected to be slightly warmer than normal rather than colder. For now, propane is taking a breather, though I expect modest price increases once contracts roll into October and winter economics take effect.

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 morning!

Happy Friday!  Crude oil prices traded in a very narrow range this week, with few geopolitical or economic developments to push the market decisively in either direction. Every piece of news seemed to be offset by another data point or forecast, keeping prices relatively steady.  The biggest global news came from the war in Ukraine. Over the past weekend, Ukraine struck another oil refinery and export facility, followed on Thursday by an attack on a major petrochemical plant and refinery. Ukraine has now hit more than ten Russian refineries in total. By the end of the week, Russia announced that exports could fall by 300,000–400,000 barrels per day due to the damage. While this caused a brief price spike, overall supply and demand concerns continued to weigh heavily on sentiment.

China again released very weak economic data this past week. Retail sales, fixed-asset investment, and industrial production all missed expectations, with some readings hitting nearly five-year lows. As one of the world’s largest crude importers, any decline in Chinese demand raises the risk of oversupply. Both the IEA and EIA continue to warn that global markets will face a supply surplus by late 2025. OPEC, on the other hand, insists demand will keep pace with production growth—but so far, traders see little evidence of a sharp increase in demand on the horizon.

In the U.S., attention shifted to the Federal Reserve. While the EIA reported a large crude inventory draw on Wednesday, markets were more focused on the Fed’s rate cut. The Fed lowered rates by 25 basis points and signaled up to 50 more basis points of cuts could come before year-end. Stocks jumped on the news, but crude oil did not follow as many expected. The U.S. dollar continues to trade near its lowest level in a decade. Normally, a weaker dollar supports higher oil prices, since commodities are dollar-denominated. But this time, uncertainty around tariffs and inflation is dampening enthusiasm. Some economists argue that without stronger tax relief, tariffs may do more harm than good, leaving the economy struggling to grow despite lower rates. For now, oil markets remain on edge, with traders waiting for clearer signals. I don’t expect much movement in crude prices until harvest season wraps up.

Harvest is now underway in the Midwest. Supplies remain ample, even though a major regional refinery is offline for maintenance until the end of October. The Chicago Spot Market is trading at a slight premium to the Group market, though the spread is narrow. Prices have been volatile but range-bound, moving in step with crude. Expect to see gasoline and diesel pump prices fluctuate frequently in the days ahead, but in a very narrow window.

Propane inventories remain healthy, though this week’s EIA report showed a smaller-than-expected build. The lighter build may be tied to the start of harvest, higher export volumes, and lower refining runs. Over the next six to eight weeks, we’ll get a much clearer picture of propane supply heading into winter. For now, I continue to recommend topping off tanks before cold weather arrives and locking in winter gallons while prices remain favorable.

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

Happy Friday!

I hope everyone had a safe and enjoyable Labor Day weekend. With markets closed on Monday for the holiday, this was a shortened trading week. WTI is on track to close lower, marking the first weekly loss in three weeks. The main drivers were growing signs of a supply glut and weaker U.S. economic data.

Geopolitical headlines leaned bearish as well. While Ukraine continues to successfully target Russian oil infrastructure, Russian crude exports remained strong, particularly to China. In fact, China purchased a record amount of Russian crude last week, underscoring its allegiance with Moscow. The Trump administration responded by tightening sanctions on Iranian oil and enforcing sanctions on India for continuing to buy Russian barrels. Still, Iranian exports flowed uninterrupted, Russian shipments to China remained steady, and India—though trimming volumes—continued buying regardless of sanctions. Russia has kept prices low to help offset the impact of these restrictions.

OPEC is meeting this weekend, and most expect the group to continue with its expanded supply quotas. The increase has now unwound years of prior production cuts. Saudi Arabia has also signaled that any remaining voluntary cuts will be phased out. Traders widely believe that even if OPEC were to freeze production quotas at current levels, the global market will still tip into oversupply. Adding to that, Mexico recently announced large shale discoveries, and Syria has resumed oil exports for the first time in years.

In the U.S., the EIA reported that crude inventories rose last week despite strong refinery utilization. On Friday, the jobs report came in below expectations, with unemployment ticking higher. This combination of supply builds and weaker labor data reinforced expectations that the Federal Reserve will cut rates at its September meeting. While lower interest rates and a weaker dollar would typically support oil prices, concerns about an economic slowdown—driven by tariffs and widespread corporate cost-cutting—are outweighing that effect. Many companies are now grappling with stretched balance sheets as the extra liquidity from COVID-era stimulus and Fed equity purchases has dried up. Layoffs of 25% or more have already been announced at several major firms heading into year-end.

Overall, while conflict risks in Israel/Palestine/Yemen and Russia/Ukraine still create a war premium, the world economic data increasingly points toward a global crude supply glut heading into late 2025 and 2026.

In local news, the Chicago diesel market briefly spiked on expectations of strong demand for the upcoming harvest. With Midwest harvest yields projected to be very high, diesel demand could be elevated. By week’s end, however, diesel prices eased as crude oil price fell and refinery utilization stayed strong. I don’t expect significant changes in diesel pump prices near term. Gasoline prices, meanwhile, declined following the Labor Day holiday. This was expected as summer driving season winds down and demand softens. I anticipate retail gasoline prices to move lower next week.

Like a broken record, propane remains the “sleeper” of the market. While prices are still trading in a narrow range, winter economics officially begin October 1. In central Wisconsin, we are already seeing some of the coldest September weather in years. With forecasts pointing to colder-than-normal conditions in October—and strong crop yields—there is a real risk of heating demand overlapping with corn drying needs. Northern Wisconsin has already experienced brief frost, and early frost across parts of the Midwest remains a possibility next month. I continue to strongly recommend topping off propane tanks now at summer pricing and locking in heating gallons ahead of the season.

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