Happy Saturday!
This past week crude oil prices were very volatile but ultimately ended lower, driven by forecasts of a global supply surplus in Q4 2025 and throughout 2026. While OPEC continues to emphasize that demand will grow next year, the IEA stated this week that a surplus in daily production is inevitable at current levels unless there is a sharp increase in demand or a significant loss of supply. Geopolitical events, however, were strongly bullish for crude oil. Israel carried out an airstrike in Qatar, targeting Hamas leadership that was meeting in Doha to discuss a ceasefire deal. The attack angered the United States, which had been brokering the talks, and all but eliminated the possibility of a ceasefire between Israel and Hamas. This escalation also raised concerns that the conflict could spill into nearby oil-producing countries. Meanwhile, Ukraine struck Russian crude export terminals and even hit two oil cargo ships—an unprecedented escalation aimed at disrupting Russia’s main source of revenue. Still, Russia has managed to keep its exports flowing. India announced it would scale back some purchases of Russian crude, but China stepped in to take additional volumes, ensuring Russia continues to find buyers.
In the U.S., the economic data released this week leaned heavily bearish for oil demand and raised fears of stagflation—a scenario where economic growth slows while inflation keeps rising. Jobless claims were revised sharply higher, lumber prices fell, payroll figures were adjusted downward, and inflation readings came in hotter than expected. This leaves the Federal Reserve in a difficult position: cut rates to stimulate growth and risk fueling inflation, or hold rates steady to keep the dollar strong and press inflation lower, while potentially slowing the economy further. Either way, the uncertainty is making oil traders cautious and keeping prices under pressure. Adding to the bearish tone, the EIA reported a very large build in crude, gasoline, and distillate inventories. Following the report, oil producers in the Permian Basin announced they are lowering job forecasts for the rest of 2025 and into 2026—further confirmation of a softening outlook.
In summary, my strategy remains the same—sit back and wait. The risks point more toward crude oil moving lower than spiking back toward $70 per barrel.
In our local spot market, gasoline prices continue to fall as summer demand drops off. Chicago refiners have also transitioned to producing winter-grade gasoline (lower RVP), which is cheaper to make than summer blends, adding more downward pressure. Diesel prices also moved lower alongside crude, despite a major Midwestern refinery currently offline for annual maintenance. For now, supplies in the Chicago market appear ample heading into harvest season.
Propane prices remain range-bound, showing little movement despite volatility in crude. That said, I continue to strongly recommend topping off propane tanks now and locking in gallons for the winter. The 90-day forecast is calling for colder weather compared to last year. If strong heating demand overlaps with crop drying season, propane prices could spike earlier than usual.
Best regards,
Jon Crawford