Happy Friday!
Crude oil prices are set to close the week at their lowest level in 16 weeks, with WTI hovering around $61/barrel. At this point, it looks more likely that prices will break lower rather than higher. Even though geopolitical headlines would normally push prices up, the world’s oversupply of crude oil has finally taken center stage. I’ve been emphasizing the oversupply theme for some time, and it seems traders are now seeing it the same way.
The biggest weight on prices this week comes from OPEC+, ahead of their weekend meeting. The group has made it clear they plan to keep raising production, citing a more optimistic view of global oil demand. Last month, OPEC+ already met its production increase target, further adding to the market glut. These moves are keeping strong downward pressure on crude, despite ongoing geopolitical risks. With OPEC+ increased production, China continues to buy heavily for storage, which has provided a price floor. But if Beijing slows purchases, oil prices could quickly collapse.
On the geopolitical front, President Trump unveiled a 20-point peace plan for Israel and Palestine. So far, world leaders doubt it will lead to a ceasefire. Fighting continues, but since it hasn’t spread into neighboring countries, oil traders aren’t treating it as a supply risk. Ukraine also made headlines. The U.S. announced it is going “all-in” on the war, supplying Ukraine with long-range missile intelligence targeting Russian energy infrastructure, and even considering sending Tomahawk missiles. While such developments could normally send oil prices higher, markets have largely shrugged them off. Russian oil revenue is down, though the true amount is hard to measure. Meanwhile, U.S. and G7 leaders are pushing for tighter sanctions, but some Eastern European nations remain reliant on Russian crude out of necessity.
In the U.S., crude inventories rose again this week, reinforcing the oversupply narrative. On the economic front, consumer confidence fell to a five-month low, and the government shutdown cancelled the jobs report. Normally, a weaker dollar would support higher oil prices, but historically crude demand falls during shutdowns, and traders are pricing that in.
Here at home, Chicago spot gasoline and diesel prices fell alongside crude. That should translate into lower pump prices next week. Harvest season is in full swing, which could cause some isolated diesel shortages, but inventories look healthy overall. I don’t expect any long-term diesel issues during harvest.
Propane prices ticked up slightly as we shift into winter pricing, though with strong storage levels and warm weather in the forecast, I don’t expect much movement in the near term. Propane is somewhat boring at the moment but depending on crop-drying, the situation could change quickly.
As always, if you have any questions, comments, or concerns, please don’t hesitate to reach out. Wishing you a great weekend!
Best regards,
Jon Crawford