Happy Friday! I hope everyone had a safe and enjoyable Thanksgiving!
Crude looks to close this week on the longest losing streak in years. OPEC meets this weekend, and market expectations are leaning heavily toward no additional production cuts. The pressure is on for the group to at least maintain current levels, but Saudi Arabia appears ready to cut prices further to keep its barrels moving—possibly to the lowest levels in five years. Saudi Aramco is even considering selling assets in what could be its most significant divestment ever, as falling crude prices begin to weigh on midstream infrastructure and equipment. Meanwhile, JP Morgan is now predicting OPEC may ultimately cut 2 million barrels per day in 2026 to avoid crude falling into the $40 range.
Israeli forces launched another counterterrorism operation in the northern West Bank and killed Hezbollah’s top military officer outside Beirut despite a brokered truce. The U.S. officially designated Venezuela’s Cartel de los Soles as a foreign terrorist organization, increasing sanctions on President Maduro and his officials. The move adds more pressure and signals continued escalation toward regime change or even potential military conflict with Venezuela. Tensions remain elevated between China, Japan, and Taiwan. President Trump held calls with leaders from both Japan and China to help cool things down. Any military conflict in this region would be devastating to the global AI and semiconductor industries and could send oil prices sharply higher.
Ukraine and the U.S. continue pushing a peace plan with Russia. Progress is being made, but leaked information suggests Russia will not make major concessions, which helps keep a small amount of support under crude. Even so, traders remain convinced that whether sanctions stay or not, the market is still heading into oversupply by 2026. If sanctions are lifted, the flood of crude entering the market would be enormous. India, which previously defied Russian sanctions, is committing to halt Russian crude purchases starting in December. However, they significantly frontloaded imports to beat the deadline. Russia is offering India its cheapest crude in two years. Shipping costs are rising as more sanctioned supertankers get stuck at sea. Iranian crude is also starting to build up offshore as China’s demand softens following heavy pre-purchasing of discounted Russian barrels. The volume of oil sitting on ships continues to break records, adding more pressure to prices. If Russian sanctions are lifted, the amount of discounted oil hitting the market would be tremendous, though many traders potentially see that as largely priced in. Oil companies are now eyeing Argentina as the next major shale play. Early geological surveys suggest Argentina could hold nearly 50 percent more shale oil than the Permian Basin. Chevron has been in Argentina for about a decade, and more companies are evaluating rigs for 2026 under the region’s lighter regulatory environment.
Traders have abruptly shifted to pricing an 80 percent chance of a December Fed rate cut, even though the Fed remains deeply divided and the data is mixed. U.S. Producer Price Index data for September rose 0.3 percent, in line with expectations. Tariffs continue to muddy inflation data, raising costs for businesses, and a rate cut would not directly solve that problem. September retail sales grew only 0.2 percent versus an expected 0.4 percent. The slowing in retail spending is being linked to tariff-driven price increases. U.S. consumer confidence for November dropped 6.8 points to 88.7, and weak economic data continues to weigh on oil demand expectations. Black Friday is expected to be soft. Globally, British retailers reported their lowest confidence in 17 years heading into the holiday season. Overall, economic data is not great but is it bad enough to push a rate cut through the Fed meeting in December? That is the million dollar question.
The Chicago market sold off sharply again as crude collapsed. Chicago is awash in diesel, and I expect to see retail prices at the pump move lower. Even though we are in a “falling knife” price scenario, winter blending of #2 with #1 diesel will slow the speed of the drop. Gasoline followed crude lower and is now at its lowest price in weeks, and I expect more declines at the pump in the coming days.
Propane found a bit of support as colder-than-normal temperatures spread across most of the country east of the Rockies. Forecasts for the next 12 weeks continue to show colder conditions than last year, with a steady cold pattern but no major polar vortexes at this time. As we move deeper into winter, we ask all customers to please keep driveways clear of snow and ice and ensure safe, easy access to their propane tank to guarantee a safe and efficient delivery.
As always, if you have any questions, comments, or concerns, feel free to give us a call. Thank you, and have a great weekend!
Best regards,
Jon Crawford