Monthly Archives: January 2026

Higher And Higher, But Maybe A Ceiling?

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Happy Friday!

Crude oil prices paused late in the week after a sharp two-week rally, with WTI pulling back towards $65/barrel. The pause came after President Trump announced the appointment of a new Fed Chair, Governor Kevin Warsh, which pushed the dollar higher and capped crude’s momentum. Trump also signaled a shift in tone toward Iran, saying he plans to pursue talks with Iranian leaders rather than immediate military action. That combination removed some of the geopolitical premium that had built into the market.

Earlier in the week, oil prices surged above $65 per barrel after Trump ordered a large naval and air deployment into the Middle East and demanded a nuclear deal with Iran, warning of strikes if negotiations fail. Markets reacted strongly to the escalation, especially given the confusion around why a deal is being demanded now if last year’s strikes were said to have crippled Iran’s nuclear program. The situation remains volatile, and any direct strike on Iran would likely face resistance from regional allies and could trigger a severe response against U.S. assets in the Middle East.

On the supply side, several offsetting forces are at work. U.S. production has been hit hard by extreme winter storms, with roughly 15 percent of daily output—around 2 million barrels per day—temporarily shut in across the East of Rockies. Kazakhstan also experienced outages, but officials now say full production could return within a week, helping to put downward pressure on crude oil prices. While U.S. production losses supported prices earlier in the week, demand has also fallen due to the same storms, keeping the overall impact muted.  However, diesel prices have sky-rocked from the events due a massive increase in heating oil demand out East.  In addition to US production predictions, OPEC+ has signaled it will keep output steady at its February 1 meeting, preferring higher prices and seeing little incentive to add supply.

Venezuela continues to re-enter the global oil market. CITGO purchased Venezuelan crude for the first time since 2019, buying heavy sour barrels from Trafigura that are well-suited for Gulf Coast refiners. U.S. officials are also working on a broader framework to lift sanctions and allow more Venezuelan crude exports involving both U.S. and foreign companies. While near-term volumes would be modest, in an already well-supplied market the additional barrels could eventually pressure prices lower. At the same time, China has backed away from Venezuelan crude purchases now that the U.S. is controlling sales, instead turning its attention toward Canada, which has been advancing trade talks and offers west-coast export capacity.

Russia remains aggressive on pricing. Moscow cut crude prices to India to the lowest levels since 2022, as shipping barrels to China becomes more challenging. Even though major Russian producers are restricted, India continues buying from non-sanctioned firms, keeping Russian cash flow moving to fund the war in Ukraine. Lukoil announced the sale of certain assets to Carlyle Group following new U.S. sanctions, though operations and oil flows are expected to continue with minimal disruption.  Geopolitically, the war in Ukraine escalated again this week. Russia struck Ukraine’s second-largest city, knocking out power and heat during a deep freeze. At the same time, Ukraine and the U.S. finalized security guarantees, pending a formal signing, which could strengthen Ukraine’s leverage in negotiations. Putin surprised markets by agreeing to temporarily halt strikes on Kyiv until February 1 to allow space for peace talks, but traders largely ignored the gesture given how often ceasefire efforts stall.

Stateside signals remain mixed. The government appears close to avoiding a shutdown, which helped stabilize the dollar. The Fed held rates steady and noted early signs of inflation ticking higher. Normally that would support the dollar and weigh on crude, but oil has been trading almost entirely on geopolitical risk rather than monetary policy. Longer term, the dollar continues to weaken as other economies outperform and global capital seeks alternatives, a trend that could put a floor under oil prices even as Trump pushes for cheaper energy.  The EIA reported a small draw in crude inventories this week alongside modest builds in refined products. With refineries operating at reduced rates due to weather and exports disrupted, inventories could rebuild once conditions normalize and facilities return online.

In Chicago, spot markets remained at relatively low differentials to NYMEX, but rising crude prices, weather-related production shut-ins, and strong heating demand pushed diesel higher again this week. Diesel prices climbed sharply, over 30 cents per gallon, while gasoline continued to trade sideways as winter demand remains soft. I expect diesel prices at the pump to move higher, but gasoline prices should remain relatively stable.

Propane supply is ample nationally, but logistics east of the Rockies continue to deteriorate. Nearly every pipeline in the region is on strict February allocation, and Canada is diverting railcars toward the East Coast where demand is stronger. Wisconsin has received its contracted rail supply, but spot rail pricing has surged. I had hoped logistics would improve in February, but the broader picture now looks worse than January. Until movement constraints ease, I unfortunately do not expect retail propane prices to move lower.

As always, if you have any questions, please feel free to give us a call.  Have a great weekend!

Best regards,

Jon Crawford

Sources: Wall Street Journal, Bloomberg, and Reuters

Where To Start

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Happy Friday!

Wow, it’s a cold one out there this week and next week!  I hope everyone stays safe and warm.  It’s been awhile since we’ve had this amount of cold weather for a couple of weeks.  Thankfully, February is looking to be more normal temperatures.  This past week was a head spin of data.  As I began to write, for the first time in a while I didn’t know where to start. LOL! On to the update!

Geopolitical developments were active on several fronts. Crude oil prices rebounded late in the week, moving back above $60 per barrel after President Trump renewed the risk of potential strikes on Iran. The U.S. continues to build a military presence in the region, and that escalation briefly restored a geopolitical premium to the market. Revised estimates now suggest protest-related deaths in Iran are significantly higher than initially reported, keeping the situation fluid.  Even so, the rally has been uneven, as traders continue to weigh headline risk against a still-heavy global supply outlook.  France intercepted a Russian shadow-fleet tanker in the Mediterranean on Thursday, marking a further escalation in Europe’s enforcement of sanctions on Russian oil. While India continues to buy Russian crude despite sanctions on major Russian producers, much of that flow is now moving through smaller Indian refiners without consequence, allowing Russian barrels to remain legally active in the market.  In addition, shipping routes in the Red Sea are again under pressure.  Attacks in the Red Sea and Suez Canal region have forced tankers to reroute around Africa, increasing transit times and costs. While most affected cargoes are Russian, the added expense and delays are pressuring Russia’s ability to reliably move oil to China, which remains critical for sustaining war-time revenues. Russia is still reporting record diesel exports from Primorsk as winter demand declines domestically, with buyers like Brazil stepping in.

On the macro and trade front, Europe temporarily called off trade talks with the U.S. amid ongoing discussions around Greenland, increasing volatility across broader markets. Britain and China reached an agreement for China to build its largest embassy in London, signaling Britain’s intent to deepen trade ties with China as it looks to replace exports lost to the U.S. A broader trade war with Europe would likely hurt U.S. exports and could push Europe closer to China, which still has excess manufacturing capacity.  Midweek comments from President Trump at Davos added volatility. He reversed course on tariffs against Europe, stated that he hopes there will be no strikes on Iran but emphasized the U.S. remains prepared, and reiterated that he believes a deal to end the war in Ukraine is close. Those comments initially pressured crude prices as geopolitical risk appeared to ease, but sentiment shifted again as military assets were redeployed into the Middle East and unrest in Iran intensified. Russia and U.S. delegates also met on Friday to discuss a potential peace framework for Ukraine, though Russia made it clear that without territorial concessions and clear border restructuring, no deal is likely in the near term.

Venezuela remains a growing factor in the global supply picture. The first cargoes under the new framework were purchased by Phillips 66 and Valero, with revenues shared between the U.S. and Venezuela to help rebuild oil infrastructure. Venezuelan crude is also beginning to flow back into Europe after nearly a year of halted shipments, and additional barrels are expected to reach the Gulf Coast. While this crude will help refiners, it adds pressure to U.S. shale producers, particularly in the Permian. Halliburton announced it is shifting some production assets overseas as rising costs and lower prices make U.S. drilling economics less attractive. Incentives to expand drilling in the Permian appear to be approaching a plateau.  Outside the Americas, Libya announced it is opening its oil sector to foreign investment for the first time in 20 years, another potential source of incremental supply. Mexico continues expanding offshore production and remains committed to high output regardless of current price levels. The only bullish news on global oil supplies is still with Kazakhstan. Kazakhstan’s Tengiz oilfield continues to have problems and declared force majeure, with two production sites now offline for an additional 7–10 days. The outage removes roughly 1 percent of global supply in the near term, offering some short-term support to prices.  However, again, this supply issue is temporary.

The International Energy Agency has begun trimming its forecast for a large crude surplus this year, now suggesting demand may begin to balance supply at some point in 2026. I remain skeptical of these revisions, as supply growth from Venezuela, Libya, Mexico, and OPEC continues to build.  However, the U.S. dollar has also been weakening, which is helping to put upward pressure on crude prices, even as the administration continues to signal a preference for lower energy costs.  In addition, EIA reported large builds in crude oil, distillate, and gasoline inventories this week.  I still remain cautious that the current run-up in crude price is temporary.  Many of the supply issues will be resolved and a lot of new crude sources will be coming online in 2026.  I would not hedge too far into the future at this time and place.

The Chicago spot market experienced significant volatility this week, driven almost entirely by diesel. Diesel prices jumped more than 30 cents as crack spreads widened sharply, fueled by a polar vortex impacting the Midwest and Northeast along with ice storms in the South. Heating demand in the Northeast surged, tightening supply and pulling barrels away from the Midwest. Cold weather also raises the risk of refinery issues. I expect diesel prices to remain elevated at least until the February futures contract rolls off. Gasoline prices, by contrast, remained relatively stable, and I do not expect meaningful movement at the pump in the near term.

Propane prices continued to climb as demand spiked with the extended cold snap. Wisconsin is experiencing one of its longest stretches of cold in the past three years. With the pipeline into Wisconsin still operating at reduced capacity and under allocation, keeping retail storage filled has remained challenging. Logistics have become the primary issue, with freight rates rising sharply and pushing retail prices higher. If temperatures moderate after next week, propane prices may ease somewhat. Even at current levels, retail prices remain under $2.00 per gallon, and compared to fuel oil and natural gas, propane continues to offer strong value during these extreme cold conditions.

As always, if you have any questions, please feel free to give us a call. Stay warm and have a great weekend!

Best regards,

Jon Crawford

Crude Prices Rise On Geopolitical Issues

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Happy Friday!

Crude oil prices are set to finish the week lower, falling back below $60 per barrel after a short-lived rally earlier in the week. The move lower came after President Trump announced that violence in Iran is easing and that U.S. intervention is not necessary at this time. That statement removed much of the geopolitical risk premium that had supported crude for several days and marked the first daily decline in six sessions. Even with occasional rebounds, the broader trend remains fluid as markets continue to focus on oversupply heading into 2026.

On Friday, Bakken producer Continental Resources announced it is shutting in production due to low prices. While this is notable for U.S. shale, it has done little to change the broader narrative. Global supply growth, particularly from OPEC and potential increases from Venezuela, continues to outweigh any near-term U.S. production cuts. The White House has made it clear that lower fuel prices remain a priority, even if that comes at the expense of domestic shale producers.  Chevron is expected to receive an expanded license to export crude from Venezuela, a move that will benefit Gulf Coast refiners but add pressure to U.S. shale basins, especially the Permian. Venezuelan crude will likely displace some barrels that would otherwise head to China, but with the world already awash in oil and the possibility of progress toward ending the war in Ukraine, China has plenty of alternative supply options.  Canada also appears to be gaining ground in trade discussions with China, including potential crude shipments from Canada’s West Coast export terminal. If those barrels flow, they could further reduce U.S. access to cheap Canadian crude and add competition for Venezuelan supply.

Geopolitically, Ukraine confirmed it struck two Russian oil tankers earlier in the week, contributing to the midweek rally. Russia responded with its largest attack on Ukraine so far this year, continuing to damage Ukraine’s energy infrastructure and increasing pressure for a negotiated settlement. However, markets remain convinced that even if sanctions remain in place, global oversupply will dominate once any peace framework emerges.  India has begun shifting more crude purchases back toward OPEC producers and away from Russia, which could force Russia to send additional barrels to China. Despite high storage levels, China imported more crude in December than a year ago, likely taking advantage of low prices. In addition, January imports are expected to slow as Chinese storage remains near capacity and discounted Iranian and Russian barrels remain readily available.  Trump also announced 25 percent tariffs on anyone doing business with Iran, briefly pushing crude higher on concerns about Iranian exports. However, the rally faded as traders refocused on surplus supply and the broader implications for U.S.–China trade, given China’s ties to Iran.

On the economic front, the U.S. revised GDP higher for November, and some forecasts now point toward growth exceeding 5 percent in 2026. While stronger growth would support oil demand, most believe it will still not be enough to absorb the supply surplus expected in the coming year. The latest EIA report showed builds across crude, gasoline, and distillate inventories, reinforcing the view that U.S. supply remains ample.  Trump also stated he does not plan to remove Fed Chair Powell, which helped stabilize the dollar. A firmer dollar continues to weigh on crude prices. Earlier in the week, renewed questions around Fed independence briefly weakened the dollar and gave oil a temporary lift, but that support faded quickly.  Major banks continue to trade the same direction: surplus supply and lower prices. Many are calling for WTI to fall below $55 per barrel, with some suggesting $50 as a potential floor. I agree that prices may stabilize in the high $50s for now, but a true recovery likely won’t materialize until 2027, when potential sustained production cuts and economic growth begin to meaningfully rebalance the market. If global economies weaken further, that recovery could be delayed.

The Chicago spot market moved higher this week in tandem with crude’s geopolitical bounce. Even with crude price settling back below $60, finished products in Chicago are ending the week higher than last week. Diesel prices surged sharply before correcting on Thursday, but they remain elevated compared to last week, and I expect higher diesel prices at the pump. Gasoline prices also jumped and should cause higher prices at the pump. Until geopolitical risk fully clears the market, I expect prices to hold at current rates.

Propane prices remain relatively stable, but shipping logistics continue to be a major challenge. An official report confirmed that the pipeline running from Kansas to Janesville will operate at only 80 percent capacity throughout the winter for safety reasons from a leak back at Thanksgiving. That 20 percent loss has shifted more demand onto rail, which is already strained after Edmonton declared force majeure on contracted railcars due to extreme cold. Trucking companies are now traveling out of state to supplement supply from Janesville, which serves much of Wisconsin. Freight rates for propane have nearly doubled, and with colder weather arriving, I expect higher retail propane prices. Unfortunately, this situation is unlikely to improve for at least the next one to two weeks, and if cold snaps persist, tight conditions could last into March.

As always, if you have any questions, please feel free to give us a call. Have a great weekend!

Best regards,

Jon Crawford

Sources: Bloomberg, Wall Street Journal, Reuters

A Whole New World

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Happy Friday!

Crude oil prices ripped higher on Thursday and Friday as unrest in Iran intensified, raising concerns that protests could eventually disrupt production. That said, the rally looks more geopolitical than fundamental. The sharp selloff below $55 per barrel earlier in the week triggered technical and headline-driven buying, but broader economic data continues to point toward demand weakness.

The biggest headline of the week was the capture of Maduro, which only pushed oil prices up about $1. Markets quickly recognized that oil flows are unlikely to be disrupted and could actually increase. Venezuela’s new president, Delcy Rodríguez, signaled a willingness to work with the U.S. to keep oil flowing. Venezuela has the capacity to produce up to 3 million barrels per day, up from roughly 1 million today, but reaching that level would take years and massive investment.   If Venezuelan crude starts flowing to the Gulf Coast, gasoline and diesel prices could fall. Gulf Coast refiners are well-equipped to process heavy Venezuelan crude, similar to how Midwest refiners handle Canadian heavy oil, often yielding higher gasoline and diesel output per barrel. Trump stated he wants to push oil prices down to $50 per barrel using Venezuelan crude. That would come at a cost to U.S. producers, particularly in Texas and North Dakota, where production and investment would likely fall. While lower global prices could reduce gasoline and diesel costs, any meaningful pullback in U.S. production or new OPEC+ cuts could quickly swing the market back the other way.

It’s also worth noting that fully ramping Venezuelan production could cost well over $100 billion in investment. Trump announced plans to seize 30–50 million barrels of Venezuelan crude and sell it on the open market. In reality, the impact is minimal. For example, the U.S. consumes roughly 20 million barrels per day, so the volumes involved are a drop in the bucket. Even though much of the crude was originally headed to China, China’s storage levels are already near capacity, limiting any real effect. Chevron, which remains exempt from sanctions, is already looking to ramp up exports as quickly as possible.  Talks between the U.S. and Venezuela are gaining traction, with discussions underway on how Venezuelan oil could be handled going forward. While some view this as bearish, traders remain skeptical that the U.S. can effectively manage or rapidly rebuild Venezuela’s oil infrastructure. Oil companies are already jockeying for access, though Chevron appears best positioned given its long-standing presence in the country.  The U.S. is even discussing subsidizing oil investments in Venezuela to speed up exports, using incentives to attract more international oil companies.

The war in Ukraine remains to affect Russian exports. Ukraine struck another Russian oil tanker, while Russia retaliated with a hypersonic missile strike—one of the few times this weapon has been used during the conflict. The missile is believed to be impossible to intercept and capable of carrying nuclear warheads, reiterating the escalation risk. At the same time, Ukraine’s continued targeting of Russian energy infrastructure is further straining exports.  The U.S. seized a possible Russian-flagged oil tanker in the North Atlantic between Iceland and the U.K., marking another escalation. Russian naval and submarine presence in the region adds another layer of risk. Oil prices also found some support as Congress moved closer to passing a new Russian sanctions bill aimed at countries purchasing Russian crude. However, countries like India are actively negotiating trade deals with the U.S., and easing some Russian sanctions could be part of those discussions.

At the same time, Pakistan and Saudi Arabia are close to a fighter-jet deal, which could strain relations between Saudi Arabia and India and add to regional instability.  Trump also threatened additional tariffs on India if it continues buying Russian crude. This time, India appears serious about compliance and is preparing audits of its refiners as it pursues a broader trade deal with the U.S.  India is also reopening trade channels with China, allowing Chinese firms to bid on government contracts for the first time in five years. While this could lower costs for India, it risks complicating relations with the U.S., particularly around data security and future trade negotiations.  China has imposed new export controls on Japan, raising tensions as Japan continues supporting Taiwan. For now, traders view the moves as posturing, with the risk of military conflict still low. That said, China was vocal in condemning recent U.S. actions, calling them a potential blueprint for future moves against Taiwan.

OPEC+ reported a drop in December production, driven by declines in Venezuela, Iran, and Russia. Sanctions, ship seizures, and Ukraine’s attacks on Russian oil assets were blamed as the main culprit. Even so, OPEC+ met after the capture of Maduro and chose to keep pumping at current levels, a decision that in my view continues to push the market toward oversupply in 2026.  Iraq announced that its government has taken control of the country’s largest oil field as sanctions continue to pressure output. Officials say they plan to work around sanctions and maintain production, but traders are concerned the intervention could lead to operational disruptions and eventually to possible tanker seizures.  Middle Eastern crude continues to trade at deep discounts, the weakest levels of the year, reinforcing expectations that supply will exceed demand in 2026.  Chevron is also emerging as the likely winner in the bidding for Lukoil’s (Russian’s major oil company and Russia is part of OPEC+) foreign assets. Combined with a potential expansion in Venezuela, this would move Chevron closer to being one of the largest oil producers globally.

Despite the recent rally, I believe the oil market is overbought in the short term. U.S. jobs data and other economic indicators continue to soften, and the latest EIA report showed major builds in gasoline and diesel inventories—clear signs that demand is struggling to keep up.

The Chicago spot market followed crude prices higher, with differentials ticking up modestly. Forward contracts are trading at a premium, signaling continued weakness and encouraging buyers to purchase spot barrels and store them. I would expect gasoline prices to maybe tick up slightly next week. Diesel prices are likely to remain relatively flat after falling sharply and rebounding just as quickly.

Propane prices eased modestly with warmer weather in the forecast. Rack prices came down slightly to start the week, and pipeline and rail logistics appear manageable for now. National inventories remain at high levels. A sudden cold snap could quickly stress logistics again.  But other than possible supply logistics, there is no clear predictor for major propane price spikes at this time.

As always, if you have any questions, please feel free to give us a call.  Have a great weekend!

Best regards,

Jon Crawford

Sources: Wall Street Journal, Bloomberg, and Reuters