Happy Friday!

WTI crude fell below $100/barrel this week and look to close beneath $95.  We are starting to see technical levels in the crude trade, so any major event will push prices quickly back above $100 or below $90.

On Monday, oil collapsed below $100, dropping as far as $95 at one point in a sharp selloff. The UN met in New York this week, and Iran sent a delegation with the green light from both the president and the Supreme Leader to make a deal. The continued threat of Houthi attacks on Saudi Arabia remained real, but the Saudis have managed to keep cargo shipments moving. Diesel prices fell too, even after Ukraine struck another refinery near Moscow early Monday and knocking out half its capacity. US diesel prices remained at a record high above $6.50 a gallon, and all eyes are were the UN meetings this week.

On Tuesday, oil fell further and hit a two-week low. Ahead of Wednesday’s UN session, Iran said the Strait could fully reopen within seven days if the US Navy ends its blockade.  Saudi Arabia announced its East-West pipeline was fully loading cargoes.  The news was much-needed relief as crude oil prices were looking at firming back higher.

On Wednesday, oil bounced off the week’s low after Trump said late Tuesday at the UN that he wanted a deal with Iran or he would consider complete annihilation.  The intensity of the statement spooked traders and repurchasing started to firm up the market.  The US and Iran met for three hours.  After steep overnight losses, crude and diesel rebounded at the open. In addition, Iraq announced that they are continuing to ramp up exports. By noon, though, gasoline and diesel prices completely collapsed. Even with the EIA reporting draws across crude and all refined products, the market is starting to believe the crude and diesel crunch could ease by year-end. Zelensky announced that he wants a winter arms deal with the US.  And he understands that the US will likely ask Ukraine to stop bombing Russian refineries in exchange for the funding. However, the biggest news of the day sent markets into a tailspin.  Reports surfaced that Trump was going to announce a 90-day diesel export ban. The announcement caused a knee-jerk reaction as traders heads spun in circles.  The ban would put the US in uncharted territory. Refiners can sell diesel at the equivalent of $200 a barrel on the open world market.  Europe is already cutting December flights over its diesel shortage and reliance on what little the US can spare  Refiners are not going to lose money because of a ban. So while the knee-jerk reaction might be a pullback, I could see diesel prices eventually rebounding even higher.

On Thursday, crude and diesel screamed higher, then eased around midday on news that the US and Iran are continuing to work on a deal to reopen the Strait and end the naval blockade. I was surprised the market bought into the headline given these same announcements have come and gone for six months now. Diesel stayed the hot topic of the day, both in the news and at the UN. The US denied wanting a diesel export ban, but Energy Secretary Chris Wright said he’s in talks with oil companies about a partial pan. Diesel prices worldwide rocketed higher on that news again, because any ban would further tighten world supply.  Although there was some good supply news.  Saudi Arabia sold almost 100 million barrels to Asia for October and November delivery and plans to move some through the Strait despite the risk.

On Friday, oil drifted lower again as hopes for an Iran deal continued to take the lead.  Strangely, crude oil prices did not move higher on the news that Saudi Arabia is preparing troops for strikes on the Houthis in Yemen.  Saudi is backed by its newly formed alliance with Turkey and Pakistan. Ukraine struck yet another refinery Thursday evening, but traders are holding onto hope that an arms deal with Ukraine gets done in exchange for it ceasing refinery attacks.

The Chicago spot market collapsed exactly as I expected. Once Mobil Joliet and BP Whiting both came back online at full strength, basis differentials fell through the floor. The prompt trading month in Chicago rolled to November on Friday. There’s a bit of support for diesel prices on the November contract, but I expect diesel prices at the pump to keep declining through the weekend and into next week as inventories rebuild. Gasoline prices came down too, just not as much. However, I do believe prices of gasoline will move a bit lower at the pump.

Propane prices continue to firm up, moving higher again this week.  There is a chance of another move higher in early October as winter demand and corn drying season east of the Rockies start drawing down inventories. I don’t see a chance of any major blowout in price.  But I do see a floor forming in the market. A $10 drop in crude could bring some relief on propane price. For now, though, I think we’re settling into the new price norm.

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

Best regards,
Jon Crawford

Happy Friday!

WTI crude touched four-month highs this week before pulling back a bit by Friday.  On Monday, crude opened up more than 3%, with gasoline up 15 cents a gallon and diesel up almost 25 cents. Over the past weekend, Saudi Arabia shut down its east-west pipeline, which normally moves 7 million barrels a day and had been covering half of the crude transport lost from the strait of Hormuz closure. The shutdown came after the Houthis, using Iranian intelligence and weapons, pulled off a fast occupation of an island in the Red Sea strait.  They effectively closed the strait and hit a Saudi export facility along the pipeline route. Saudi Arabia gave no timeline for reopening and said it has about a week of inventory left before exports stop entirely. Saudi Arabia struck back in Yemen, but the Houthi response was massive, destroying large parts of Saudi military bases, radar, and ammunition. Trump also said over the past weekend he wanted to broker a deal between Ukraine and Russia to stop them from attacking each other’s energy infrastructure, and by midmorning Monday he announced a deal was in place. The market whipsawed on the news, and diesel gave back its entire 25 cent gain.

On Tuesday, Saudi Arabia announced the east-west pipeline would be down 3 to 5 weeks, sending prices sharply higher to start the day. And the truce between Ukraine/Russia on attacking energy infrastructure didn’t even last a day.  Ukraine struck another Russian refinery early Tuesday morning, and Russia retaliated with a 200-drone attack on Kyiv. The attacks pushed prices, especially diesel, even higher. Ship traffic through the Strait of Hormuz slowed further as the regional escalation continued. All eyes turned to the Fed’s Wednesday meeting, with traders betting on a rate hike.  However, the big question was whether it’s been already priced into the crude oil market.

On Wednesday, oil prices fell after Saudi Arabia said it would reroute the pipeline’s canceled cargoes through its export facility in Oman. It was good news, but it doesn’t change the overall supply picture.  We may be near a ceiling on crude oil prices, but there still isn’t enough product to bring prices down meaningfully. Europe remains in bad shape on diesel, and Russia announced its diesel export ban will run at least through the end of October. Higher diesel prices are finally starting to hit European demand, and if that pace continues, a recession there by year-end isn’t out of the question. At home, the EIA reported only a small 600,000-barrel draw in crude, alongside builds of about 1.5 million barrels in gasoline and diesel.  The news was nothing dramatic enough to move the market. The Fed decided to raise rates a quarter basis point.  Although the stock market collapsed, the announcement did not move crude oil price, confirming that the rate hike was already priced into the market.

On Thursday, oil prices retreated further as traders saw the Saudi pipeline restart tracking ahead of schedule, and the Oman exports began flowing as expected. Ship traffic through both Hormuz and Bab el-Mandeb remains very light. Ukraine struck yet another Russian refinery.  This was the second in three days, continuing to squeeze world diesel prices. There was more positive talk of American oil companies investing in Venezuela, but any real production increase is still at least a year out. At home, there is growing talk of limiting US diesel exports as diesel prices push the economy closer to recession. However, a diesel export ban would maybe lower prices temporarily, but would eventually make prices move even higher due to the refiners need to capture the spread lost on the open world market.  With the Fed’s rate move higher, traders don’t see higher rates doing much to slow inflation at this time.  The only real fix is bringing energy costs down, and without a deal in the Gulf or with Russia, a recession may be the only path left to get there.

By Friday, crude prices eased back a bit after touching four-month highs. There’s cautious optimism heading into the weekend that Saudi Arabia will continue progress on the east-west, and Saudi announced higher cargo exports for October. China also started exporting diesel again.  Although the volume is not very high, every barrel helps in this tight market.  China reportedly reached out to the Houthis urging them to stop attacking Saudi oil infrastructure, since the disruption is also hitting the crude China buys from Saudi Arabia.

The Chicago spot market went absolutely wild this week. I’ve been saying for weeks how tight the market is heading into harvest, and that any refinery hiccup could send spot prices exploding.  Well, that’s exactly what happened. Two refineries went down: Mobil Joliet and BP Whiting. Diesel prices in our market spiked more than 50 cents a gallon in two days, and gasoline jumped close to 25 cents. I expect gasoline and diesel to move noticeably higher at the pump. With harvest demand hitting right as these refineries are down, prices are likely to stay elevated until the refineries are back to full capacity.  And if crude prices stay calm, we should avoid $7 diesel.

Propane price followed crude oil price higher again this week. I expected a small move as winter fundamentals set in, but this week’s jump was touch more than I anticipated. Although I don’t expect much more movement higher from here.  We’re likely at a ceiling until crude prices pick a clear direction. You can still lock in pricing for the coming winter to protect yourself from any price volatility.

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

Best regards,

Jon Crawford

Happy Friday!

Monday there was no market due to Labor Day, so everything took off on Tuesday. Over the holiday weekend, the US attacked three Iranian tankers, and Iran retaliated with attempted strikes on US warships. And in a surprise move, the Houthis attacked energy facilities and cities inside Saudi Arabia.  The attack is a major escalation in the Gulf. Saudi Arabia said any ceasefire with Yemen is now on hold.  Iran responded by announcing a new “exclusion zone” in the strait and warned that any attacks on Iran would be reciprocated with attacks on American assets. On the supply side, Nigeria announced it has reached 700,000 barrels a day of crude processing, with the majority going to diesel and jet fuel.  The almost 1 million barrels a day was much-needed good news at a time of continued tight world supply of distillate. This week, all eyes were on monetary policy, with the ECB looking to raise rates and the Fed possibly not far behind.

On Wednesday, the US and Iran exchanged heavy fire. The US sank five Iranian oil tankers, and Iran struck 10 random ships in the strait while also firing at American bases in Jordan. The US announced that any further attacks from Iran would result in another Iranian tanker being sunk. The US is continuing its path of economic pressure to end the war.  However, Iran keeps defying expectations. The escalation pushed WTI toward $100 a barrel, and gasoline and diesel prices climbed dramatically. At home, the US Treasury is trying to control the bond market sell-off, but the dollar didn’t gain any strength to help rein in oil prices. Adding to the pressure, Ukraine struck another oil refinery in Russia, further pressuring refined fuels in the world market. Diesel prices continue to sit at record highs and keep climbing. The only bearish news came from China, which said it expects oil demand in their country to fall 8% this year and keep declining into 2027. If the US slides toward recession and China keeps buying less oil, we could be looking at an oil shock collapse in 2027. By midweek the consensus was we’re stuck with current prices for longer.

On Thursday, the European Central Bank raised rates by a quarter point, putting more pressure on the Fed to possibly follow suit at its next meeting to tame inflation. Wholesale prices rose again in August as expected, but oil prices kept climbing anyway. The Houthis moved north along the Yemeni coast and now have the ability to control oil exports in the Red Sea coming from Saudi Arabia.  The quick move believed to have been carried out with Iranian weapons and intelligence. This new threat to crude shipping routes is putting several countries in a tight spot that may require military action. OPEC cut its 2026 demand forecast for the fifth time, though it still sees some demand growth by year-end.  In contrast the IEA, still believes overall demand will decline. The EIA report came out Thursday due to Monday’s holiday.  Refiners continued running hot at almost 98% capacity, crude stockpiles slipped again, and gasoline and diesel stockpiles rose slightly.  However, diesel inventories remain 13% below normal. That tightness isn’t helping the price situation. By the end of day Thursday, crude oil rose well over $100 a barrel, and diesel hit another record high.

Crude oil took a breather Friday but is still on pace for an 8% weekly gain. Diesel retail prices broke yet another record by week’s end, with the average retail price crossing $6 a gallon. Beyond the OPEC-IEA disagreement over whether demand will rise or fall at these prices, Saudi Arabia released an interesting statistic.  Saudi Arabia has now cut oil production to its lowest level since the Gulf War in 1990. The economic data at home wasn’t great either.  CPI rose 0.4% in August and is up 3.4% year-over-year, with core inflation also rising. That data was a big reason crude oil prices dipped Friday.  And the data is giving more weight to the idea that the Fed might raise rates, which would strengthen the dollar and weaken crude prices. Time will tell as we approach the next Fed meeting.

The Chicago Spot Market continues to be balanced and well supplied heading into harvest, with differentials still running at a favorable deficit to NYMEX. That said, both gasoline and diesel costs moved higher this week.  Gasoline went up just over 10 cents a gallon since Monday, and diesel on track to end the week over 35 cents a gallon higher. I expect gasoline and diesel prices to move higher at the pump. Hopefully, after today’s breather, we hold at these levels for a bit.

Propane prices, for the first time in months, followed crude oil higher.  Although not by much, but enough to nudge retail prices up slightly. National inventories remain very healthy, and I don’t expect propane to blow out the way gasoline and diesel have. Especially since rail cars from Canada will start showing up for winter.  I could see retail prices tick up a little more by the end of September before holding as winter economics fully set in. We’re still writing contracts for the upcoming winter, and you can still fill your tank at a lower price than contract.

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