Well the buildup is finally over. OPEC and Russia met today and decided to extend production cuts through 2018. After days of potential pullout from Russia, everyone came to the table and announced the agreement today. The markets did not react with any positive bounce. In fact, the extension sort of holds a “business as usual” tone. The extension agreement has been baked into crude prices for some weeks now. Now had OPEC and Russia cut more, you would have seen WTI jump through $60/barrel. Based on the results of the meeting today, I am now calling for WTI to trade in the $55-60/barrel range through June of next year. The US had large builds in gasoline and diesel inventories after a drop in crude inventories. The build in finished product is showing that refinery runs are good and the US is going to be going to market with product. So Russia and OPEC are going to have to concede market share to the U.S. I am hesitant that Russia will hold these cuts for the entire year. Russian oil companies will struggle to lose customers to the U.S. for a long period of time.
In local news, the Keystone Pipeline restarted and Chicago refineries all came back online. These announcements caused a massive drop in spot prices in Chicago as we moved to the next refinery cycle timing. I would expect to see diesel prices average around $2.85 and gasoline get down to $2.30/gallon very soon. Hopefully these will hold and we can all save some money during the Christmas and New Year’s travel season.
Propane prices have been holding steady. Supplies are in better condition with pipelines reopened and a drawdown in corn drying demand. Propane inventories had a smaller than expected draw today which surprised the market. The weather is going to truly dictate the price movement in propane. Any drop in crude prices will not affect propane if temperatures drop back to normal. As a reminder, please call in your propane order when your tank is at 30% or higher to ensure we have up to five days to get there during the busy season.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Jon Crawford – Pres.
Crawford Oil and Propane