Monthly Archives: November 2017

OPEC and Russia

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Good afternoon,

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.

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

Happy Thanksgiving!

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Good morning!

Crawford Oil and Propane hopes everyone had a safe and enjoyable Thanksgiving! We are so thankful for all of our customers and a safe delivery season in 2017. We look forward to another safe and successful year in 2018!

Jon Crawford – Pres.
Crawford Oil and Propane

Some Cold Water on the Rally

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Good afternoon,

Last week crude oil prices skyrocketed based on Saudi Arabia causing unrest in the Middle East, the OPEC forecast for increased demand in 2018, drop in U.S. inventories, and talk of OPEC keeping the current cuts on the book until the end of 2018. Long positions on crude entered the market last week in record numbers and caused panic buying to push WTI price above $57/barrel. Most of the news agencies and pundits called for $60/barrel by the end of the year. I was a bit skeptical of how fast we moved, but I did write that if what was discussed last week were true, then yes, $53/barrel in WTI might be then new bottom action for price. Well, what a difference a week makes. This week, the IEA came out with their demand forecast. Their numbers are 600k barrels/day lower than OPEC’s forecast! The discrepancy is very notable and put many investors on their heels. In addition, the U.S. incurred over a 5MM barrel build in crude oil. I was concerned that possibly we were still catching up on post hurricane production. Clearly, we were still catching up. Also, the U.S. added more rigs to the production picture and will probably break the daily barrel/day production level record by year’s end. The IEA does not see where demand will outstrip production in the first half of 2018, even with current cuts in place from OPEC. That being said, even if OPEC continues with cuts as is, future prices will not be greatly affected. The news this week put a quick cooling to the rally. In fact, WTI has the potential to fall back below the support price of $55.barrel by week’s end! OPEC now has some major thinking to do because just extending cuts might not be enough to keep Brent above $60/barrel.

In local retail news, gasoline prices have finally eased back below $2.49/gallon. Diesel prices are now well below $2.99/gallon. The Chicago market is continuing to give back it’s earlier gains from supply disruptions. I expect to see prices fall a little bit more into next week, which is good news for the Thanksgiving travel week.

Propane prices have actually climbed a bit in the past week. With current cold weather and the highest demand for corn drying in five years, propane supplies were tight and prices followed suit. We are now at the highest delivery price in over two years. If warm weather and crude prices ease by month’s end, we could see a little relief on price in this recent propane rally.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

Saudi Arabia, U.S. Production, Asia, and Propane Issues

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Good afternoon,

I hope this message finds everyone well. Saudi Arabia is really driving prices up in the crude oil market. Prince Mohammad Bin Salman surprised the world and arrested much of the royal family on corruption charges. One member arrested was the director of Aramco, the Saudi oil company scheduled for IPO in 2018. Prince Mohammad B Salman is trying to show his country and the rest of the world that the royal family will be held accountable to the law and no longer able to live above the law. He hopes his actions will show investors that their money will be safely invested in Aramco and not liable to corruption from the royal family. He also hopes to bring confidence to his people that the royal family will be held to the same standard of law as it’s citizens. In addition to the arrests, Saudi Arabia is calling for sanctions against Iran due to a missile launch this week from Iran. The instability in the Middle East and in Saudi Arabia in particular have added a $5/barrel premium to crude for the short and potential long term in 2018. The response is exactly what Saudi Arabia was hoping for.

At home, the U.S. is under pressure to keep up production to meet the world demand. Since the OPEC cuts, the U.S. has picked up the slack. One blink by the U.S. and prices could soar. Now, if one country in OPEC decides that Saudi Arabia is taking too much power and throws off the cuts, we could see the entire cooperation from OPEC crumble and take crude prices down along the way. For the moment, I am seeing WTI crude finishing near $55/barrel this year instead of $50. I do not think that right now is the time to lock in next year’s diesel pricing. I think opportunities will present themselves in December or January.

In local retail news, the supply issues are back in balance. Retail prices for gasoline are around $2.49/gallon and diesel prices are around $2.79/gallon. With the actions from Saudi Arabia, I’m not sure how much more relief in prices we will see before the holidays.

Propane supplies in Wisconsin were tightened due to a western and a southern pipeline issue. With the heavy increase in demand from corn drying, Minnesota and northern Illinois ran out of propane, so everyone came to Wisconsin. This caused major issues in the state and the governor issued an Extension of Hours to help haulers get product to the farmers. I expect the issues to subside in about two weeks. Prices have not been greatly affected. If warm weather hits at the end of the month, we could see some softening in the propane market. However, if cold temps come early, hold on to your seats. Those who contracted for the year are almost 20 cents/gallon under market price today.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

OPEC, Chicago Pipeline, and Propane Supply

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Good morning,

Crude oil prices have continued to rally on OPEC’s compliance to cuts. Saudi Arabia and Russia continue to commit verbally to cuts through all 2018. However, OPEC has not taken an official position to extend the cuts past March of 2018. Many investors are buying into the market on this news causing WTI to near the next resistance price of $55/barrel. However, the U.S. has continued to increase production and exportation. The U.S. completed their first shipment of crude oil to India. The U.S. crude oil production will set a new record by year’s end and does not show any signs of slowing down, especially with their new customers in Asia. As long as the spreads between WTI and Brent continue to be wide, the U.S. will continue to have the advantage on the open market while forcing OPEC to discount their exports. The geopolitical issues of the Middle East and North Korea seem to be in check and not offering to many purchase jitters. Without any significant change in demand or production, I don’t see WTI being able to push through $55/barrel. Time will tell.

In local news, the Explorer pipeline carrying gasoline out of Chicago went down last week causing the price of gasoline to spike over 30 cents/gallon. Retail prices will continue to climb dramatically until the issue is resolved. Right now there is no news on a completion date of the repair. We are hoping by the end of next week. In the meantime, I would prepare for temporary high retail prices on gasoline. Diesel cost was mildly affected, but supplies seem to be more ample. Once the repairs are completed and the refinery issues in Chicago are completed, I expect over a 35-40 cent/gallon drop in gasoline cost and potentially 10-15 cent drop in diesel cost. Hopefully everything will be back to normal before Thanksgiving and the start of holiday driving season.

Propane supplies had their first disruption this week as well. The West leg of a major pipeline went down for repairs causing massive outages across the Midwest. These outages caused companies to move across State lines and emptied supplies at some terminals in Wisconsin. We are supplied through multiple terminals, including various rail terminals which are strictly allocated. Therefore access to supply is not currently an issue for Crawford Propane. Prices for propane surprisingly have peaked for a bit. However, those who contracted as advised are sitting very good so far this year. There is some potential for price relief in November if temperatures warm up and corn drying diminishes.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane