Nothin’ Gonna Keep Me Down

Posted on February 22, 2018February 22, 2018 by locadmin

Good afternoon,

After entering into correction, WTI pricing has whipsawed back to above $62/barrel. With the dollar recovering from the low and production increasing in the U.S. and Nigeria of OPEC, many of us are scratching our heads at the quick claw back in crude pricing. In addition, Iraq is investing in more production, and if Nigeria is truly cheating on quotes, I wonder how much longer others will hold out. Russia has been stomaching their quota but their players in the country really would like to increase production. I’m thinking that maybe crude recovered much like the DOW. There was still money left on the table from the tax cuts and record profits to throw into the market when the first round of selling triggered across equities and commodities. At this point, I’m sticking with what one trader called earlier this month “the appetizer before the meal.” I really do think that crude will come back down below $60/barrel one more time this spring, possibly in March. If the Fed raises rates in March, pressure on crude will mount. Also, traders will have to decide if they want to cash out of crude in Q1 and move the money into something else.

In local news, retail prices are all over the board. In a 45 mile radius from Madison, retail prices on gasoline have ranged from $2.35 to $2.49. Diesel prices are starting to ease a bit as #1 ULSD blends fade out a bit. Just as prices were going to break into the possible teens on gasoline, crude clawed right back.

Propane retail prices have a eased a bit from the highs. We expect to see prices go down from here for the rest of the heating season into spring. Summer fill and contract information for 2018 will be available closer to June/July.

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

Best regards,

Jon Crawford – Pres.

Game of Tug and Pull

Posted on February 15, 2018February 15, 2018 by locadmin

Good morning,

Crude oil finally unwound from its highs last week. Over $10/barrel came off of the WTI crude oil contract last week due to increased production in the US and the strength of the dollar. Futures prices dropped dramatically and crossed our strike price of $60/barrel. This week, crude prices rebounded a bit on a weaker dollar and news from Saudi Arabia that they plan to keep production low even though the US overtook them in production. The US also started building inventories of products going into the spring. In addition, the US also shipped their first “super-tanker” of crude. And some of our crude oil is showing up in new countries meaning that our customer base is growing. I do not believe that we bottomed out last week. I believe we will see a tug and pull between $59-62/barrel for sometime. If the dollar index starts to move higher and hold above 90, I don’t believe WTI crude will hold above $60/barrel. Lots of talk going on and rebalancing of hedge fund monies right now, so hold on because it’s going to be bumpy for a few weeks.

In local retail news, gasoline and diesel prices continue to drop. If you are considering locking in fuel prices for this year, now is good time to start thinking about it. I am still advising clients to lock up prices for the fall and maybe let the spring ride. Feel free to call me for more info.

Propane prices rebounded off of the lows due to a slight increase in demand. However, I do not see the recent price increase affecting retail prices. As of right now, we are seeing prices for next heating season being about the same as this season. More pricing info will be released this summer.

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

Best regards,

Jon Crawford

Crude Tumbles with the Stock Market

Posted on February 9, 2018February 9, 2018 by locadmin

Good morning,

As I have been saying for sometime, WTI would begin to correct towards the end of January or in February. The correction has begun and is following the stock market. WTI prices have fallen from near $70/barrel down to $60/barrel. I believe that there is still some hedge fund money sticking around and eventually we will fall through the $60/barrel support level. The value of the dollar has been increasing which is also putting downward pressure. In addition, the U.S. crude oil inventories are starting to build just as I predicted. Across the globe, Saudi Arabia is arguing amongst themselves on where and how to release their IPO of Aramco. I believe that this will eventually cause Russia to become impatient. I think Russia was holding out on production increases as long Saudi Arabia released their IPO this spring. I guess we will wait and see. If the OPEC deal falls apart, I think you will see crude tumble down again.

In local retail news, I expect to see both gasoline and diesel prices start to drop.

Propane prices are steady and supplies are looking good for rest of winter. I am expecting prices to be lower by March. In addition, I also think we will have plenty of supplies for some good summer fill prices. And prices for next year’s contracts at this moment are looking to be close to this year’s prices. So pretty much good news all around for propane right now. More information will follow towards the end of winter.

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

Best regards,

Jon Crawford – Pres.

Someone’s Gonna Blink

Posted on February 1, 2018February 1, 2018 by locadmin

Good afternoon,

Lots of big news this week. The dollar index continues to hold on to a floor right now which is buoying WTI crude prices near $65/barrel. OPEC is showing very strict compliance to their cuts, but mostly being held up by Venezuela’s drastic drawdown in production. In the U.S., crude production topped 10MM bpd for the first time since 1970. We have now set a record for daily production and surpassed Saudi Arabia as the number two producer in the world! In addition to the record, the industry sees no signs of slowing down at these prices. The EIA weekly inventory report showed a build in crude for the first time in eight weeks which created an initial dip in the market, but then the market reversed due to the existing exuberance that demand will keep outperforming production. Also in addition, we still have the record, yes record, of hedge fund long positions on crude oil in the market.

So where does all this lead? I am seeing a showdown between hedge fund managers and OPEC. The U.S. oil industry has made it quite obvious that they are not going to slow down. The oil industry is about to go into the refinery maintenance season which will decrease crude demand causing supplies in the U.S. to build. If the dollar index starts to increase in value, then the price of crude will start to decline. These situations are going to pin the hedge fund managers and OPEC against one another. If OPEC increases production by surprise, you will see the market collapse and the hedge fund managers will lose out on the top and hope to sell at a good time during the falling of the knife. If the hedge fund managers “ring the register”, then the price of crude could drop about $10/barrel and both the U.S. and OPEC get pounded on price. But regardless, there is very little true economic support for crude at these levels. To me, the market feels like it’s trying to get WTI to $70/barrel. OPEC is sitting back waiting to see if they should force the hedge fund managers to sell, or enjoy some higher prices for everyone. In other words, someone is going to blink. It’s only a matter of time. And when they do, crude will fall fast and hard.

In local retail news, gasoline and diesel supplies have been very ample throughout winter. No disruptions or pipeline issues so far. Gasoline prices hover near $2.49/gal and diesel prices are around $3.05/gal depending on which winter blend is used in the fuel. I expect these prices to continue in the near term until we see some major changes in crude prices.

Propane has been staying pretty steady. We are still confident that our current price is probably the highest for the year. We hope to see prices relax by the end of February. The weather is now the main driver for propane. We officially have enough propane in the country to make it through the rest of winter. We are starting to track next year’s prices and so far we are seeing numbers not too far off from this year.

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

Best regards,

Jon Crawford – Pres.