Monthly Archives: June 2018

Crude Prices Hit With Triple Whammy

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Good afternoon,

Well, as I wrote since the last pull back in crude prices, I’ve stated that some key issues needed to play out in order for us to gain a potential predictable direction for crude prices.  Unfortunately, a triple whammy of events struck this week causing a massive gain in crude prices.  And I can safely say that the prediction for prices is now higher for the remainder of the summer.  OPEC has only decided to add an additional 1M barrels into a market that many believe is undersupplied by as much as 2-2.5M barrels.  The analysis caused crude prices to spike, especially WTI as the action puts more pressure on U.S. crude production.  Then on Tuesday, Trump announced that he would not ease into allowing countries curtailing their Iranian crude purchases starting in November.  He called for “absolute zero” purchases.  The action caused a massive spike in crude prices, more so in WTI due to the additional pressure on U.S. production.  And then today, the EIA inventory report posted a massive draw of over 9M barrels in crude inventory.  The announcement caused crude prices to rally hard once again, with WTI prices closing in on less than a $5/barrel spread to Brent.  WTI has closed in from over an $11 spread to Brent, to now just under $5.  The closing of the gap will greatly affect futures pricing for refined products here in the U.S.  Basically a 10-15 cent/gallon premium has just been added into the market.  I hate to bring bad news, but high energy prices are going to be here for some time unless Russia and Saudi Arabia greatly increase their production capacity.  The U.S. is pretty much at max production capacity and any supply disruption is going to have major upside consequences on market prices.

In local retail news, I would expect to see summer gasoline prices to stay around $2.75/gallon and diesel prices to stay above $3.00/gallon.  Unfortunately with all the events of this week, crude prices will not be able to unwind fast enough to offer relief in prices this summer.

Propane prices are also starting to take off.  We are still at the lowest price of the year and I highly suggest that all customers fill their tanks now.  We also have released our next season’s heating contract pricing.  We suggest that everyone contract their propane for next year given all the supply and geopolitical issues in the market.  Please call the office to schedule your summer fill and lock in your heating contract.

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

Best regards,

Jon Crawford – Pres.

OPEC Under Delivers… 2018-2019 Propane Heating Contracts Released!!!

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Good morning,

The big news at the end of the week was the OPEC decision to put an additional 1M barrels of oil back on the market.  The decision is very vague and many countries will not be able to increase their quotas due to constraints.  Therefore, Saudi Arabia and Russia will be able to probably increase greater than announced.  Some believe the total volume will only amount to about 700k barrels which underwhelmed the market.  The markets reacted very strangely.  WTI Crude Oil soared over $3/barrel, while BRENT Oil traded about half as much.  In addition, BRENT is now starting to sell off which is easing the gap in price between WTI and BRENT.  China is working on ways to purchase more oil from Iran once the sanctions take place, and the overall trade war environment is putting the markets in a holding pattern.  Basically, the algorithms of the oil market are all over the map, and quite frankly, not much makes sense right now.  I think we will have to wait at least a week for more details to emerge before we can start to predict where all this is heading.  This week’s market is the perfect example of what happens with computer traded commodities and pre-programmed “sells” and “buys”.  Also, the US oil rig count dropped one last week.  If our production is starting to peak, I would not be surprised if we see these prices hold for the remainder of the year.  Last week our inventory also showed a massive draw in crude oil inventory but the equivalent build in refined products.  So basically, we just refined a lot a crude and put products into storage.  This was surprising considering we are in high demand season.  In other words, strange things are afloat and I’m just going to sit on the sidelines with my popcorn for a bit.

In local retail news, prices of gasoline and diesel are slowly dropping.  With the recent move on Friday, I’m not sure how much lower the prices will go, but at least they are not going up.  I expect, like with crude, more predictability in a week or so.

Propane prices have remained very stagnant during this crude price upheaval.  Right now, our board price is the lowest of the season and we recommend that everyone fill their tanks in the next two months.  Also, we have released propane heating contracts for next season!  Please call the office now for summer fill pricing and fill out your contract for next season!

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

Best regards,

Jon Crawford – Pres.