Monthly Archives: October 2018

Crude Prices Continues to Slide

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Good morning,

Crude oil prices continue to slide this week.  WTI crude touched $66/barrel on Tuesday, closing over 11% down in the past two weeks.  Traders have all rung the register and jumped on board believing that Saudi Arabia will make sure that all Iranian crude lost from sanctions will be replaced.  Many feel that Saudi Arabia will deliver on the promise to help diminish consequences over the killing of a journalist.  In addition to the geopolitical climate changes, the world stock markets have been in correction giving strength to a potential slowdown in the economy which is bearish for crude.  I do not feel that crude prices will go much lower.  I feel that at this point the hedge fund money is out of the price.  When you look at the amount of contract positions sold in the past two weeks, the amount purchased in return is minimal.  Therefore, traders are not selling their long positions and shorting crude.  So basically, from a technical standpoint, crude prices are in a “wait and see” pattern until the hedge fund managers enter the market again.

Local prices of gasoline are inching closer to $2.49/gallon.  I expect to see prices continue to fall throughout the weekend.  Diesel prices have not fallen as much due to increased demand for harvest.  Although harvest is going to be very prolonged this year due to the flooding and temperatures, I don’t expect to experience any diesel supply disruptions over the coming weeks.

Propane prices are slowly rising as we get into winter.  The colder than normal October has increased demand.  The major sell off in crude affected propane slightly, but overall, prices are continuing to trend higher.

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

Best regards,

Jon Crawford – Pres.

WTI Crude Falls Below $70/Barrel

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Good morning,

For the first time in weeks, WTI crude price dropped below $70/barrel.  As I have been discussing, there are reasons to believe crude prices could go higher, and also reasons for prices to drop.  Over the past weeks, the reasons for crude to climb (healthy demand, supply tightness, Iran sanctions, political instability in the Middle East) were winning the discussion and the bull market took off.  Once hedge fund positions took a record long position on crude, I took pause.  I was in agreement on the runup in price because emotions had clearly taken over the market.  And then, just like that, profit taking took over.  Announcements came out that Saudi Arabia and Russia were looking at secret production increases to offset Iran sanctions, the FED announced that it’s ready to keep going on rate increases, China’s economy showed headwinds, hurricanes eroded demand and supply surplus came back in the US, refinery maintenance moved closer to completion, and the hedge funds started to ring the register.  Within a week, $7/barrel came off of WTI and refined products started to relax in price.  I am cautious about any further downward movement considering the political instability in Saudi Arabia.  All eyes are on deck surrounding the international situation with the disappearance of Jamal Khashoggi.

In local news, gasoline retail prices started to relax a bit.  We are moving back down closer to $2.50/gallon.  Time will tell, but for now, the big upswing in price is on hold.  Diesel prices might come down a touch, but diesel cost has not dropped as much as gasoline.

Propane prices are holding a bit of a flat pattern after running up last week.  The supply situation seems to be a little bit stronger, but the weather forecast is looking like a potential for a 10% colder winter compared to last year.  This would be a dramatic increase in demand.  So for now, it’s wait and see.  I still am calling for propane prices to rise in the coming months, and it’s not too late to lock in your prices for this winter.

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

Best regards,

Jon Crawford – Pres.

Correction Hits the Crude Market

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Good morning,

The crude markets went into correction last week and gave back almost $6/barrel.  In addition, refinery maintenance in Chicago started to finish up causing winter RVP to flow into the cash price point in Chicago on gasoline.  Saudi Arabia and Russia keep hinting at a private side deal to secretly raise output starting in November.  The IEA also lowered their demand forecast for 2019.  And hurricane Michael destroyed demand down south, including most of the infrastructure along the panhandle in Florida.  Also, in a surprise, President Trump is discussing variances for purchases of Iranian crude for countries that tried to curb purchases in the past months.  And last but not least, economic downturn in China and the U.S. due to trade wars overtook the airwaves for a few days as well.  All of these events caused a major downturn in crude prices.  The main event going into this week is the political tension between Saudi Arabia and the rest of the world surrounding the disappearing journalist.  Any major announcement of sanctions could cause a spark for retaliation which in turn could make crude prices soar.  All eyes are on deck.

In local news, retail prices for gasoline and diesel are starting to slowly come down.  I would expect prices to slowly ease depending on what happens this week.

Propane prices climbed in the past week due to an increase in demand and potential supply tightness going into winter.  In addition, corn drying is in full swing.  We expect propane prices to continue to climb going into winter unless crude prices collapse.

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

Best regards,

Jon Crawford – Pres.

Crude Prices Have A Fever of $100/Barrel

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Good morning,

As you may have noticed, the price of fuel has been rising at the pump.  As the sanctions against Iran are getting closer to kicking in, traders have caught a nasty fever.  The fever of the magical $100/barrel crude price is on and traders are putting their money where their mouth is.  Right now, the net long positions on crude oil futures hit historic levels again.  This week OPEC and Russia reminded the world that the Iran sanctions were put in place by the U.S., not them.  Therefore, they are a bit reluctant to come out and rescue the world from higher prices.  However, many believe that Russia and Saudi Arabia are secretly putting more oil into the market leading up to the Iran sanctions in November.  Under the current market conditions with the Iran sanctions coming, I do believe that Brent prices could touch $100/barrel in the coming months.  But I’m also a huge fan of history.  Every time we see this amount of hedge fund money pour into crude at a frantic pace, a correction is around the corner.  And in recent years, the correction comes sooner than later.  I believe that by the end of November, there is a potential for prices to unwind, especially by year end as traders take profits on the tax breaks based for this year.  Unfortunately, this means that high prices at the pump are probably here for at least two more months.

Retail prices on gasoline and diesel are climbing not only due to the rise in crude prices, but also because of refinery maintenance at facilities in the Midwest causing supply constraints.  I believe that gas prices will stay under $3/gallon and diesel prices under $3.49/gallon for a bit here.  But if the $100/barrel fever doesn’t break in the coming weeks, at the end of the month we could see gas prices breaking $3/gallon and diesel climbing over $3.49/gallon.

Propane prices continue to baffle me.  Inventories across the country are at the same level as last year.  But the cost ratio of propane to crude oil is low.  Corn drying demand is low and much of the tobacco crop was destroyed out east.  So for now, propane prices will remain stable, but any demand event could cause a large spike in price.

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

Best regards,

Jon Crawford – Pres.