Small Floor in the Making

Good morning,

Wow, myself and every hedge fund never saw this week coming.  I am still perplexed by the last week in crude oil trading.  Traders are now negative for the year on long crude oil trades.  This week hedge fund managers removed all money from forward crude positions and dumped them into natural gas.  Natural gas is seeing record price increases due to low inventory levels, high exports, and low production.  Natural gas is shaping up to be nasty in price and supply this winter, much like propane in 2014.  WTI Crude prices found a bit of support at $56/barrel after falling through the $57/barrel support price.  OPEC, mainly Saudi Arabia is trying as hard as they can to convince traders that they are going to cut production.  This week they announced cutting shipments but not production, but yesterday they finally announced that they are looking to cut 1.4M barrels/day in 2019.  They are looking to drum up support for the upcoming December OPEC meeting.  The IEA is also being very bizarre in their predictions as well.  They continue to say that 2019 shows a slowing economy and world demand, but then turns around and says the world needs another 10M, yes 10M, barrel/day production in the next five years?!  Basically, you can take it or leave it with the IEA announcements at this point.  There is not much predictability in their news.  For now, we can enjoy low gas and diesel prices going into Thanksgiving and wait and see what OPEC does in December.  At the end of the day, I still can’t believe crude prices fell this far so fast.  I expect the pendulum to swing back up closer to WTI $60/barrel in December.  But for now, sit back and relax.

Local retail prices on gasoline have finally broke through $2.49/gallon.  I expect the price at the pump to continue on the downward trend.  Diesel retail prices are even getting close to $2.99/gallon.  We might see $2.99/gallon diesel in the next week, especially with some farm demand starting to dry up in the Midwest.

Propane prices are slowly breaking away from the crude trade and starting to rise.  We are experiencing colder than normal temps and expecting the cold to continue into December.  Regardless of what NOAA is saying, the weather prediction services that I subscribe to are calling for a potential Polar Vortex showing in December.  I should know more next week.  For now, if you are a will-call customer, please keep a close eye on your tank as most users are going through more than normal this month.  Heating demand is already up over 20% for the season!

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

Best regards,

Jon Crawford – Pres.

Catch A Falling Knife?

Good morning,

President Trump’s plan to keep crude prices low for midterm elections worked perfectly.  He convinced Saudi Arabia and Russia to pump more oil to make up for the sanctions being put on Iran which started on November 1st.  Leading up to November 1st, crude prices started to relax as world demand and possible surplus crude supplies from the US were in question.  Then to put the icing on the cake to insure that prices stayed low, President Trump on November 1st granted eight waivers to countries allowing them to buy Iranian crude.  This action sent prices falling even further.  Now Saudi Arabia, Russia, and the rest of OPEC are very upset.  OPEC countries are mad at Saudi Arabia and Russia for trying to help the U.S. with the Iran sanctions which put prices at risk.  And Saudi Arabi is furious at the U.S. for granting the waivers putting crude supplies into possible greater surplus.  Regardless, lower prices will be here for a little while until the OPEC meeting during the first part of December.  I  expect OPEC to announce supply cuts.  The U.S. made too many moves to help the elections and I fear retaliation.  So for now, enjoy the cheaper prices.  But I wouldn’t hold out that these current prices stay through Christmas.

Local retail prices on gasoline continue to inch down closer to $2.49/gallon.  With the latest price drops, I wouldn’t be surprised if we see $2.49/gallon on gasoline this weekend or early next week.  Diesel prices continue to remain higher now that winter additives are in the price as well increased demand for harvest.  I don’t expect to see too much movement on diesel prices.

Propane prices continue to remain calm.  As I have been saying for months, once we have a demand event or crude turns around, hold on.  Propane is still setup for a nice price jump at some point this season.  If you are a will-call customer, I highly recommend that you fill your tank now.  In addition, if you monitor your own tank levels, please make sure to call us when you are around 30% to give us sufficient time to complete your delivery during the winter months.

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

Best regards,

Jon Crawford

 

Crude Oil: How Low Will We Go?

Good afternoon,

After heavy selling last week, crude oil prices continue to slide this week.  WTI crude prices are set to close below $65/barrel.  On technical charts this puts us into correction and possibly a bear market.  However, I try not to just watch the charts but also the hard data.  The global market is very tight on supply.  Any disruption puts the world supply back into deficit.  The Iran sanctions have just begun.  And right now traders are banking on Saudi Arabia playing nice due to the political fallout from killing a journalist.  I am skeptical at seeing these prices hold much longer.  I am still anticipating a return in WTI prices closer to $70/barrel.  I expect that China and the US will continue to make progress on trade and that the global slowdown being discussed will not come into fruition.

In local retail news, retail prices of gasoline continue to drop closer to the $2.49/gallon threshold.  The economics are not quite there, but they will be soon if the sell off continues.  Diesel prices have continued to remain more stable due to the increased demand for harvest during this time.  In addition, winter blends are starting to be implemented adding anywhere from 3-15 cents/gallon to the cost depending on the additive treatment and blend ratio with #1 ULSD.

Propane prices are remaining stable as we go into winter.  I am still surprised by the inventory numbers released on a weekly basis.  I believe that with a large demand event, propane prices will spike quickly.  All eyes are on the weather forecast which continues to turn more towards a colder winter now than a month ago.  Stay tuned.

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

Best regards,

Jon Crawford – Pres.