Monthly Archives: January 2019

Public Service Announcement: EXTREME COLD

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Good morning,

I would like to discuss the EXTREME cold temperatures that are hitting our area for the next week.  The arctic blast from the Polar Vortex is going to hang around for some time.  In addition, we might see snow on Monday.  If you are a will-call heating oil or propane customer, please keep an eye on your tank.  Your consumption will greatly increase over the coming days.  These temperatures are very dangerous so please take caution when being outside.  Frostbite can happen in under 30 minutes with some of the temperatures predicted.  Our drivers are working extra hard to stay ahead of this cold snap.  Please make sure that your driveway is cleared and there is a safe path to your tank.  We want to complete safe and efficient deliveries over the coming week.

As far as prices are concerned, crude oil continues to be volatile.  The biggest news that we continue to monitor are the developments in Venezuela and the US government shutdown.  The potential for lost crude imports from Venezuela could impact the US.  We import about 300K barrels of heavy crude from Venezuela and the loss of that product could push up diesel prices.  The government shutdown continues to put pressure on the economy.  As long as the government opens soon and the Chinese/US trade teams continue to talk, we expect to see crude oil consumption stay healthy this year.

In local news, the crack spreads on diesel in the Chicago market dried up driving the cost of diesel in our market up by more than 20 cents/gallon.  Our cost is now on average with the rest of the East of Rockies markets.  I expect to see diesel prices at the pump rise.  Gasoline retail prices continue to resist breaking back over $2/gallon.  I would expect to see most markets back above $2/gallon in the near future.

Propane prices are starting to creep back up with winter weather causing healthy demand.  However, production is very strong and inventories are high.  So I don’t see any potential for major prices moves higher in propane 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.

Crude Prices Holding Steady

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Good morning!

Crude oil prices continue to trade in a very narrow range based on the news of the day.  We seem to be bouncing along between $51-53/barrel on WTI.  I continue to believe we will stay in this range for a bit longer.  Refineries are making great money right now so supplies are ample.  But crude and refined exports to China are starting to show up again, so possible relief on trade tensions are being discussed as well.  Basically, as the US floods our local markets with additional refined products coupled with record crude harvesting, and as long as there are buyers, prices will stay steady.  If the US refineries hit a hiccup in production, crude oil inventories could build quite quickly in the US.  But OPEC, particularly Saudi Arabia, are drumming up continued support for their cuts and are offering side deals to anyone in the world that wants to work with them to help keep prices higher.  Canada is also joining in the party with cutting production.  Russia is slowly cutting back on production as long as prices don’t go up too fast.  The biggest area of concern for the year is the world economies.  If economies stay healthy in 2019, then I believe we have experienced the bottom in prices for the year.  But if we start to slow down demand for oil, I’m not so sure OPEC can cut fast enough to deal with the record production here in the US.  So as the last few weeks have been, it’s a “be patient” scenario.  I still believe that hedging diesel supply for the future months is a smart hedge.  Diesel inventory levels are lower than the five year average and if crack spreads decrease, we are going to run into some supply constraints later in the year.  In addition, the new IMO standard for marine fuel starts in 2020 and is going to push up prices due to production cost increases.

In local retail news, gasoline prices are trying to push back up above $2/gallon.  Cost has increased enough to justify pushing prices back up over $2/gallon, but retailers are hesitant to give in.  Diesel prices have increased a little, but hold on to your seats.  Diesel cost is 25 cents/gallon lower out of the Chicago Spot market due to insanely great crack spreads.  Once we have a production issue or a drop in supply, diesel prices in our local market are going to sky rocket.

Propane prices are holding steady with demand increases due to cold weather.  Our prediction services are calling for very cold temps the rest of January and possibly all of February.  So for now, we are preparing for increased demand in the coming weeks.  Please make sure an icy driveway is salted or sanded and that there is a clear pathway to your tank to make sure we can safely and efficiently deliver.

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 Back Above $50/Barrel

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Good morning,

Well, that didn’t take long!  WTI Crude price climbed back above $50/barrel this week and looks to close above for the week.  Signs of progress on the China/US trade war seem to be coming to fruition.  In addition, economic data in the US seems to be better than expected with retail sales strong and jobs hiring on the rise since December.  Furthermore, Saudi Arabia cut more than expected in crude production for December and announced that they are willing to shed market share to increase prices.  Saudi Arabia also floated the possibility again of an IPO for Aramco in 2020.  The announcement is meant to give support to their position of wanting higher crude prices.  Back at home, the FED is starting to take a softer position on rate increases for 2019 which caused the stock market to climb along with energy prices.  So for now, the bottom on WTI seems to have been carved out at around $45/barrel.  There are still some bearish scenarios floating around the marketplace.  China’s economy is murky at best.  True data is hard to find so time will tell if the economic giant is truly in troubled waters.  The US production of crude has soared past 12M barrels/day.  With OPEC cuts and healthy demand, the production levels in the US are not a damper on prices.  But if China truly is slowing down or something changes in the US economy, crude prices could tumble back down quickly.  In other words, volatility is going to be the name of the game for crude in 2019.  Major banks are changing their forecasts on crude prices every other week by as much as $10/barrel swings.  In other words, nobody knows.  It’s a big guessing game this year.  My advice, buy some upside price protection if possible at these current values.

In local retail news, prices of gasoline are starting to climb.  We have seen cost increases come to both gasoline and diesel.  In fact, diesel is set to rise almost 20 cents/gallon at any moment!  Our Chicago market spot prices are well below the rest of the markets East of Rockies.  It’s not a matter of “if”, but “when”.  My advice for those larger diesel customers is to fill up your tanks now and keep them full.

Propane prices are also starting to climb again with the rise of crude prices, but not as fast.  We need to see some cold weather push demand to over 2M barrels/day consumption for propane prices to really rally.  For now, prices are good and supplies are ample.  As a reminder, please make sure your driveway is plowed and sanded/salted if needed.  And also to be sure there is a clear path to your propane tank to ensure a safe and efficient delivery.

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

Best regards,

Jon Crawford – Pres.

Happy New Year!

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Thank you to everyone for a safe and wonderful 2018!  I hope everyone enjoyed their New Year celebration and is looking forward to 2019!

Fuel prices are starting to carve out a bottom.  Stocks and crude are starting to trade at normal volumes.  There is not too much to report at this time.  Oil prices are starting to cautiously rise but more predictions will come next week.  OPEC is looking like they are sticking to their proposed cuts.  The dollar is losing strength.  Global economic acceleration is in question.  Trade wars are in discussion.  And demand strength is debatable.  All great topics that will be better covered next week.  So hang tight.

For now, enjoy some cheap gasoline and diesel prices at the pump!  The Chicago SPOT market which sets cost in our area is WAY oversupplied in the moment.  I would expect to see gasoline prices jump about 5 cents in the next couple weeks, and diesel is ripe for nearly a 20 cent+ price jump in the coming weeks!  More to come!

Propane retail prices are stable and supplies are good.  The warm weather is keeping demand in check.  But the cold is coming.  It’s just a matter of time.  Please make sure that your driveways are plowed and there is a safe path to your propane tanks to ensure driver safety and efficient delivery.

Thank you again for a great year in 2018 and if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.