Monthly Archives: March 2019

Crude Prices Continue To Hold

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Good morning,

The market looks like WTI will hold price above $60/barrel this week.  There are so many variables flying around right now.  The bulls are being pushed by FED keeping rates low, Saudi Arabia hammering cuts through 2019, Iran and Venezuela sanctions, positive progress on the US and China trade talks, and feelings of healthy demand appetite for crude oil.  The bears on the sidelines are staying active following weak economic data out of China, a not-so-thrilling housing market in the US, record US production, Russia discussing leaving the OPEC cuts, Trump hammering on OPEC to stop cutting, investors such as Warren Buffet saying our economy is out of steam, and potential extension of supply waivers for countries buying from Iran.  So basically you have a full hand of cards showing bull market strength, and a full hand of cards showing bear market strength.  I don’t like to keep sounding like a skipping record, but crude is probably going to trade back and forth in a $5/barrel range for the next quarter until data starts to truly back one of the hands in play.

In local retail news, I believe gasoline is a bit overbought going into refinery maintenance season.  We could see gasoline prices fall off a little bit in the next couple of months.  But for now, I would get used to paying around $2.69/gallon on gasoline.  Surprisingly, diesel prices are staying fairly consistent around $2.95/gallon. I still think there is a lot of upside risk in diesel prices going into Q3 and Q4 of this year.  More to come on this in the following months.

Propane prices continue to drop as we unwind the winter delivery season.  Propane production is continuing at record levels and inventories remain over 30% higher this year compared to last year, and demand was stronger!  Propane prices have a chance of breaking away from crude and falling.  I am very confident we will see excellent summer fill rates and contract prices for next season at or below this season’s prices.  More to come in the following months.

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

Best regards,

Jon Crawford

WTI Crude Over $60/Barrel

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Good afternoon,

WTI Crude price closed this week over $60/barrel for the first time since last fall.  The rise in pricing has been attributed to tightening sanctions on Iran and Venezuela, OPEC and Russia continuing to deliver on production cuts, and strong world demand.  In addition, the EIA’s inventory report showed a massive drop in crude, gasoline, and distillate inventories.  So the bulls have been running with this info.  However, there is caution in air.  This week the FED released their report that they will not increase rates this year.  The news at first caused crude prices to soar.  But then as the information was digested, the price backed off.  The FED also sees the economy slowing down by year end.  Therefore, the combo of healthy demand coupled with a weaker dollar is in jeopardy.  The US continues to produce oil at record numbers.  So the potential for a supply glut to reappear could occur at anytime, especially if the world economy slows.  The economic data from China has not been so hot either.  As I always say, the devil is in the details.  But for now, the bulls maybe have taken a breather, but I don’t think the rally is done just yet.  And just like last fall, this year is looking ripe for another bust on crude prices.  I firmly believe that “boom and bust” economics will be in play for crude prices for at least the next two to three years.

In local news, gasoline retail prices continue to rise as I have been saying.  Most stations are nearing or over the $2.50/gallon retail price on regular gasoline.  The big issue is that consumer behavior changes when gasoline prices go over $2.50.  So we are hoping that the “bust” in price happens before driving season.  Diesel prices have fallen below $3.00/gallon and will probably stay under $3.00/gallon now that winter blending for the year is completed.

Propane prices are ripe for a nice drop this summer.  Our national inventory is 30% higher than last year, and we experienced a colder winter!  Propane production continues to move at record levels.  In comparison to crude prices, propane prices are shaping up for a disconnect from crude and drop this summer.  More to come on this when winter ends.  But don’t relax too much, we still have about three weeks of heating season remaining. 🙂

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

Best regards,

Jon Crawford

The Bulls Lead the Way

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Good morning,

The net long positions in crude continue to build for both WTI and Brent.  Many traders are really holding on to OPEC’s compliance to cuts and the sanctions placed on Iran and Venezuela.  In addition, there continues to be reports of progress on the China/US trade deal.  Although the US rig count declined, production is staying strong.  Refinery utilization is down due to the start of refinery maintenance season.  Therefore we expect all four production quadrants East of the Rockies to experience supply/price issues over the coming months.  As of right now, Chicago appears to be short on gasoline going into spring, so Chicago pricing is starting to disconnect from our neighbors in the Group.  So for now, it’s still the bulls in charge.  I expect to see current retail prices to only increase over the coming month or so.

In local retail news, gasoline retail prices continue to lag in comparison to cost.  Some cities in the surround areas are advertising retail prices below cost of product.  Retail prices on gasoline are ripe for an increase.  Diesel retail prices will remain stable for some time as the #1 oil blending components start to fade out from winter treatment.

Propane prices are remaining stable as we finish up this winter.  Propane production continues to be at record levels and shows no signs of slowing down.  So far we are already seeing prices for next season to be very close to this season.  Stability in price forwards is always nice for consumers.  And there is also a good chance of lower prices for summer fills this summer.  As a reminder, for all will-call customers, please keep an eye on your tank.  This time of year, many people can forget about their tank as temperatures rise during the day but stay cool at night.  🙂

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

Best regards,

Jon Crawford – Pres.