WTI Crude Over $60/Barrel

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

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.