Monthly Archives: April 2019

Problems in Chicago

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Good afternoon,

I hope everyone had a chance to enjoy some beautiful weather the past week.  In crude oil news, WTI crude oil has officially closed above $66/barrel and now surpassed a technical resistance price point.  The push over the edge came on the heels of Trump’s announcement that oil waivers would no longer be issued to countries purchasing crude oil from Iran.  Traders viewed the announcement as bullish support for supply tightness coupled with the instability in Libya.  However, Saudi Arabia and UAE said that would be able to easily put another 1M barrels/day into the market.  That announcement capped any significant gains in crude prices.  Since the announcements on Iran, economic data from South Korea was terrible; the worst posting since the great recession.  US Jobless claims rose, and the Fed is starting to think about staying firm on rate increases.  Oil is struggling to hold these current price levels, but the bulls have a pretty strong platform built around $60/barrel WTI.  As I have been saying, I expect prices to stay high for a while longer.  But I think June is going to be very interesting.  Russia is not happy with the deal that the US cut with Saudi Arabia and UAE.  I think Russia might pull out of the OPEC deal in June and start pumping more crude.  In addition, the US continues to keep crude production levels high.  And the last piece of caution news to look at is a rumor floating that Trump is considering giving China a waiver for Iranian crude as part of a trade deal.  He really wants to ink a trade deal quickly to cool the heat that has been burning in DC.  I guess we’ll see if anything comes out in the next few days.

In local retail news, gasoline prices East of Rockies started to sell off except for Chicago.  Chicago is having continued supply problems at refineries and is about 10 cents/gallon inflated compared to neighboring markets.  So unfortunately our current retail price will hold for some time yet.  Diesel retail prices are holding steady and I expect the current prices to remain, especially going into the start of planting season for the farmers.

Propane prices are continuing their trend of detaching from crude prices.  Retail prices are slowly dropping into summer.  I expect to see next season’s heating retail prices be at about the same price as last year, even though crude prices are 20% higher!  That’s some good value!  For now, make sure you consider getting a summer fill and watch out for contract info that should be mailed out around the 4th of July.

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

Best regards,

Jon Crawford

Happy Easter Weekend!!!

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Good morning,

I wanted to wish everyone safe travels this Easter weekend.  We hope everyone enjoys time with family and friends.  The weather is looking excellent which will be a nice reprieve from the past week!

Not much has changed in the market place.  There is a short week of trading this week since the market is closed on Friday.  I am waiting for next week to see how news is truly digested.  Right now Venezuela is avoiding sanctions by selling crude through Russia.  Russia is really getting anxious and wanting to pull out of the OPEC deal.  The US continues to produce at record levels above 12M barrels/day.  The jobs report was good and earnings have been strong.  In regards to technical trading, WTI crude oil has been unable to break through the resistance level of $65/barrel.  So for now, we are taking a breather.

Retail prices on gasoline and diesel are holding steady with the market.  As I have been saying, I’m not seeing much price relief at the pump in the coming weeks.

Propane prices continue to detach from crude oil and are far showing the most bearish fundamentals we have seen in a long time.  I expect prices to stay low throughout the summer.  Keep a lookout for next season heating contracts around July.  I am thinking that prices will be very similar to last year, even though crude prices are 25% higher.

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

Best regards,

Jon Crawford

Mission Impossible

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Good afternoon,

As one oil analyst said this week, “It is impossible to predict the price direction of oil.”  WTI crude prices went to $70/barrel in October 2018, down to $46/barrel in January 2019, and back up to $64/barrel in April of 2019.  The massive amount of volatility really puts a lot of pressure on anyone who claims they know the direction of crude prices.  As many oil analysts say, “we are experiencing boom/bust movements in crude prices and we should get used to it.”  I could not agree more.  Almost five years ago, I sat in a seminar from a famous oil analyst in Canada.  When the US shale revolution started to get legs, he warned of these times.  Man, he was spot on.  The lifestyle of these prices swings could last as long as five to ten years depending on who you talk to.  For right now, not much has changed.  It’s all about the economic headlines for the day.  But the fact remains, the US is still strong in crude supplies and production.  The “swing” in production will be watched in Saudi Arabia, Libya, Iran, and Venezuela.

In local retail news, refinery maintenance season is underway in Chicago and prices for gasoline have continued to break out.  Gasoline prices continue to inch ever so closer to the dreaded $3/gallon price.  I’m not so sure that we get there, but I don’t see prices retreating any time soon.  Diesel prices have slowly crept up as well.  I expect us to see closer to $3/gallon diesel in the next month.

Propane prices are starting to reattach with crude price movements.  But propane is very bearish: record production, supported by high crude prices, lower petrochem demand, full strength exports while experiencing inventory gains, over 30% higher inventory of US propane after a higher than normal demand winter.  I’m sitting on the sidelines for a while with propane.  For now, retail prices are getting close to $1/gallon.  I expect to see excellent summer fill prices and contract prices very close to this season.

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

Best regards,

Jon Crawford

Bulls On Parade

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Good afternoon!

Nothing seems to stop the bulls from taking crude prices higher.  The US Jobs report was better than expected so the fears around recession melted away.  The FED continues to talk of lower rates and the US oil rig count continues to drop.  In World News, Libya is experiencing turmoil which can affect oil exports, and Saudi Arabia announced that its largest oil field is producing much less than expected.  And the US/China trade deal looks like “all systems go”.  All-in-all, the data is showing high demand with robust economic indicators.  However…. The US continues to produce record levels of crude with less rigs, showing that we are becoming more nimble and efficient.  Russia is wanting out of the OPEC cuts and does not want to see the price of oil get much higher.  And world demand continues to hang on every announcement.  Basically, we are starting to enter price territory where price will affect world demand.  In conclusion, as I have been saying, the ride up is not over yet, but I’m not so sure it will hold on for the rest of the year.

In local retail news, gasoline retail prices continue to hold around $2.69/gallon and diesel under $3.00/gallon.  With the continued rise in crude prices, I don’t expect to see any downward movement in prices at the pump in the foreseeable future.

Propane prices are starting to drop and I expect to see prices continue the downward movement.  We have only seen propane prices detach from crude price movement a few times in the the past, and it is happening now.  Propane supplies are at record levels for this time of year and are only continuing to increase.  In addition, exports are remaining robust and we expect inventory levels to continue to increase.  Therefore, it’s not a question of “if” propane prices will go lower, it’s a question of “how low” propane prices will go.  For now, we sit back and wait for summer fill prices to come out along with next season’s heating contracts.

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

Best regards,

Jon Crawford