Monthly Archives: September 2019

Crude Gains Erased

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Good morning!

WTI crude prices are now lower than were before the attacks in Saudi Arabia.  Saudi Arabia is claiming to be back to 75% production and will be at full capacity within a month.  Saudi Arabia struck deals with other countries to cover all their customer contracts during this time.  In addition, with impeachment proceedings looming for Trump, the demands side of crude economics was pulled back to front and center.  Coupled with political news, Chinese trade talks stalled and the market rally took pause along with an easing in crude prices.  This week, the US petroleum inventory report showed a surprise build in inventories with low production runs.  Basically, an attack on the world’s largest oil refinery is still not enough of an event to shake the supply/demand dynamic in the crude market.  Demand is very unstable and production is at record highs.

In local retail news, gasoline prices have calmed down from the jump two weeks prior, but diesel prices will continue to remain high moving forward.  There was a discount on diesel coming out of the Chicago spot market for the past month, placing our cost in Wisconsin about 20-30 cents cheaper than our neighbors to the east.  The glut of diesel has dried up, and prices skyrocketed.  I expect to see diesel retail prices hold where they are at for some time, especially with high harvest demand on the horizon.

Propane prices are slowly inching up.  Although retail spot prices are cheaper than contract, winter fundamentals and potential massive corn drying demand will hit the markets next month.  I am predicting propane prices will jump in October.  How much higher, will depend on crude prices.  For now, you can still contract propane for the heating season.  Feel free to discuss your options with us!

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

Best regards,

Jon Crawford

Attack in Saudi Arabia

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Good morning,

What….a…..week.  Over last weekend, one of the biggest fears in the oil industry came true.  A successful attack was made on the world’s largest oil refinery.  The refinery is also the bottleneck for exports out of Saudi Arabia.  Blame given to either Yemen rebels and Iran went back and forth.  The US condemned Iran.  Iran went ballistic on hearing the claim and threatened US bases in the area.  Trump responded with “we are locked and loaded”.  Saudi Arabia said they will retaliate as well.  Over 5% of the world’s oil supply was in jeopardy.  Crude spiked over 11% and gasoline and diesel prices were up over 15 cents per gallon.  The Middle East geopolitical risk factors were put on full display and traders were reminded of the powder keg that exists in the Middle East……. Then the world stopped and took a birds eye view…. The rest of the oil producing countries would be able to make up the difference.  The world economies potentially are slowing, lowering the impact of supply loss.  And the damage looks to be fixed in a month after thorough inspections on Monday and Tuesday.  By the end of the week, crude only closed up 7%!!!  That is absolutely insane!  In years past, this would have put $15-20/barrel on crude within two weeks.  Instead, crude closed up only about $3.50 for the week!  The truth is that Saudi Arabia is no longer the main controller of crude.  The US and Russia are main players and supply tensions are much easier to handle in our current environment.  In addition, this week shows the general fear of trade wars and slowing economies.  Not even a bomb on the world’s largest oil refinery was able to trigger a major breakout in crude prices!  What a strange new environment we live in!

In local news, gasoline prices at the pumps will rise a bit, but now much.  Gasoline supply in our market is strong and cost has calmed down.  Now diesel is a different story.  Our Chicago market cost has been 15-25 cents under our neighbors in Group supply.  The differentials disappeared this week and diesel cost has risen almost 30 cents per gallon!  I expect you will see diesel prices at the pump rise in the coming weeks.  Plus, as harvest starts, supply disruptions become a possibility.

Propane prices are slowly rising and will kick in to winter differentials at the end of the month.  Although current board prices are under contracts prices, you always have to remember that the contract price is an insurance policy against rising prices and is based on the average cost potential for the year.  For those of you who contracted, we have many months to go before winter is over!

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

Best regards,

Jon Crawford

Roller Coaster Repeat

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Good morning!

Crude prices pressed “repeat” again this week with supply and economic news driving the volatility.  We started the week off with Brexit drama, Iraq announcing that they pumped more oil than they should have, and Iran saying they will breach all parts of the nuclear deal.  Prices dropped hard.  Then OPEC comes out after a new Saudi Oil Minister was named saying that they will do whatever is necessary to keep prices high leading into the Aramco IPO.  Iraq followed saying they will behave and do better on cuts moving forward.  Even Russia said they would work with the US on crude prices which is unheard of!  The news cause prices to spike higher.  Then on Wednesday, inventory numbers on crude levels displayed large draws coupled with strong economic data in the US causing prices to spike even higher.  But then in the afternoon, Trump fired John Bolton, the biggest Hawk on Iran, and said he would consider waivers on Iranian crude exports to get them to the table for negotiation.  Crude prices turned and fell off a cliff.  Then on Thursday the IEA announced that world supply would probably go into major surplus in 2020, causing prices to continue the fall.  And finally, today economic data on the US was strong and US/China trade relations showed movement to the positive with each country giving in a bit.  The US will not enforce new trade tariffs, and China will lift the agricultural purchasing tariffs and buy soybeans.  The news gave support to crude prices and stopped the fall.  So WTI crude price ended where it started at about $55/barrel.  What a ride the past weeks have been for crude prices and I don’t see it stopping anytime soon.

Retail prices on gasoline continue to stay very low.  Prices on regular gasoline are ranging between $2.34-2.44/gallon based on major price differentials currently between suppliers.  Diesel prices are also remaining very stable going into harvest season.

Propane prices are slowly starting to creep up, but nothing too scary.  Propane is trading based on crude movement.  We are still at historically low prices of propane with historically high volumes of inventory.  We do not expect to see prices rising until October 1st when winter tariffs kick in and harvest demand starts to take shape.  If you have not contracted your volume for the heating season, you can still do so.  Please call our office to have your tank filled and we can prepare a contract for you.

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

Best regards,

Jon Crawford

Roller Coaster Ride

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Good afternoon!

I hope everyone had a wonderful and safe Labor Day weekend.  Crude oil prices went on a roller coaster following the long weekend.  The week started out with tumble as China announced retaliation tariffs along with economic pressures starting to creep into the US markets and Chinese data.  But then a day later, China and the US announced a meeting and everything turned around!  In addition, the Hurricane Dorian managed to miss the Gulf so no oil production will be impacted here in the US.  But then, the big rally was dampened by the release of info that OPEC, particularly Russia, is not holding to compliance cuts.  As prices started to relax, Yemen announced that they killed 30 Saudi’s in retaliation strikes today which caused crude to soar higher, coupled with large announced draws in US inventory.  In addition, the US payroll data was fantastic and China revised their production data showing no contraction.  But by the end of the day, crude oil prices finished flat with world economics and potential over supply still in play.  What a roller coaster and a head scratcher!  Crude has been trading with high volatility in a narrow $5/barrel range.  This tells me that crude is ripe for a break out in one direction.  Which direction is TBD!  And by TBD, that means what news stores are discussed for the day! 🙂

In local retail news, gasoline prices have fallen below $2.49/gallon and were are five year lows for Labor Day.  The lower prices were a nice relief on everyone who was traveling.  Diesel prices continue to fall as Chicago economics continue to favor our market over the neighboring Group.  However, I don’t expect to see diesel prices go any lower as refinery maintenance finishes and harvest season approaches.

Propane prices continue to remain low, low, low.  The national inventory showed another large build and we are well on our way to breaking an inventory supply record this year.  If there is no major corn drying demand event, early cold, or nasty winter, I expect propane prices to remain low all winter.  Now next year will be a different story as additional exporting hubs and pipelines will be in full operation.  So for now, enjoy the lower prices of this season!  If you have not filled your tank to start the season, please do so!

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

Best regards,

Jon Crawford – Pres.