Monthly Archives: January 2020

Coronavirus Causing Market Sell Off

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Good morning,

The week started off with Libya’s production going offline due to internal civil war conflicts again.  In the past, this type of conflict caused at least a 5% spike in prices.  Instead, traders shrugged off the event due to the US hitting another week of record production runs and increases in inventory volumes.  The IEA is still calling for decreasing prices in the second half of the year due to crude supplies going into surplus while under current OPEC+ production cuts.  But the big news of the week is the Chinese Coronavirus.  The virus continues to spread to other countries and has killed close to 100 people already.  A city of almost 30M people is under quarantine in China.  The last time this happened was with SARS and crude prices tumbled due to demand erosion.  Well, history is proving itself to be true once again and crude prices tumbled to their lowest levels in the last three months.  WTI crude is starting to point closer to $50/barrel than $60/barrel.  For now, we are awaiting developments on the Coronavirus and taking cues from the WHO.  Until we know where the virus is heading, I think the last rally in crude prices is on ice.

Local retail prices on gasoline and diesel are slowly decreasing.  However, spot cash prices have not dropped as much as expected with the decrease in crude prices.  Regardless, I don’t expect to see prices at the pump go up in the coming week or so.

Propane prices dropped once again this past week.  The weather continues to be propane’s worst enemy.  We are getting very close to experiencing the warmest January/December on record.  The demand destruction on propane is very real, even though exports are at record levels.  At the current inventory levels, we are one pace to end the winter with the most propane in inventory post winter in the history of tracking inventory!  If the current state of propane holds, I would expect very low prices on summer fills this year.

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

Best regards,

Jon Crawford

Crude Slide Continues

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Good afternoon!

Crude oil prices continue to remain weak and received very little support from events that unfolded.  Even though US and China struck a “light” trade deal, crude did not respond positively.  The deal is not seen as changing the world economic environment.  Basically, most see the phase one deal as a “stop measure” from the situation getting any worse.  OPEC also released information that even with the purposed crude oil cuts, crude production will beat demand.  This news is very bearish and tracks as the US officially hit a new production record of 13M barrels/day.  Gasoline and diesel stock inventories rose again this week.  And even though exports are strong, petroleum productions continue to be ample in supply.  Overall, the outlook for crude prices is very bearish and this is on the heels of a potential conflict with Iran only two weeks ago!

Gasoline and diesel retail prices dropped a bit this week.  We are seeing about $2.39/gallon on gasoline and $2.84/gallon on diesel fuel.  I don’t expect to see much change on prices at the pump.

Propane prices dropped again this week.  Propane is very bearish.  Supplies are at national record levels and the lack of demand is making it worse.  I don’t expect to see any major blow out in propane prices this season.  For right now, we are waiting to see if winter will ever stick around!  Even with the recent cold snap, nothing looks to ever stay longer than a couple days.

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

Best regards,

Jon Crawford

Craziest Week Ever…

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Good morning,

Well, I think this might be the craziest week with crude prices I have ever experienced.  President Trump issued the order for the execution of General Soleimani from Iran in Bahgdad on January 2nd.  The drone attack caused crude oil prices to sky rocket.  Iran threatened retaliation and Trump responded with further attacks if Iran killed any more Americans.  The escalation in the Middle East pushed WTI prices to the highest level since April 2019 when Iran attacked Saudi Arabia’s oil refineries.  Then on Wednesday, Iran launched rockets into Iraq targeting bases that housed American soldiers.  As we feared for the worst, we were told that no American lives were lost.  Trump gave a speech declaring that Iran announced the rockets were the retaliatory strike and no more attacks would be issued.  Trump considered the escalation diffused.  Then something strange happened.  Crude oil prices sold off at a greater volume prior to the attacks and are now sitting below $60/barrel and continuing to find weakness.  The US executed an Iranian general, Iran launches rockets at American bases, and crude prices go down.  Never before have we experienced this type of fluctuation based on the events.

This week shows how oil production in Russia and the US have taken away much of the risk premium in the Middle East.  We were on the brink of potential conflict with Iran and oil prices only rallied 5% and now sold off more than 6%.  The incident really displayed the new world we live in with crude oil production.  Production is incredibly strong and no major supply hurdles are on the horizon.  Therefore traders are shrugging off the Iran conflict, just like the Iran attack on Saudi Arabia.

In local news, gasoline prices and diesel prices continue to move around with crude price fluctuations.  Gasoline retail prices are averaging 2.44/gallon across the state and diesel prices are averaging 2.84/gallon.

Propane supply continues to be very high and the warm temperatures are not helping demand.  I do not see any issues for supply problems coming from our main storage facilities in the US.  As of right now, we are about to experience the most propane in inventory for January in our nation’s history.  If crude prices continue to fall and the weather stays warm, I would expect to see softer propane retail prices and good prices for next year as well.

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

Best regards,

Jon Crawford

Happy New Year and Best Wishes in 2020!

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Happy start to 2020!

I hope everyone had a great holiday season and enjoyed a safe and fun New Year celebration.  2019 was a wild year for crude oil and the energy markets.  I expect more of the same in 2020.  The big events we will be watching in 2020 are economic growth in China and the US surrounding trade agreements, growing unrest in Iraq/Iran/Syria, the FED making any changes to monetary policy, OPEC+ holding to their proposed production cuts, and the US ability to continue at current production runs.  Needless to say, there are a lot of factors to be watching in 2020.  And if anyone had a crystal ball to call crude prices correctly, I would call them lucky! 🙂

For what it’s worth, the year of a presidential run usually leads to lower energy costs.  This is a pattern of the past that seems to hold true.  Therefore, I’m not calling for any major upside risk in crude prices in 2020 at this time.  Now this is based on all the above scenarios playing out correctly.  I do believe the world economic growth will maintain but nothing major in calling for more crude oil demand.  I believe that unrest in the Middle East will stay contained as Iran knows the US election is coming.  The FED will not throw any major wrenches in the mix, at least not enough to chart a new course for crude prices.  OPEC+ will argue over production cuts and I do not think that Russia and others will maintain their proposed cuts.  I also think that US production will be capped at around current levels.  If the US production falls, I definitely see Russia jumping in to pick up that market share.

Therefore, in my opinion, I don’t see any urgency in locking in prices for 2020 at this time.  I will continue to update as we move into the new year.  I’m excited for 2020 and looking forward to challenges and opportunities.  I wish all the best to everyone and hope that 2020 brings prosperity, enjoyment, and lots of laughter!

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

Best regards,

Jon Crawford