Monthly Archives: August 2020

Hurricanes and the FED

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Good morning!

Well, another wild ride for crude prices this week.  At first to start the week we were expecting to see some bumps higher in prices as a potential for double hurricanes in the Gulf were brewing and the US and China renewed Phase 1 trade talks.  As prices rose on Monday, many expected to see crude prices rally through the week.  On Wednesday, draw downs in inventory and continued coronavirus fears supported the pricing complex.  However, our local Chicago spot market also changed their cycle timing to October which caused a large drop in basis.  So as crude prices were holding steady, our local market was experiencing some cash price erosion off of the highs on Monday.  And then the FED topped the week off with their aggressive change in tone on rates and perception of the economy.  The FED is now going to work a policy that spurs inflation, job growth, and keeping rates lower for longer.  The announcement caused a shift of selling in crude and a buying into equities.  Although at the end of the week, crude prices have remained somewhat supportive, the local cash markets have broken away from the trend due to an abundance of supply in the Midwest.

In local news, I expect to see gasoline retail prices continue to hover just under $2/gallon.  Diesel retail prices are still very attractive if your market is under $2/gallon.  The diesel retail margins are very tight.  However, diesel products are very plentiful in the Midwest and depending how harvest goes in the coming months, a potential for some nice drops in diesel retail pricing is possible.

Propane prices are stable but are transitioning to winter economics soon.  I expect to see propane retail prices rise a bit in September.  If you have not ordered a summer fill yet, please do so before prices start to change.  I also recommend locking in your price for the upcoming heating season.  The price is lower than last year and with COVID-19, world trade relations, a presidential election, and a crazy summer of weather, I have no idea what to expect this coming winter.

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

Best regards,

Jon Crawford

Volatile Times Coming For Crude

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Good afternoon,

The crude markets have been behaving very strangely this week.  I am starting to believe that maybe traders are putting the cart before the horse with the global recovery from the pandemic.  Crude prices continue to be buoyed by a weaker dollar.  However, if the global recovery slows down at all, lack of demand will overtake a weaker dollar on crude price prediction.  There was a draw in US inventories this week and reports of crude shipments from the US going to China.  But sources are saying that Chinese demand for crude is not what is being displayed.  Overall, I feel that going into the election with the continued massive amounts of unemployment is going to catch up after summer and show that our economic recovery is far from over.  Although the stock markets have recovered in many ways, the economy is not tracking the same.  I do feel that crude is over bought and lower prices will come going into the fall.  Historically, prices always collapse around the time of presidential election.

In local news, margins are very slim at retail in many markets.  I expect that eventually gasoline and diesel retail prices will be easily over $2/gallon if they are not already in your market.  I am floored at the street value for gasoline and diesel currently.  If gasoline or diesel is under $2/gallon in your market, I recommend filling up!

Propane prices are continuing to stay stable and I expect prices to remain fairly stable through the fall into the end of the year.  Production surprisingly remained strong through summer and corn drying demand is looking to be much weaker.  I am not worried about supplies going into this winter.  However, summer economics will start to change in September regardless of supplies, so if you have not filled your tank yet, please make arrangements to do so!  The current prices are good value right now!  And don’t forget to lock in your heating price for the upcoming winter!

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

Best regards,

Jon Crawford

Covid Relief Package And Trade Issues With China

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Good morning,

Crude prices started the week out strong with Trump announcing continued pressure on China trying to force the sale of the app TikTok.  The action is renewing skepticism that the US and China will not be able to reconcile their trade differences in the near term.  In addition, as COVID-19 continues to spread, Congress and Trump have still not passed a relief package as the previous relief package expired.  Many Americans are finally starting to get back to work, but with the majority of schools going virtual in the fall, without some sort of financial package to help families with the cost of keeping kids home, many are worried our economy will start to decline again.  Although the oil industry is starting to recover and the strength of the dollar is weaker, the continued China trade and COVID issues are putting downward pressure on crude.  I still expect WTI prices to hold near $40/barrel until a COVID relief package is passed.

In local news, retail prices on gasoline and diesel continue to climb.  I expect to see gasoline retail prices at or above $2/gallon and diesel retail prices will be over $2/gallon.  As the futures trading months are moving more into harvest months, diesel prices are gaining some momentum with increased demand forecast.

Propane prices continue to follow crude.  If you have not filled your tank this summer, please do so.  The retail value of summer fill pricing has very high value for the consumer.  I expect our retail prices to climb 10+ cents/gallon going into September.  I also recommend contracting your propane usage for the upcoming heating season.  I am reading reports of a colder winter this year and with all the instability in the marketplace, I think that the safety of locking in your pricing is very attractive.

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

Best regards,

Jon Crawford