Monthly Archives: October 2020

COVID Surge in Europe and the US

Posted on by

Good afternoon,

The surge in coronavirus cases across the US and Europe has triggered quite the selloff in some equities and commodities.  Crude oil prices have tumbled all week and look to finish at the lowest levels since the Q1.  I believe that most hedge funds are looking at the lockdowns in Europe and are worried about demand erosion coupled with increased supplies.  Libya continues to pour out more crude and OPEC does not meet again until January.  At least in January we will hopefully know who the new President is and OPEC will act accordingly.  I believe that prices could be temporarily deflated until after the election.  I do believe that a Biden victory will give a $10/barrel bump on crude prices.  So for now, everyone is on pins and needles waiting for the election and watching the surge of COVID take over Europe and the US.

In local news, we are seeing demand starting to slow up in Wisconsin as COVID-19 rages through the state.  I don’t expect to see any ramp up in gasoline usage going into Thanksgiving weekend unless the recent surge shows a peak very soon.  Gasoline prices will remain under $2/gal for some time and diesel prices are continuing to hold great value.  Any diesel pump prices below $2/gallon at the pump are great value buys.

Propane prices continue to cause head scratching.  National inventories showed a build this past week when demand would be at a high level.  Futures did not react.  In fact, the disconnect between supply/demand economics in propane are leaving many to wonder if algorithm trading has entered the propane futures market?  Maybe a platform like a Robinhood has allowed access into the market, or an ETF is out there trading with propane futures.  Who really knows!  But we do know that the price of propane is very heavy based on supply and demand.  I expect to see a “bust” in prices if temps warm up at all going into the holiday season.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.  Please stay safe and remember to vote.

Best regards,

Jon Crawford

Same Old, Same Old

Posted on by

Good morning!

Happy Friday!  Unfortunately, I don’t have much new news to report.  WTI prices, as predicted, are holding at the $40/barrel level.  I believe this in part to the upcoming election.  When looking at the supply and demand fundamentals, the appetite for refined products in the US is starting to drop, but demand is increasing in other parts of the world where the coronavirus is not as front and center.  So there seems to be a balancing act in the current state of economics.  I believe that we will trade in a very narrow range through the rest of the year until the big OPEC+ meeting in January.  The results of the election and the state of the coronavirus in America will all weigh on the OPEC+ decision.  We will see if the election results give any bump in oil prices, especially if it’s a contested election.  Other than the upcoming election, I still believe we are in a holding pattern.

In local news, gasoline retail prices are starting to drop now that gasoline supplies have returned to normal in the Chicago spot market due to the completion of some refinery turnarounds.  Diesel cost remain higher as we move through harvest and the end of year construction push.  However, diesel retail pump prices are extremely low right now in comparison to cost.  There is great value for diesel customers in our local market at the pump right now based on historical data.  I think that if the market continues to hold, diesel retail pump prices will have to jump back up above $2/gallon.  There is now a disconnect again between the cost of gasoline and the cost of diesel coming out of Chicago.

Propane prices are the continued head scratcher.  Propane prices are higher than anticipated even though inventories are robust and corn drying demand is low.  I believe most supply hubs are keeping prices higher with the unknown winter ahead, but I still feel that propane prices are 5-10 cents heavy.  We feel like if inventories are tight and corn drying demand is high, prices go up.  And if inventories are ample and corn drying demand is low, prices still go up.  Seems like no matter what, suppliers win in times of harvest.  🙂  If crude oil prices hold at the current level, I do think that there is a potential like last year for propane prices to drop in January and February of 2021.

As always, if you have any question, comments, or concerns, please feel free to give us a call.  Thanks and have a great weekend!

Best regards,

Jon Crawford

Oil Prices Steady

Posted on by

Good morning,

Oil prices sold off earlier this week on surging coronavirus infections across the globe, lack of a US stimulus deal, and fears of demand erosion with an abundance of supply.  The sell off was halted on Thursday when the US reported massive draws in crude oil and refined product inventories.  The market really seems to want WTI to stay above $40/barrel.  Even though fundamentals are quite bearish for crude, there are many qualitative factors affecting crude prices.  We have the Presidential election coming up, rising coronavirus infections, world wide reports of vaccines from multiple countries, and overall anxiety about what the future holds.  The anxiety of the unknown drives volatility in unexplained ways.  I would say that right now emotions are driving much of the markets and until the Presidential election is behind us, it’s going to be a bumpy ride.  Markets will still be volatile after the election, but we we will have at least one of the “unknowns” checked off the list.

In local news, retail gasoline prices are holding near $2/gallon and diesel prices on average are above $2/gallon.  I do not see much relief in diesel prices until after the fall harvest.  So far, the harvest is going smoothly and quickly.  I expect harvest to be mostly completed by early to mid-November.

Propane is the biggest headscratcher of all commodities I follow.  Prices have climbed dramatically and quickly going into winter index economics.  Although propane inventories are at record levels and corn drying demand is the lowest in many years, prices are holding steady.  Propane prices feel very, very heavy and unless the cold snap holds for the next month or so, I don’t see propane prices holding at these current levels.

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

Best regards,

Jon Crawford

Politics Like a Hurricane… Plus a Real Hurricane

Posted on by

Good morning,

I hope that this message finds everyone well.  Crude oil markets went on a wild ride this week.  After a steep sell off from Trump announcing his positive COVID-19 test and hospitalization, markets rebounded when Trump returned home.  In addition, politics started to play out where stimulus packages would get passed in Congress.  And then hurricane Delta poked its nose into the mix shutting down oil production and exports in the Gulf.  To top off the rally back, US inventories experienced a draw due to production cuts.  By Wednesday, crude prices were back to the highs of last week.  And now with the hurricane hitting land soon, traders took WTI over the $40/barrel mark and will probably hold until next week sometime.  Crude prices are very volatile.  I was expecting crude prices to drop today based on increased numbers of jobless claims and 23.5M people out of work with unemployment benefits running out.  Something needs to happen to support the economy.  Our entire airlines industry is going to collapse and 23.5M people out of work going into winter and holiday season is not particularity great for oil demand.  If Congress gets a deal done I believe that crude prices can hold.  If there is no deal on stimulus, then I could see crude prices tanking into the end of year.

In local news, retail prices have finally started to catch up to the increased cost on gas and diesel out of the Chicago spot market.  Although spot prices have eased a bit, I expect to see gasoline and diesel prices over $2/gallon for the coming week.

Propane production and supplies are ample, but prices continue to climb.  The situation is much of a head scratcher.  We are already at contract prices for our spot market pricing.  I think propane prices are setup to ease if the winter is mild.  You can still lock in your prices for winter though.  If you are unsure if your account is keep-fill or will-call, please call the office to clarify.  Hard to believe that winter is already sneaking up!

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

Best regards,

Jon Crawford

WTI Falls Below $40/Barrel

Posted on by

Good afternoon!

Happy Friday! I hope this message finds everyone safe and well.  I know that Wisconsin is now one of America’s hotspots for coronavirus spread.  The next four to eight weeks are not going to be fun.  I wish everyone good health and safety as we battle the current wave of virus in Wisconsin.

The prices for WTI Crude Oil closed below $40/barrel to end the week.  The week started out with a rally in prices looking at shorter supplies from lackluster demand and refining.  However, on Thursday, the combination of the economic data released and the “no deal” on coronavirus federal aid pushed crude prices below $40 barrel.  Many believed the sell off was a breather from recent runs higher.  But then at 2am this morning, President Trump announced that he and the FLOTUS have tested positive for COVID-19.  The news sent markets into a tailspin, along with crude oil prices.  In addition, the economy data released shows continued weakness and gaps in a chance for a faster than expected economic recovery.  I am still bearish crude oi.

In local news, gasoline retail prices jumped about $2/gallon.  I expect prices to hold for sometime. Diesel cost jumped as well, but retail prices have not quite moved yet.  Diesel retail prices have potential to climb higher in the short term.

Propane prices have actually gone up this week.  The move higher is a head scratcher to everyone.  We experienced low demand, increased production, increased inventory levels, and increased exports.  We now have over 102M barrels of propane in inventory.  However, with a colder than normal start to winter, prices might find support. However, it’s not a bad idea to lock in propane prices for the year.  The spot post delivery price on propane is the same as contract.  Looking ahead, since spot price and off the truck price are near identical, it might bot be a good time to lock in your price for the year.

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

Best regards,

Jon Crawford