Oil Prices Steady

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

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

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