Crude prices have remained largely unchanged for the week. Prices have traded in a very narrow range as vaccine distribution, information on new COVID variants, national crude oil inventories, and economic data were released. I do believe a $50/barrel floor in WTI crude prices is very solid at the moment. Although there is much uncertainty with the new Covid variants, the vaccines in current distribution seem to at least cause less severe illness with the new variants. Commodities are taking a bullish tone to start 2021 and I tend to agree. The road will be bumpy with vaccine rollout and there will be still be more infection. However, if the data holds true, severe illness will less, especially with the introduction of the J&J vaccine that only requires one dose. The one potential downside risk for crude hanging out there is Iran. Pres Biden has made it clear that he would like to negotiate with Iran on a new nuclear deal. If a deal is made and sanctions are released on crude oil exports, the market could be flooded with crude at a time of rebalance and careful production cuts. If this happens, I do think any downside movement would be short-lived. In summary, I still believe that there is much more upside risk than downside risk for crude oil prices in 2021.
In local retail news, retail prices of gasoline and diesel are holding steady. I do not expect to see any major movement at the pumps in the coming week. I also believe that gasoline prices under $2/gallon are behind us.
Propane prices have balanced somewhat from the “short squeeze” in January. Although retail prices have dropped a bit from multi-year highs, I don’t expect them to drop too much more very soon. I tend to think that prices will slowly unwind as we finish up winter. The weather in the Midwest and Eastern US has been so unpredictable. However, the demand from China and other parts of Asia has started to let up as they finish up a cold, hard winter. And the arb on American exports has brought European propane back into the competition, so American exports have the potential to slow a bit in February. For now, all eyes are on February. As a reminder, please keep your driveway clean and a clear path to your tank to ensure a safe and efficient propane delivery.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.