Wishing A Safe And Enjoyable Memorial Day Weekend

Good afternoon,

I would like to take a moment and wish everyone a safe and enjoyable Memorial Day weekend.  I know many of us will be traveling and enjoying activities for the first time in a very long time.  But please take a moment and reflect on all the service men and women who have given the ultimate sacrifice of their very own lives defending our country and our freedoms which allow us the opportunity to enjoy an extended weekend.

I will keep my update short and just say that prices are going up.  From crude oil to propane, prices continue to rise.  All eyes and ears will be on OPEC+’s meeting in June.  Until then, keep your wallet handy while purchasing gasoline, diesel, and propane.

Have a great weekend and I will touch base more next week.

Best regards,

Jon Crawford

WTI Crude Oil Falls Below $65/Barrel Support

Good morning,

This week crude prices tumbled on the news of Iran and US approaching a new nuclear deal.  The deal would allow Iran to sell crude through transparent channels on the open market.  With the additional crude supply from Iran hitting the market, Saudi Arabia would have a hard time allowing Iran to take customer share.  Therefore, traders are thinking that crude has the potential to fall into surplus if demand does not ramp up quickly.  In addition, with inflation running hot, COVID-19 making a resurgence in East Asia, and supply chains a mess, portfolio managers are starting to move from risky assets into more stable investments.  Along with the small crude correction, crypto currencies experienced nearly a 30% correction this week as well as sell-off’s in tech investment.  As managers look to place their bets for the remainder of the year, some are saying the FED will announce a taper of their bond buying program in the second half of the year.  I think that WTI might trade in the range of $60-65/barrel until we get closer to the OPEC+ meeting in June.

Local retail prices have peaked for the time being given the slight correction in refined products this week.  I would expect to see some cheaper street prices on gas and diesel towards the end of next week possibly, but not much.

Propane prices are holding very firm.  Inventory continues to be very low in the country at a time when levels should be building.  Exports remain high and demand is still holding stronger than normal.  Production is also high, so if demand tapers at all we can start to rebuild quickly.  However, we are under the 5-year average at this time.  I do not expect to see summer-fill prices get much lower this year, if at all.  The only good news in propane is that Canadian inventory levels of propane are building at levels greater than last year.  So if the US falls short, with rail economics being attractive for the coming year, we should be able to supplement large amounts of propane from Canada.  But, this is also dependent on the reliability of the railroad transport system which has been very chaotic the past few years.  I am looking to release next season’s heating contract pricing the last week in June.  More info to follow.

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

Best regards,

Jon Crawford

The Gasoline Shortage That Wasn’t

Good morning,

The big news this week was the hacking of the Colonial Pipeline in South Eastern USA.  The ransomware attack shut down the largest distribution pipeline causing massive panic buying fueled by constant media reports and disinformation.  I shook my head as gas stations all over the East Coast started to run out of fuel.  In addition, the misinformation caused panic buying in states that are not even supplied by Colonial.  Down in southern Florida, stations started to run out of fuel and even in Wisconsin, lines formed at the pump to panic buy based on fears of price spikes and supply problems.  The truth is that there was never any spike in cash price markets in the Gulf Coast or New York Harbor.  In fact, a gallon of base price gasoline continued to trade at a CHEAPER rate than the Chicago market!  Go figure…  So the media hype of the week made a potential supply problem into a disaster that could have been avoided with accurate reporting.  Colonial has reported that they were operating on “outdated Microsoft Windows” and decided to pay $5M in ransom for their information to be returned.  The information that was stolen contained which companies owned what products and the volumes there of throughout the entire pipeline.  Therefore, the information was very valuable.  Crude oil prices traded up this week on the news of the pipeline hack, along with Israel/Palestine conflict, and potential increased demand outweighing the disaster in India.  This week was a perfect example showing how the media can affect commodity prices and unfortunately business/consumers outside of the Colonial issue paid the price.

In local news, cost of product continues to slowly tick higher.  Retail prices of both gasoline and diesel are holding near $3/gallon and I don’t expect to see much relief until possibly after Memorial Day.

Propane prices also continue to be stubbornly higher than normal.  Although our country experienced a nice rebuilding in national inventory this week, prices continue to hold firm with crude’s movement and high rates of exports.  I’m not quite sure we are going to see much lower prices until possibly later into end of summer or early fall based on inventory levels and potential corn drying demand.

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

Best regards,

Jon Crawford

Crude Trying To Push Through A Psychological Barrier

Good morning,

Despite rising production in the US and OPEC+, a lackluster US jobs report, and an absolute disaster in India, traders continue to try and push WTI prices through the psychological and technical barrier of $65/barrier.  If WTI is able to hold gains above $65/barrel, then traders are going to try and go to $70/barrel.  The issue with the continued push higher is that gasoline and diesel retail prices will hold steady above $3/gallon.  Once retail hits these prices, many organizations, producers, and countries take notice.  I am still under the impression that major investment firms took long positions on crude contracts and need to push prices near $70/barrel before they can sell and regroup.  OPEC+ will be meeting again in June and I can’t imagine there will be any barriers to holding back production.  We are starting to see OPEC+ offer discounts on exports as well.  Another issue floating is the Fed interest rate.  Although Treasury Secretary Yellen is saying rates might need to bounce this year to cool things off, the Fed Chair Powell is saying “steady as she goes”.  At this point Powell has not even mentioned reducing the bond buying program.  So as long as we continue on this track, the strength of the dollar will be held down keeping crude prices higher.  But if India continues on their path and the US holds stagnate, eventually demand for crude will overtake the weaker dollar and cause commodities to fall in price.

In local retail news, I was wrong.  I did not expect to see diesel retail prices break $3/gallon, but they have and will continue to hold at this rate.  Gasoline retail prices are also inching closer to $3/gallon as well.  There does seem to be some exuberance in the air unwinding out of COVID and the school year.  We could possibly see the old fashioned run-up on prices to Memorial Day weekend, then sell-off in June.  Only time will tell.

Propane prices are holding firm.  Spot markets are not going any lower at the moment.  With colder weather hanging around, propane inventory building season is off to a slow start.  I am cautiously optimistic that prices will ease, but probably not until July.  I also do not expect next season’s contract pricing to be out until mid-July due to the longer heating season and current future’s pricing economics.

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

Best regards,

Jon Crawford