Monthly Archives: June 2021

Same Old, Same Old

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Good morning,

WTI Crude oil continued to trade in a narrow range between $70-75/barrel.  As the OPEC+ meeting approaches, the debate between Saudi Arabia and Russia is starting to heat up.  Saudi wants to keep production increases small to support prices, and Russia wants all limits lifted to put pressure on US producers and go after market share.  In more geopolitical news, Iran elected a new hardline-president that looks to further isolate Iran from a nuclear deal with the US.  The potential for a negotiation stand-off is back on the table which would keep Iranian crude exports from increasing with greater transparency.  At home, inflation continues to rise and crude inventories continue to fall giving support to prices.  Even though US production is strong, exports and domestic demand are strong.  So for now, we wait and see what happens with OPEC+ meetings.

In local markets, retails prices continue to rise with the cost of product.  Gasoline retail is inching ever closer to $3/gal and diesel retail has been holding fairly steady around $3/gal.  Unfortunately, until we experience any major drop in crude prices, these retail prices will be here for a bit.

Propane cost continues to go higher and higher.  The US is now officially at the lowest level of summer propane inventory in over eight years!  There is quite a possibility that the retail prices back in April will be the lowest for the year.  I highly recommend everyone locking in some of their heating season gallons.  Although Canada is flush with propane, rail shipments will be very volatile as backorders of goods and cars start to return to the market possibly end of year.  Unless crude oil prices fall over $15/barrel, I can see propane prices being in for a wild ride this year.

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

Best regards,

Jon Crawford

FED vs Supply/Demand

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Good morning!

Happy Friday.  We received some much needed rain in our area last night which was a nice way to start to the weekend.  Crude prices continued their run higher this week as crude inventories continued to decline in the US with record demand.  Anticipation of continued world demand is also keeping a strong bullish sentiment on energy commodities.  However, the FED on Thursday dropped some hints that rate increases will be moved up as well as increases of their inflation forecasts.  The dollar rallied against the main basket of currencies yesterday causing a midday crash in crude prices of over $2/barrel.  However, the crude markets recovered by the end of day and are surging ahead to end the week.  The energy markets seem to be all-in on a bullish run believing that supply will be tight around the world by end of summer.  I am not fully convinced of the bullish attitudes considering there is still a staggering amount of world crude production sitting on the sidelines waiting.  Meanwhile, the US has recovered to 11M bpd crude production with 92% refining capacity, and crude inventories are still dropping.  What the scenario says to me is that possibly our crude exports are very healthy.  Eventually, our competition is going to want a piece of that pie.  I could see someone blinking over the next few months and causing a correction in crude prices.

Although crude prices have increased, gasoline and diesel prices eased a bit due to continued increasing refining utilization and building inventories.  I expect to see gasoline retail prices hold near $2.79/gal and diesel prices near $3.00/gal.

Propane cost has continued to rise and does not seem to be showing any signs of decreasing.  Future pricing also continues to hold even though we are going into summer season.  I would like to point out, that although propane prices seem high, when looking at the cost of propane in comparison to crude oil, the current pricing on propane has good value.  Until crude prices collapse, I just don’t see propane prices falling lower.  When coupling high crude prices with lagging inventory builds, unfortunately I think these current prices on propane will be here to stay for a while.

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

Best regards,

Jon Crawford

WTI Crude Over $70/Barrel and Propane Prices Climbing

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Good afternoon!

WTI price continued the climb this week and finally broke $70/barrel.  Demand coupled with a weaker dollar and overall exuberance are keeping prices inflated.  When I look at the data coming out of the inventory report this week, I am seeing a picture that feels very heavy on crude prices.  Supplies are great, refinery runs are increasing, and refined product levels are increasing.  Even though crude inventories diminished again this week, the details are showing that we are only refining more crude to store gasoline and diesel.  If China continues to shut down parts of the country and there are any other setbacks across the globe or a demand drop comes to the US, crude prices could tumble.  I have a feeling that OPEC+ will continue with their plan to keep crude production increasing, especially after the US said they will not be lifting sanctions on Iran until time has passed in a possible new nuclear deal.  Other data showed a 5% CPI increase in May and the spread is making it’s way into all areas of travel vacation.  Time will tell if eventually demand starts to take a breather in the US.

In local retail news, Bp Whiting finally put their refinery back online.  Although spot market cash differentials dropped a bit on the Chicago exchange, the continued increase in crude prices has offset much of any relief in retail prices at the pump.  However, current prices at the pump will at least hopefully take a breather from much more upside movement.

I have been ringing the alarm bell for months.  Propane prices continue to rise this summer.  Nine times out of ten, propane prices drop dramatically in the summer.  This is that one year.  Propane price is coupled much with crude prices.  So as crude prices remain high, so goes propane.   In addition, national inventories are still below average, although some good builds hit the market the last two weeks.  For now, propane has ignored cues on inventories and is following the price of crude.  I do not expect to see propane prices fall to normal summer lows.  I also recommend that everyone contract their anticipated propane needs for next heating season.  I hope to have our contract pricing out by the end of June or right after the 4th of July.

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

Best regards,

Jon Crawford

WTI Crude Price Almost to $70/Barrel

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Good afternoon,

Crude prices continued their push higher towards many bankers’ hopes of $70/barrel.  Throughout the week, continued news stories push the narrative of higher prices.  We closed the week with WTI at $69.62/barrel.  The last time we were holding these prices and climbing was in January of 2020 and the world economy was on fire.  Spike in world demand and potential tightening of crude supply are the main drivers of price right now.  However, in the US, crude inventories decreased, but refined product inventory increased.  So a lot of crude was refined into products and stored.  And Russia is threatening to leave “the dollar” as the closing currency for crude trades.  Ands OPEC+ is discussing further increased outputs in June.  In addition, the US is not adding rigs very quickly but a lot can change in the coming months.  I’m seeing a potential for crude prices to start falling at some point this summer.

In local news, gasoline retail prices are inching closer to $3/gal.  The national average retail price for gasoline is now over $3/gallon.  Diesel retail prices have broken through $3/gallon.  But diesel prices are a bit higher due to a refinery issue the largest refinery in the Midwest: Bp Whiting.  The issue has lasted a few weeks but looks to be fixed, so I expect the cost of diesel to ease a little in our market over the coming week.  But don’t expect the price to drop at the pump if crude prices stay high.

Propane inventories finally displayed a large inventory build.  Although most of the builds were on the Gulf Coast and the East Coast.  The Midwest supply is still under the five-year average.  We must continue to increase Midwest inventory.  If we don’t and we have a very cold winter, supply will be tight and much pressure will be put on the pipeline and railroad support.  Prices have finally taken a breather but could still go higher if inventories do not increase in the coming weeks.  Contracts for next season should be released at the end of June or early July.

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

Best regards,

Jon Crawford