Good morning!

Although Goldman Sachs continues to pound the drums of $100 WTI crude oil, a lot of bearish overtones finally poked their way through the loud chatter from the bullish news cycle.  Down in the Permian Basin, the largest shale oil play in the US, private companies have increased production past pre-pandemic levels.  Although public companies are holding firm withholding supply, many believe they can’t hold out forever. If prices start to fall, I would expect to see market share become the name of the game.  Crude oil inventories started to build in the US again which is a sign of decreased local demand as well as export demand.  Although the Delta variant is calming down in America, covid cases had their highest level increase around the globe the past two months.  The fears of economic slowdowns across the globe are gaining attention again.  The US Q3 economic data was terrible along with many other countries.  China is looking to resolve their coal shortage issues which would decrease their demand for oil.  And Iran is working to maybe come back to the negotiating table with the US which would bring more transparently traded oil into the market.  And the addition of more Iranian crude into the market could completely wipe out the OPEC+ agreement.  As I have been writing the past two months, the oil market has been running on headlines and getting very heavy in my opinion.  There are many reasons to be patient and sit back until year end while all these scenarios play out.  I am still seeing more downside risk than upside risk in the long term for 2022.

Chicago spot diesel prices have dropped this past week so I expect to possibly see retail prices on diesel ease a little.  Although crude prices have eased a bit, there is a slight supply disruption on gasoline coming out of Chicago, so I do not expect to see much movement on gasoline retail prices just yet.

Propane price is continuing to level off and stop the trend of flying higher.  We are in the heart of contract season and demand has been very light.  Corn drying has been minimal and supplies are very healthy.  The US has built a little additional inventory but not a safety net.  The latest forecast is calling for colder than normal temps this winter.  I would take this pause in price movement lightly.  Propane prices still have plenty of variables on the horizon.  If we have a colder than average winter, propane could break out even higher in price.  However, if crude prices collapse during the winter, propane prices could at least be held in check.  I do not expect to see propane prices back in the $1/gallon range in the coming six months.

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

Best regards,

Jon Crawford

Good morning,

Happy Friday.  Crude prices took a slight break mid-week due to a massive increase in crude oil inventory in the US.  But by end of the week, crude prices found much support from the continued global energy crunch.  Natural gas and coal prices continue to scream higher from lack of supply and fears of a cold winter.  The main driver comes from green energy projects in Europe and the UK not producing the anticipated outputs calculated going into winter.  The world crude producers are continuing to withhold lots of crude oil from the market in order to also keep prices high.  Many oil producers have a lot of revenue to make up from the losses in 2020.  The FED announced a possible tapering of bond buying in November.  However, even a stronger dollar is not weighing on energy prices.  I truly believe that energy commodities are in a momentum trade and will hold strong and even go higher until end of the year.  But it’s not all doom and gloom.  There is a strong scenario on the table predicting that crude prices will start to unwind fairly quickly in Q1-Q2 of next year and fall steady from that point.  For now, I believe there will be short-term inflationary pain on crude prices trickling down through natural gas, propane, gasoline, and diesel.

Retail prices for both gasoline and diesel continue to slowly creep higher.  Gasoline retail prices are averaging over $3/gallon and diesel retail is nearing $3.49/gallon.  As I have been writing for sometime, I believe your pocketbook is going to get a lot lighter fueling up for the next 3-5 months.

Propane prices finally took a breather at current rates.  Retail prices are holding over $2/gallon but seem to be in a slight holding pattern now that petro-chem companies are cancelling shipments of propane due to cost.  In addition, the lack-luster corn drying season and hot weather is helping to keep propane prices from really taking off.  I see that colder weather is in the forecast so demand will start to pick up going into November.  The Midwest is in decent shape for propane inventories.  Overall supplies are short, but the Midwest seems to be in better shape than some areas.  I expect a continued bumpy ride and higher prices on propane for the remainder of the season.

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

Best regards,

Jon Crawford

Good morning,

Energy prices are holding firm to end the week.  The FED announced this week that regardless of tapering or raising rates, inflation is going to persist into 2022 because of supply bottlenecks.  The domino effects of these supply constraints are supporting energy prices.  In addition, there is a huge supply crunch on fossil fuel energy due to Europe’s and UK’s miscalculations of green energy production.  They have fallen short on their green production and are in need of more fossil fuels.  And the purchases just can’t be fulfilled quick enough.  Although China is shutting down parts of their economy due to record high coal prices, some supply might be able to shift.  But these types of moves take months to sort themselves out.  Also, equities are starting to spook some investors and there is a lot of chatter saying to throw your money into energy for a quick return on your money in Q4 and possibly Q1 of 2022.  Therefore we have speculation money supporting crude prices as well.  Unfortunately, I am bullish on crude prices until the end of the year.  I just don’t see a situation where enough cards can can fall fast enough to drag down crude prices.  I do believe that there is downside risk in 2022.   I do not see these high prices persisting all the way through 2022.

Local retail prices on gasoline hold near $3/gallon and diesel retail has well surpassed $3/gallon.  Unfortunately with well supported crude prices as previously discussed, I believe these prices over $3/gallon are here to stay for some time.

Propane prices continued to gain momentum based on record low inventories going into the heating season coupled with a major fire in Canada.  Propane prices in September are at an all-time record high.  One can only hope that crude prices stabilize and the damage of index price spikes are mitigated to pockets here and there throughout winter.  Unfortunately, propane prices are going to be high this year.  Like crude oil, I am hopeful that supply and demand economics going into spring of 2022 will balance out bring some price relief for next heating season.  In the meantime, it’s not too late to lock in your heating cost for the upcoming season.

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

Best regards,

Jon Crawford