Happy Friday! I have been under the weather most of the week so my summary will not be as thorough. I’ve been doing my best keeping up with the slew of info coming in everyday. The week started out with WTI crude prices falling on news of shutdowns in China. Factories for Apple and other tech companies closed with Omicron surging out of control in China. The slowdown in China sent fear through the market and crude prices dropped to levels we experienced at the start of the Ukraine invasion. In addition, crude production seemed to pick up pace in the US and the FED raised rates for the first time since 2018. The invasion in Ukraine seemed to be slowing by mid-week without any more major surges. Overall, market conditions were seeming to stabilize. Then, on Thursday, crude prices ripped higher on news from the IEA that crude supplies were going to be tighter than normal, hiring was strong in the US despite record inflation, and Putin sent out messages that he’s going to try and work with China to fight to the bitter end. Crude spot prices soared over $8.00 higher to close back above $100/barrel. For now, crude prices are remaining higher with optimism of a Ukraine peace deal and China withholding support. I know that many would think that this news would lower crude prices. But, the markets are taking the stance that a ceasefire or peace deal would keep the world economies going strong with Russia still on an island. Therefore, tighter crude supplies will remain throughout the year. Without a world recession, the markets are betting on tight crude supplies regardless of what happens with Ukraine and Russia.
In local retail news, President Biden claimed this week that since crude prices dropped, the gas stations are not lowering retail prices fast enough. What the President doesn’t understand is that store owners are working off of inventories bought at many different volatile prices points. In fact, the day he said that stations should lower prices faster, gasoline cost went up 20 cents/gallon and diesel cost went up over 35 cents/gallon! As I have been writing about, gas stations are doing the best they can. Wisconsin gasoline and diesel retail prices are UNDER the national average. And consumers need to remember that Visa/Mastercard are making almost 12-15 cents/gallon at these prices, and they are RAISING rates in April! So if I was a consumer, I would be yelling at Visa/Mastercard! Visa/Mastercard are charging almost as much as the Federal Gas Tax on a transaction! Once again, please take it easy on your local gas station employees. The owners are doing their best. These price fluctuations are a nightmare and buying on the wrong day can ruin your margin for a week.
Propane prices have fallen from their highs during the first week in March. But propane prices are starting to find support due to record low inventories just like last year. The propane trade is starting to look a lot like last year. Prices might bottom out around now and then slowly increase through the entire summer, regardless of what happens to crude prices. With Europe looking to import more LNG, we could see propane inventories struggle to build this year, which in turn keeps prices high. The saving grace last winter was the lackluster crop drying season. Inventories are so low right now, I am already hoping for another lackluster crop drying season in 2022. I hope that production can surpass exports and the supply situation improves. But for now, I am skeptical on seeing low propane prices this summer. I highly recommend contacting our office and making sure that you take delivery of all your contracted gallons by end of April. That will be your best cost savings strategy for the year.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.