The Little Engine That Could…

Good morning!

Happy Friday! The data released this week is causing much confusion and forcing traders to take pause. For months now, the fear of recession has loomed over the markets.  Analysists have been waiting patiently for earnings and Q2 GDP data to be released that would either confirm their fears or maybe kick the can down the road.  Well, this week was a head scratcher.  Earnings from big retailers showed slow growth and guidance was weak.  Walmart showed slowing sales.  GM was down.  Facebook and other advertising-based tech companies all showed slowing growth and weak guidance. And then the GDP report for Q2 showed almost another 1% contraction, confirming two straight quarters of negative growth to start the year.  By mid-week, most folk were confident in calling the “down-cycle” to continue.  But then on Wednesday, the EIA reported draws on crude oil, gasoline, and diesel.  The draws were a surprise that possibly demand was still intact at current price levels.  Then Ford and Amazon hit their numbers out of the park reversing the negative earnings trend for the week.  Biden and Xi met and are trying to “mend the fence” for China and America to work better together.  Ukraine and Russia struck some food supply export deals.  Europe is starting to get control of their nat-gas situation.  And no one believes that OPEC+ can increase crude production into the end of year.  Basically, market started to shrug off the fears.  Oh, and did I mention that the FED officially raised rates another .75%, confirming the two largest back-to-back rate hikes in over 20 years?  Even the FED announcement on Thursday did nothing to stop the markets grip on positive sentiment.  WTI Crude prices are climbing back to $100/barrel.  Supplies are tight, but we are winding down from high demand seasons across the globe.  Is the rally real, or are we setting up another head-fake going into the end of the year?  I believe the reality of where we are heading will start to flush out by end of September.  Until then, emotions on news stories will run the market.

In local news, gasoline and diesel prices continue to slowly drop.  Unless we have a major refinery issue in the Midwest, I do not expect to see gasoline retail prices above $4/gallon, and retail diesel should remain below $5/gallon.  The foundation is shaky, but it’s much better than last month.  Now we need to hope for a staggered harvest.  A rush-harvest could really cause some supply issues in the Midwest.  But that’s a couple of months down the road.

Propane is continue it’s skip along the bottom.  I can not continue to stress enough the value of propane at current prices.  Propane inventories are not in great shape right now.  We did not build national inventories to levels that I am comfortable with for this time of the year.  If we have a strong corn drying season and a cold winter, propane prices will go up dramatically.  In the past, Canada rail propane has been our savior.  But this year, new petrochemical factories have opened in Canada which will take most of the excess propane that could be shipped to the US.  I am not sounding any alarm bells or asking for panic.  I’m just saying that don’t relax on propane based on current market conditions and past experiences.  If you have not filled your tank this summer, please do so.  And I highly recommend contracting some propane for the upcoming heating season.

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

Best regards,

Jon Crawford

WTI Holding Below $100/Barrel

Good afternoon,

After Biden’s trip to Saudi Arabia, oil prices have failed to maintain any rally this week.  Demand erosion continues to threaten markets as fears of recession loom in the US and Europe.  The European Central Bank finally raised interest rates this week. In addition, mortgage demand in the US plunged to a 22 year low.  And to top off the week, Russia reopened their main natural gas line to Europe showing signs that maybe Russia will be unable to economically self-support a complete shut down.  WTI oil prices took a ride this week above $100/barrel but have settled out around $95/barrel for the week.  The Ukrainian “War Premium” is getting close to being wiped out of the futures market.  If oil supplies start to build around the globe, a race back to $70/barrel will be very possible.

As discussed last week, in local retail news, gasoline prices fell below $4 and diesel prices fell below $5/barrel.  I expect gasoline and diesel prices to hold near current posting into next week.  The drop in price is a nice little relief going into the end of summer.  I don’t want to jinx it, but we might have peaked on retail prices for the year.

Propane prices continue to skip along the bottom.  I really don’t believe there is much more downside risk in propane.  However, I do believe there is much more upside risk to propane this heating season.  We highly recommend that you order a summer fill and contract some propane for the upcoming heating season.

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

Best regards,

Jon Crawford

Plop, Plop, Fizz, Fizz….

Good morning!

Happy Friday!  “Plop, Plop, Fizz, Fizz…. Oh what a relief it is”  Well, after some nice drops in crude oil prices this week, and some “fizzling out” in spot market differentials, consumers are starting to see some relief at the pump.  Unfortunately, the cause of the drops in prices is based on negative economic data.  Banks are starting to prepare for a recession by building up cash reserve positions to cover bad loans.  Inflation data ran even hotter in June at over 9%.  The labor market continues to lag at a ratio of 2 jobs open / 1 person looking for work.  China is locking down more of the country to combat Covid which puts further pressure on supply chains.  And the Euro value officially tanked below the dollar in parity for the first time in over twenty years.  Biden is on his way to Saudi Arabia to try and repair the strained relationship since the Khashoogi murder.  Biden hopes to convince Saudi Arabia to “open the oil spigot” and keep oil prices under $100/barrel.  But there are rumblings that Saudi Arabia’s proposed maximum capacity is less than what they are saying.  Even if Saudi announces a large increase in production, the markets will be watching to see if they can deliver.

In local news, differentials between the Group and Chicago have moved towards balance.  Although diesel supply is very tight and price spreads are wide, the retail price of diesel has moved below $5/gallon in many markets.  Gasoline continues the downward trend and some markets have dropped below $4/gallon.  I expect to see retail diesel below $5/gallon and gasoline below $4/gallon in more markets next week.

Propane prices are holding fairly steady even with the selloff in crude.  Propane continues to flash signs that the bottom is here.  Propane inventories are tight in the US and Canada.  Any sort of early cold spell or heavy corn drying demand could cause a massive blowout in price this winter.  I recommend everyone fill their tanks this summer and lock in some propane for the heating season.  The war in Ukraine is still going and there is not a lot of room for error in the propane supply chain.  Feel free to contact our office for summer fill and contract options for the upcoming heating season.

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

Best regards,

Jon Crawford

Wild, Wild, Week…

Good morning,

Happy Friday!  This week was a shorter trading week with the markets being closed on Monday for holiday.  On Tuesday, the markets decided that recession was closer to reality and WTI crude oil prices collapsed over 10% falling well below $100/barrel for the first time in many months.  As the contagion took hold, many banks started calling “the sky is falling” bottom at $60/barrel, while others said “buckle up” for $200 oil on a head-fake.  On Wednesday, rumors of China looking at lockdowns and poor economic data in Europe sent prices lower once again.  But then on Thursday, the roller-coaster ride left the gate and took WTI crude right back over $100/barrel.  And now, by the end of the week, we might end where we started.  The volatility with the crude oil trade continues to amaze me.  Crude entered into the current “boom-and-bust” period back in 2008 when the US decided to go all-in on crude production.  And over the past 15 years, the cycles of “boom-and-bust” continue to expand in size and frequency.  After the fallout from the war in Ukraine , I am not sure if the crude markets will ever be the same.  By the time we settle out the mess of reorganizing distribution of energy around the globe, new forms of energy production will be online, mostly in China with nuclear energy.  India continues to expand production of alternative energy and all major oil companies are committed to major investments in solar, wind, and hydrogen.  I could see WTI crude prices collapsing back to $60/barrel on a recession, but the potential of a stable and predictable crude oil trade in the coming years seems nearly impossible.  OPEC+ continues to stay strong with a new leader being announced soon.  Barkindo passed away unexpectedly before his term ended this month.  He was considered to be one of the best leaders in OPEC’s history.  So there is a potential that OPEC+ could go through some reorganizing pains.  But Barkindo laid out such a fantastic blueprint for success that OPEC will probably just look to “rinse and repeat” on their current success.

In local markets, gasoline and diesel prices are absolutely a nightmare based on scary supply constraints and refinery maintenance.  One of the major refineries for the Group market is down for at least a month causing over a 40 cent/gallon spike in price compared to Chicago.  In addition, a major refinery in the Chicago market is going to be down most of the month of July into August, and then another one in August/September.  With crude prices swinging wildly higher and lower, finding a true spot market cost on refined products has been near impossible.  The spread on cost within each terminal around the Midwest is the largest I’ve ever seen.  I think July and August could be very tough for price and supply.  Couple the supply issues with increased consumer demand and trucker shortages, and the rest of this summer is looking to be a very difficult situation to manage.

Propane prices eased one last time this week.  I truly believe that propane prices are skipping along the bottom and could bounce higher in a blink of an eye.  Although the corn crop in the Midwest is catching up, supplies of propane are still a bit tight.  If you have not ordered a summer fill, please do so.  We are still at the lowest prices we have seen since last September.  Next heating season contracts are available.  Letters are being mailed out starting this week.  Feel free to call the office to explore your options for locking in the price of propane for next winter.

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

Best regards,

Jon Crawford

Happy 4th Of July Weekend!

Good morning!

I just wanted to take a moment and wish everyone a happy 4th of July weekend!  Regardless of all the chaos going on in our country, when looking at the big picture of the world, we have so much to be grateful for.  I hope everyone is able to have some fun and enjoy time with friends/family.

Just a quick update before the holiday weekend.  🙂  Prices eased a bit this week with recession fears driving the market.  But this could be the “calm before the storm.”  OPEC continues to strong-arm with no increased production on the horizon.  We just don’t have enough natural gas and diesel to get through winter around the globe without Russia.  The next two months will be interesting.  The framework for a deal with Russia was on the table back in March and I hope the world starts to look at diplomacy or this winter could be scary for Europe which would send shockwaves through the world.  Gas and diesel prices have come down a bit with the slight drop in crude prices.  But a whipsaw back higher could happen at any moment.  Propane prices are skipping along the bottom and next season’s heating contracts will be released on Tuesday next week.  Current customers can look for letters to hit mailboxes starting next week or feel free to give us a call for more info.

I will update further next week after the holiday weekend.   As always, if you have any questions, comments, or concerns, please feel free to reach out.

Best regards,

Jon Crawford