Good morning!

Happy Friday! A lot of action in the news this week affecting crude oil prices.  First, in global news, the Nord Stream pipelines look to have been sabotaged by Russia causing the largest ever release of methane gas into our atmosphere.  Although the pipelines are not in operation at this time, the lines are still pressurized.  Many believe that Russia is using the incident to show that all options are on the table to try and “win” the war in Ukraine.  OPEC+ will be meeting on October 5th to discuss potential cuts to production.  Russia is being said to request a 1M bbd cut in crude oil production due to the drop in price along with demand destruction hitting Europe, China, and the US.   Also, the continued strength of the US dollar is putting heavy downward pressure on crude oil prices.  But the biggest news of the week was hurricane Ian making landfall in Florida as a Category 4 storm.  The combination of all the events this week pushed WTI crude prices over $80/barrel for the first time since almost two weeks ago.  The Gulf Coast crude production of almost 200k bbd was shuddered from the storm.  However, production will resume starting next week.  In addition to the hurricane, a surprise drop in national petroleum inventories caused additional support to prices.  But I believe the EIA numbers were a bit off due to hurricane prep/panic and shutting down of production.  Although crude prices have gained momentum higher, the push/pull between supply/demand is going to be front and center going into October with the OPEC+ meeting.  I believe that cuts are already priced in at this time.  But demand erosion is a very large looming threat globally and I do not think we are out of the woods.  I could see crude oil prices going back down into the $60’s for a bit next year, and as long nothing goes majorly sideways in Ukraine, we should be capped under $100/barrel.

In local news, the over 100 year-old Toledo refinery owned by Bp/Husky might not be able to reopen until Q1 of 2023.  The refinery fire a week ago was on the heels of a major turnaround maintenance at the facility.  Workers have now been laid off which is not a good sign for the market.  Chicago market prices on gasoline are now trading at a 70 cents/gal premium compared to New York and the Gulf.  The 200k bpd refinery became a major supply point over the past two years due to the extremely tight refinery market.  As I have been writing, there is NO room for error with refineries and this is a major error.  The US does not have the refining capacity it once had and the continued closing of refineries is only making it worse.  And due to the Ukraine conflict, additional import capacity of refined products is capped.  Gasoline retail prices were about to drop below $3/gallon and now I don’t see that happening anytime soon.  Diesel retail prices should remain fairly stable, as BP Whiting refinery is the main diesel supplier to our local market.

Propane prices continue to surprise us with stability as corn drying season begins and winter approaches.  Although we are almost 15% higher in national inventory compared to last year, our numbers are still well below the five-year average.  Any sort of extreme cold weather event this year could cause a major spike in price on propane.  We highly recommend filling up your tank now and hedging a bit of your heating season usage by locking in your price for winter.

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!  Lots to get caught up on here.  I was on vacation last week so I’ll cut to the chase.  Going into this week, the big news was going to be whether or not WTI crude prices can hold above $80/barrel.  Last week crude prices sold off a bit but as prices started to touch closer to $80/barrel, support started to build.  In addition, the US announced that they would refill the petroleum reserves at $80/barrel which actually supported higher prices in crude!  Announcing the “strike price” on a reserve refill gives support to future pricing.  If the US wanted to refill reserves, the strategy should be to make no announcements and “slow and steady” purchasing.  Basically, you want as few as people to notice when you are buying.  So going into this week, support at $80/barrel was VERY strong.  By the time of this writing, WTI price fell BELOW $80/barrel, even after all the support built in last week.  The UK announced rates cuts at a time of record inflation pushing markets on Friday into a tailspin.  The strength of the dollar soared to new highs out of the gate this morning and the bottom fell out of the market.  I guess for now, it’s time to go to the kitchen and make some popcorn.  The next level of support is under $70/barrel.  The looming issues still causing mild jitters are Russia threatening to use nukes and hurricanes hitting the Gulf of Mexico.  For now, sit back and be patient.

In local news, as crude oil markets collapsed, gasoline cost soared over $1/gallon higher in the Chicago spot market.  Yes, you read this correctly.  Gasoline prices went up $1/gallon in three days.  A Bp refinery in Toledo suffered a massive explosion killing two people this week.  The loss of the refinery puts immense pressure on an already tight market due to short supplies in the neighboring Group market.  Diesel prices did not go up as much since gasoline supply is much tighter.  My recommendation is to fill up you car because prices could get ugly for awhile.  Once a roadmap to normal supplies is realized, prices will fall faster than you can blink!  Retail markets are going to be very interesting in Wisconsin for the coming weeks.  Harvest is starting to take shape so demand for diesel is going to skyrocket.  So far, markets seem to be prepared and we hope to scoot through the next month.  However, a hurricane to the south or east coast could mean disaster with the Chicago and Group struggling to find supply reliability during this time.  There will be no spare capacity in either market to help out the East Coast or Gulf Coast.

Propane prices continue to hold as supplies are looking better than last year.  However, we are still under the five year average in national inventory and corn drying has not been completed.  We will know in a couple of months how propane is positioned for winter.  But if crude prices truly collapse going into an economic downturn, propane prices might be held in check.  The winter is predicted to be colder than normal, so a potential offset to low crude prices might occur due to increased winter demand.  As always, only time will tell.  But for now, at least propane supplies are in better shape than a few months ago.

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

Best regards,

Jon Crawford

Good morning!

Crude prices fell again this week with WTI price moving closer to $80/barrel.  A lot of “technical selling” took place as traders repositioned to the upcoming winter after summer driving season.  The next major floor for WTI is $80/barrel and the resistance to push lower looks very strong at this time.  Although the EIA released a massive build in crude oil inventories on their weekly inventory report, the majority took place outside of Conway, meaning that exports were down.  The US is still drawing down crude supplies at a decent clip.  Europe announced price caps on heating bills as well exploring a cap on Russian crude import price.  Countries are trying to convince India to come on board with the Russian crude price cap, but that will be a heavy lift.  China is really showing signs of weakness in their economy.  Shipping rates are decreasing, productivity is dropping, and a new “election” is taking place soon with an emphasis on more isolationist economic policies.  The US and Australia responded with a massive trade meeting to try and work out deals between countries including Vietnam, India, and Indonesia.  All three of these countries could provide incredible relief on the trade markets if China starts to pull back.  The labor rates in China have increased dramatically in order to promote the rise in common wealth, so other nations are seizing the opportunity to bring economic prosperity to their citizens.  The development of new global trade partners will be very interesting to watch over the next couple of years.

In local news, gasoline and diesel retail prices continue to drop.  Chicago spot market has continued to give back their delta compared to other markets.  I expect to see diesel retail prices ease a little bit more at the pump.  Gasoline prices will easily hold under $3.49/gallon next week.

Propane prices continue to stay steady going into winter.  Although inventories are up from last year, our national volume is still lower than average.  If corn drying ends up being a nothing-burger, we should be in pretty good shape for the winter.  However, we must be conscious that Eastern Canada is 50% below last year’s inventory level which means there is no spare capacity coming from Canada this year.  As long as there are no major supply hiccups in the US or major “Polar Vortex” situations, we should scoot through the upcoming winter.  However, we highly recommend filling your tank right now at the current price.  I still believe that propane prices will go up this winter as supplies start to fall.

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

Best regards,

Jon Crawford

Good morning!

I just wanted to take a moment and wish everyone a safe and enjoyable Labor Day weekend!  As we head into the fall, prices are starting to ease a bit more on demand worries outweighing tight supplies.  Although the world crude oil market is in slight surplus, any hiccup could be a disaster.  Europe is trying to shore up more energy supplies and so far, things are starting to look a little better.  Countries are now talking about trying to cap Russian crude prices.  But the action would be fairly futile since India and China would never agree.  Russia has continued to make record profits as they sell crude oil to new customers at high prices.  For now, WTI prices are holding just under $90/barrel after jumping last week.  If economies around the globe start to slow down, the major peaks of oil pricing could be behind us.  The headwinds include hurricanes at the US and the upcoming severity of winter around the globe.  Although crude supplies are looking at being in deficit next year, the US production continues to slowly increase and I believe the rest of the world will catch up by next spring.  I’m not as “doom and gloom” as others for next year.  But, this is the world of commodities so anything is possible!

In local news, a fire at the BP Whiting refinery in Indiana halted the production of 300k barrels per day of gasoline to the market.  Thankfully the outage will be short lived and the heavy travel of summer will be behind us.  Gasoline prices will probably hold into next week.  Diesel prices have finally eased from record delta spreads to gasoline.  I expect to see diesel prices at the pump come down next week.

Propane is the broken record.  Propane prices are steady as she goes with great value compared to all other petroleum products.  We highly recommend filling up now before it gets cold, as well as locking in at least some of your winter usage.  Propane prices could catch a ride higher at any time when looking at the value prop compared to crude prices.

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

Best regards,

Jon Crawford