WTI Crude Price Still Holding Around $80/Barrel

Good moring!

Happy Friday and cooler weather! Wow, was that a week of heat! As I have been writing, WTI crude oil prices continue to hold around $80/barrel. China reported less than stellar economic data again this week and crude oil prices dropped below $80/barrel for a couple days. But then recession fears in the US hit the news and the next day crude price jumped right back to $80/barrel. This week the top bank CEO’s and the FED are all meeting in Jackson Hole for the annual meeting on the analysis of the US economy. This morning, FED Chairman Powell stated that inflation is still too high and interest rates might go up a little more and hold for a longer period of time. The news sent crude prices higher, which is the opposite under normal economic conditions. Usually as the dollar gains strength, crude oil prices drop because crude oil is traded in dollars and customers can get more bang for their buck when purchasing crude. However, higher interest rates for longer have a greater chance of slowing down the US economy which lowers crude demand. Therefore, producers will cut production to increase the price rather than compete for market share. Crude producers are saying loud and clear they would rather pump less crude and make more money than collapse price and pursue market share competition strategy. I’m not too concerned about the economic issues in China since they have the power to do whatever is necessary to fix their economy. And I am still convinced that $80/barrel is the new norm for WTI Crude price. All oil companies are needing to make investments outside of oil, and $80/barrel works for all crude producers. We might see the occasional dip, but US producers will shut down rigs and Saudi Arabia will cut production to keep prices from collapsing.

In local news, diesel prices calmed down a bit. But the September futures contract expired, and just as I have been writing, the October contract shot up 15 cents per gallon. The reason is that diesel supply will be tight in Chicago during harvest. The Midwest is not going to run out of diesel, but logistics are going to be tough to manage and distributors like myself will have to chase terminals for a month or so. Gasoline prices have calmed down as summer ends. I see gasoline retail prices staying around $3.49/gal. However, diesel retail prices could jump back above $4.00/gallon and hold for the next few months.

Propane prices gained a little bit of ground this week even though the US is at record inventories. I believe exports will continue to skyrocket going into winter and Canada will use as much propane as possible for manufacturing as opposed to shipping to the US. In addition, if we have a warm winter, suppliers will keep prices high to make up for the loss in volume, which in turn will raise retail prices. As a reminder, contracts start in September and you still have time to take advantage of summer fill pricing.

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

Best regards,

Jon Crawford

China Doom and Gloom Affecting Crude Prices?… Not Just Yet.

Good morning!

Happy Friday! WTI crude prices took a little hit this week. China released less than stellar economic data, cut interest rates, and stopped reporting youth unemployment which has been at all time highs. The news caused crude oil prices to tumble and fall below $80/barrel for a brief second. But the strength of the US economy, the decreasing oil rig count in the US, and the cooperative discipline from OPEC+ to keep production cuts steady continue to support the narrative of tightening world crude oil supplies. In fact, regardless of China’s economy, crude producers seem to be in lock-step keeping production low in order to prop up prices and avoid a massive collapse. As I have been writing, I believe $80/barrel WTI to be the “new norm” moving forward for quite some time. Yes, we might have some dips below $80/barrel. But the timing will be brief as traders hedge bets at those prices which in turn prop prices right back up to $80/barrel. I also believe there is potential for upside price in WTI crude to breach $90/barrel. But for now, we should all start accepting the reality that current crude oil prices will probably remain the new norm regardless of what happens in the world economy.

In local news, diesel spot prices have come down from their highs. Diesel supplies in the US are still very tight and any major disruption in refining prior to harvest could cause a massive increase in diesel prices east of the Rockies. Most people in the industry are keeping their fingers crossed that the harvest is mostly completed before any hurricanes potentially affect Gulf Coast production. Gasoline prices have fallen a touch from their peaks as well. But again, as long as crude oil prices remain strong, both gasoline and diesel prices will hold firm.

Propane prices remain steady going into end of the summer. Although supplies are very high in the country, the appetite for exporting and Canada keeping more propane in house for manufacturing, prices will probably start to climb in Q4 of this year. If we have a mild winter, I also believe suppliers will increase their margin index to make up for lost volume. The action from suppliers will in turn raise the retail price of propane. I highly recommend topping off your tank by the end of September. We are being very liberal with our summer fill volumes.

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

Best regards,

Jon Crawford

$80/Barrel WTI the New Price Floor for Crude Oil?

Good morning!

Happy Friday! WTI crude oil prices held above $80/barrel this week. OPEC+ confirmed Saudi Arabia’s announced production cuts of 1M bpd happened in July. In addition, the IEA increased their outlook on crude demand for the end of year and into 2024. The US seems to be experiencing a softer landing around inflation which will continue to fuel demand for more crude oil. Producers seem to be determined to try and keep oil prices as high as possible. I believe that the world economies can survive at $80/barrel WTI. Therefore, I don’t see any incentives for a producer to go after market share by flooding the market with crude oil and collapsing price. Although the war in Ukraine is a wild card, the US Presidential election is coming next year and many voters are starting to rank ending the war in Ukraine as a top priority. So politics at home could play a major role in how the US government continues to send money to Ukraine. I would have to write for now that crude oil prices are nicely supported and I don’t see too many headwinds besides a complete collapse in the Chinese or American economies. But both countries have tools in the toolbox to heed any major recession.

In local news, diesel spot prices continue to be volatile as harvest approaches and two major refiners are going into maintenance mode. I could see diesel prices at the pump blowing out higher this fall for a brief period of time. Gasoline spot prices continue their slow burn higher. I expect to see gasoline prices peak towards end of summer. However, prices of gasoline could remain higher if refiners choose to produce more diesel due to the potential tight diesel market in the fall. The next few months will be very interesting in our local spot market.

Propane prices have followed crude oil prices higher. Spot prices have moved almost 20 cents/gal higher from the bottom. I recommend everyone to top off their propane tanks now and contract for the upcoming heating season. It’s hard to believe that colder temperatures are right around the corner!

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

Best regards,

Jon Crawford