Monthly Archives: November 2023

Happy Thanksgiving and Safe Travels!

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Good afternoon!

I just wanted to take a quick moment and wish everyone safe travels this week and a Happy Thanksgiving! The markets are low in liquidity this week due to many workers taking time off. In addition, the NYMEX is closed on Thursday and only open half the day on Friday. This week the FED reinforced that rate hikes are probably done but will stick around for longer next year. OPEC+ delayed their meeting by four days, so that will happen next week. Also, Israel and Hamas agreed to hostage releases in exchange for a ceasefire.

Gasoline and diesel spot prices fell in Chicago so I expect to see cheaper retail prices this holiday travel season. And propane prices skipped right along with crude oil prices showing no surprises. I will offer more commentary next week once more data is digested into the market after the Thanksgiving break.

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

Best regards,

Jon Crawford

Small Black Swan Event

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Good morning and Happy Friday!

I first would like to wish all the deer hunters safe travels this weekend and a safe hunt next week. 🙂 This week, WTI crude oil experienced a small “Black Swan” event on Thursday and dropped as much as $4/barrel. Large US retailers released lackluster earnings and weak guidance going into the holiday season. The news spoked many traders to clear positions, book some profit, and maybe buy back in before year end at a lower price. The contagion of demand destruction also spread after Biden’s and Xi’s meeting failed to produce meaningful trade agreements with the US’s largest enterprises. However, the news of yesterday also reinforced the idea that the FED might cut rates sooner. If the FED cuts rates to spark consumer demand, crude oil prices could rally. A weaker dollar, coupled with increased demand would make crude oil more expensive. Regardless, Saudi Arabia is keeping a close eye on the market. Although it looks as if WTI crude oil price will post four straight weeks of loses, I do not see Saudi Arabia letting the price collapse. I still believe there will be one or two more mini “Black Swan” events that could pull WTI crude oil price below $70/barrel for a brief time; even as short as one day. There was a lot of buying/selling liquidity in the market yesterday, so clearly any events such as yesterday will spark massive trade volume. I am still long on crude oil prices for next year, but believe there will be one or two more events like yesterday between now and end of January as traders look to book year end profits and buy back in at a lower hold price for next year.

In local news, Chicago diesel spot differentials finally collapsed and are now lower than our neighbors in the Group spot market. I expect to see retail diesel prices drop in the coming weeks. Gasoline came down a bit as well. I do not expect to see a jump in gasoline prices prior to the holidays. Many economic forecasts are sending signals of weaker travel plans this holiday season.

Propane is truly carving out and skipping along the bottom. Propane prices have not dropped at the same percentage rate as crude. As I wrote in the past, propane is trading at the lowest percentage to crude in years, so the markets are just letting the price of propane catch up to normal crude percentage economics. I really don’t think propane producers are going to produce propane much cheaper this season. Especially with calls for the warmest winter on record…again.

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

Best regards,

Jon Crawford

Bears Were Hungry, But The Bulls Formed A Strong Defense

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Good morning!

Happy Friday! Again this week, the news of terrible economic data poured out over the news wires. The stock market ripped as traders looked for places to possibly make more money than long-term treasuries/bonds. China’s exports continued to dwindle. The EIA lowered their demand forecast for 2023. Chairman of the Fed Powell said that they are not done fighting inflation. Overall world economic slowdowns were reported. And Russia announced that they will lift their ban on refined fuel exports. Russia exports the most diesel in the world. The combination of all this data caused WTI crude to fall below $75/barrel for a brief moment. $75/barrel WTI has not been hit since July. As I have been writing, if WTI gets close to $70/barrel, I believe that is a good place to start slowing dipping toes into future crude purchases. This morning, Saudi Arabia announced they believe the economic slowdown is “overhyped”. The news was interpreted as Saudi Arabia will do whatever it takes keep prices higher. As their Sovereign Wealth Fund reported economic gains this past month, their strategy of keeping crude oil prices higher and selling less oil is working. I do not see Saudi Arabia changing their strategy anytime soon. In fact, I believe they will cut more production if necessary. As they also enter the LPG export business for the first time this year, a new revenue stream will flow into their economy. At the end of the day, I believe there could be a “black swan” event once the American consumer’s back is truly broken economically, which in turn will produce a nice futures buying opportunity for crude oil. However, if the event does occur, Saudi Arabia and even other oil companies outside of OPEC, including American companies such as Occidental, will cut production quickly to keep prices from free falling. As I have been writing, I am still bullish on crude oil prices long term, and one should be patient for the short lived opportunities that will most likely present themselves in the coming months and into 2024.

In local news, diesel prices out of the Chicago spot market continue to be inflated compared to our neighbors in the Group spot market. But I believe that once harvest winds down, we will see diesel prices fall back into the normal trading range out of Chicago. Gasoline prices fell this week in tandem with the price of crude. Gasoline is tracking crude oil prices very closely.

Propane continues to trade narrow and is ticking up a little bit in price due to demand increase. As a reminder, please keep your driveway clear and salted in the winter, and a clear path to your tank. We want to ensure safe and efficient deliveries. It’s hard to believe that snow is 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

Wars?.. What Wars?..

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Good evening and Happy Friday!

This week, crude oil completely traded on economic data coming out of the US and China. WTI Crude price was on the way to break through $90/barrel in October based on the never ending war in Ukraine and the continued developing war between Israel and Hamas/Hezbollah/Houthis. Instead, the markets turned a blind-eye and focused on company earnings, job reports, and the FED meeting/minutes. In addition, China’s economy is not looking strong and stimulus as well as bailouts for bankrupt commercial building powerhouses will be needed. All the released economic data combined caused WTI crude price to close at $80/barrel for the week! The FED decided to keep rates the same as expected, but left the door open for one more raise. New jobs added to the American economy were less than expected. Company earnings were not as stellar as most were expecting this week. And inventories of refined products in the US were interpreted as “bearish”. In addition to the never ending credit card debt piling up in America, cars are being repossessed at the greatest clip since “The Great Recession” and high mortgage rates are holding causing the housing market to cool. Overall, the fear of an economic slowdown caused crude prices to drop. Therefore, crude oil prices dropped as treasuries continued to remain strong and the strength of the dollar held. I am still bullish on crude oil prices but if WTI crude price falls much below $80/barrel, I see some future buying opportunities. And if WTI crude price was to really fall and hit below $70/barrel, I would take long positions on futures. I believe there will be world crude oil distribution issues that develop from the instability in the Middle East. We have plenty of spare crude oil production capacity across the globe, but I see the potential for destruction in world crude oil distribution channels. I guess we will see what November brings!

In local news, after our neighbors to the west (Minnesota, Iowa, etc) experienced tight diesel supplies that ended up raising the cost of diesel over $1.25/gallon compared to our market, now our market is paying more for diesel than our neighbors! Chicago spot prices on diesel closed 20 cents/gallon higher than the Group to end the week. Within four weeks, we’ve experienced over a $1.50/gal swing in diesel cost across the two spot markets. Gasoline prices continue to fluctuate, but are now balanced with the Group. However, the balancing caused differentials on gasoline in Chicago to rise, so consumers will possibly see a slight increase in gasoline price at the pump. I expect diesel prices to trade in the current range out of the Chicago spot market until harvest in the Midwest region is almost completed.

Propane prices traded in a very narrow range as an early cold snap in the Midwest and corn drying demand kicked in at the same time. The combo caused national supplies to draw more than expected keeping prices fairly firm. We still have the most propane in national inventory that we have experienced in years. I am not worried at all about propane supplies this winter. I do expect the occasional logistical issues with pipelines and delayed train car deliveries, but nothing out of the norm for propane in a winter season. We are well positioned for a successful winter propane delivery season.

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

Best regards,

Jon Crawford