Monthly Archives: April 2024

Irritated Scalp From All The Scratching

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Good morning!

Happy Friday! Well, again, the week is ending on a complete head-scratcher. WTI crude oil price continues to remain under $85/barrel! The US and Chinese economy continue to stay strong, even with US inflation and CPI remaining hot. The EIA reported a massive draw-down in national crude oil inventories. The US passed a resolution sending more weapons to Ukraine and Israel. The US is sending long range ballistic missiles to Ukraine for the first time ever in the war. The missiles have the capability of striking all of Russia’s ports and oil infrastructure. Israel is providing over 40,000 tents to the Palestinians in Rafah to prepare for the Israeli invasion. Biden and others are discussing tighter sanctions on Iran and Venezuela after each country reported large crude oil sales to China. Blinken and others are discussing raising tariffs on Chinese exports to thwart off China flooding the market with their continued inventory growth of exportable goods. Although Iran has said they will not retaliate towards Israel anymore, Iran did say they will consider attacking ships in the Straight of Hormuz and the Red Sea. Honestly, all of the news this week was very bullish for crude oil prices. However, crude oil prices dropped throughout the week! The prices for crude oil are looking to close around the same price as last week’s close. Therefore, since crude oil price continue to stay soft during a period of high bullish activity, many traders liquidated their short positions and bought long crude oil prices. The largest number of options trading on the market in over a year occured all within this week! Again, everything happening from supply/demand, market reports, to geopolitical issues are all pointing to higher crude oil prices. I continue to remain long crude oil prices.

In local news, Chicago Spot Market remains well supplied with gasoline and diesel. Prices have eased a bit with the drop in crude prices. Therefore, I do expect to see lower retail prices at the pump. We are looking at two weeks of softening gasoline and diesel prices in our market. Therefore, I believe there is a lot of value at today’s retail price for gasoline and diesel. I am definitely a buyer at these prices.

Propane prices continue to trade in a narrow range. The EIA report on propane inventories was a bit bullish this week. Unless crude oil price falls off a cliff, I don’t expect propane prices to drop much more. Next season’s heating contracts should come out next month. I highly recommend everything buying propane in the summer. As I stated earlier, I am still long crude oil price and believe prices will rise this summer and continue until the end of the year.

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

Best regards,

Jon Crawford

Never Before In My Life

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Good morning!

Happy Friday! Never before in my life have I seen so many bullish situations for crude oil prices. But this week, oil prices DROPPED! Iran attacked Israel this past week, and Israel struck Iran last night. The retaliation from Israel caused prices of crude oil overnight to surge higher. But because the strike was not as large as expected, crude oil prices started out lower this morning! Iran responded by saying that they will now retaliate to Israel’s response. From all angles, sounds to me that Israel and Iran are officially in direct conflict. Biden and other European leaders have been trying to deescalate the the situation to no avail. Iran strongly supports the continued hijacking of oil tankers in the region. The Houthis’ will continue their attacks in the Red Sea. Hezbollah said they will continue their strikes on Israel. Russia said they will not let up on attacking Ukrainian energy infrastructure. Ukraine said they will continue to attack Russian oil infrastructure. I have never seen so much instability in the Middle East in my entire career. And the world’s largest commodity trade rests in the heart of all these conflicts: oil. With the presidential campaign on the way, oil price is a top issue. Biden must keep oil prices low in order to help his chances of reelection. Somehow, traders are shrugging off the most intense threats to oil supply. I believe that eventually the Middle East situation along with Russia/Ukraine is going to end up affecting oil supplies causing a major spike in oil price. For now, we can watch how the most irrational market behaves in the coming weeks.

In local news, gasoline and diesel prices dropped in tandem with the price of crude oil. The Chicago Spot market is well supplied. Therefore, I do expect to see prices of gasoline and diesel move lower in the coming week.

Propane prices dipped a bit this week, but not as much compared to the percentage price drop of crude oil. Propane future prices are finding a floor that I believe will be hard to break. I am still bullish on propane prices for the rest of the year and into 2025. Next season’s heating contracts will probably come out next month. So more to come!

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

Best regards,

Jon Crawford

World War III?

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Good afternoon!

Well, it has been a week. Crude oil prices relaxed a bit during the week, but clawed back and will be holding around last week’s high. The geopolitical risk for crude oil prices has not been this intense since Russia invaded Ukraine. Israel and Hamas were close to reaching a deal on a ceasefire, but the deal was called off. Intelligence reports from Israel claimed that all remaining hostages that Hamas are holding are dead. Therefore, there is no leverage to negotiate. Israel still plans on invading Rafah. But then in a surprise attack that was not discussed with allies, Israel bombed and destroyed the Iranian embassy in Syria killing at least eight Iranians. The news sent shockwaves across the world. Iran announced full retaliation for the attack. An Iranian response seems to be imminent. Israel told Iran that if any drones or other artillery from within the borders of Iran hit Israel, Israel will interpret the attack as an act of war. Israel said they will then retaliate with strikes into Iran directly. The situation between Israel and Hamas is escalating and spreading quickly into new territories. The world is starting to worry that a much larger conflict could breakout and pull more countries into war. Oh, and I haven’t even touched on Ukraine! This week was brutal between Ukraine and Russia. Ukraine struck another Russian oil refinery. Ukraine has officially damaged 15 of 30 Russian oil refineries. Ukraine has vowed to attack as much oil infrastructure as possible. However, Russia responded by destroying Ukraine’s largest power plant outside Kiev. Therefore, the more Ukraine bombs the Russian oil network, the more Russia will take out power in Ukraine. The war is really dragging and not looking good for either side at the moment. If the attacks of this week continue, both countries’ energy sector will be demolished. The energy losses are bad for the entire world. Also, in a surprise and not well covered interview, Secretary of State Blinken announced that the plan is to officially bring Ukraine into NATO. A timeline was not given, but Blinken reiterated that eventually Ukraine will be a part of NATO. Under Article 5 of the NATO treaty, an attack on any member of NATO is an attack on all members of NATO. Therefore, if Ukraine is a member of NATO and is bombed by Russia, the potential for a large-scale war is on the table. And depending on the conditions in the Middle East with Israel and Iran, as well as Chinese/US tensions, a potential for World War III is on the table. Finally, on the supply/demand projections for crude oil, OPEC+ is still calling for continued supply deficits in the market going into year-end. Many other countries and banks alike are making the same call due to healthy economies and steady demand for oil. Also, if Russia truly continues to lose the ability to export, crude oil deficits in the marketplace become all the more probable. Supplies in the US continue to see-saw back and forth, but the US still has upside capability to harvest more crude oil. Our exports of crude and refined products continue to flow at record levels. Therefore, if a hurricane takes out any of our exporting capabilities, there would be a shock to the world supply causing prices to move higher. And, just this week, Biden cancelled all future federal land leases on the oil reserves in Alaska. Alaska has always been our “ace in the hole” play for oil. Taking the largest deposit of oil off the table only flames support for crude oil deficits in the marketplace over the coming years. In addition, inflation data came in hot showing a strong March and healthy American economy. Although a stronger dollar usually lowers the price of crude oil, the stock market is taking a hit because FED rate cuts will probably be pushed out. Since crude oil world supply is looking to be in deficit this year, traders are pouring money into commodities to try and make up for stock market loses. As I have been writing for a while, I believe crude oil prices are well supported and have plenty of room to run higher.

In local news, Chicago spot markets traded in a very narrow range. Supplies in Chicago and the Group are very healthy. Therefore, large spikes in crude oil prices will probably not adversely affect refined fuel prices in the spot markets. Prices at the pump will probably move higher, but not at the percentage rate compared to crude oil price.

Propane price also continues to trade in a narrow range but is starting to find some support. Inventories last week reported a draw. During this time of year, national inventories should be starting to build. As record production and exportation continue to be strong, propane inventories continue to run lower than the five-year average. If crude prices take off, propane prices might end up following and taking away any advantage of cheaper summer fills. For now, I am still seeing next season’s heating contract pricing to be around the same price as this past heating season. Therefore, propane is continuing to display great value in price when compared to other energy commodities.

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

Best regards,

Jon Crawford

Up, Up, And Away!

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Good morning!

Happy Friday! I took last week off due to Spring Break. Unfortunately, the crude oil market is finding lots of support to continue the run higher in price. The war in Gaza escalated this week as Israel not only targeted the Iranian Embassy in Syria, but also mistakenly killed aid workers in Gaza. The geopolitical risks for higher crude prices kicked into full gear as expected. The US economy continues to run hot and calls on the FED cuts are all over the map. There is no consistency on if/when FED cuts will take place. The US crude oil inventories increased this week. However, gasoline and diesel inventories dropped. The report was interpreted as bullish. However, most of the refined products are being exported. The US economy seems to be healthy, but there are headwinds as cash/credit tighten with the consumer. If consumer spending starts to drop going into the summer, we could see a pull-back in crude prices. To add additional fuel to the bull-fire, OPEC+ met online and decided to keep cuts in place. Algeria and Iraq continue to pump over quota, and Venezuelan crude will find a home potentially in China. Russia’s exports have fallen, but the drop is temporary. Saudi Arabia announced this week that they are unable to meet their 2030 vision goals at the current rate of investment and crude oil sales. Although Saudi Arabia wants WTI crude oil to be closer to $100/barrel, the possibility of the Saudi’s increasing production moves onto the table if competition continues to take market share. I continue to sit back and watch everything play out. We are approaching a very intense presidential election in the US. If WTI oil continues to climb and hit $100/barrel, voters will be inclined to take out the “pain at the pump” on a sitting President. In my opinion, Biden will do everything in his power to try and lower oil prices going into November.

In local news, diesel prices have moved much higher with the increase in crude prices. Gasoline prices have remained fairly flat. The Chicago market seems to be sending a message that they are over-supplied with gasoline. We are starting to approach hurricane season and NOAA is calling for an intense and jam-packed storm season. The potential for “mini-blowouts” in basis pricing is on the table this summer and early fall.

Propane prices have moved higher in tandem with crude oil prices. However, propane cost has not moved higher at the same percentage to crude oil price movement. Summer fill season is right around the corner, and as customers finish up their contract pricing from the current season, they are pleased to hear the current retail price of propane is lower. Next year’s contracts will probably be coming out in May sometime, so more to come. Oh, and this current winter is now running at 12% warmer than last year, breaking the record for the warmest winter EVER!

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

Best regards,

Jon Crawford