Drill Baby, Drill!

Happy Friday!

This week, crude oil prices continued to trade within a narrow range, with WTI holding above $80 per barrel. Geopolitical news was relatively quiet. Ukraine is grappling with a severely damaged electrical grid, potentially increasing diesel consumption for generators. Russia shows no signs of de-escalating, and tensions are rising in Palestine as Israel killed a Hamas commander in Rafah. Additionally, the Philippines constructed an aircraft landing strip near Manila in contested waters with China, potentially escalating tensions regarding Taiwan. The Shanghai Cooperation Organization (SCO), which includes China, Russia, and several other nations, met and pledged mutual military and economic support, posing a potential challenge to NATO. These developments underscore a possible economic conflict and a cold war-like military structure emerging globally.

Crude oil supplies remain tight worldwide as producers exercise disciplined production. The U.S. is recovering from Hurricane Beryl, which temporarily halted exports and refinery operations. Normal operations are expected to resume in a few weeks. The Federal Reserve’s anticipated rate cut in September could weaken the dollar, putting downward pressure on crude oil prices. However, producers have signaled continued production cuts if rates decrease. Former President Trump announced plans to make the U.S. the leading global producer and exporter of crude oil, though U.S. producers remain focused on maintaining higher prices through disciplined production. OPEC agrees that reducing production during a recession is essential to sustaining higher prices. The consensus among global oil companies is “less barrels for more money,” suggesting no imminent price reductions despite a potential landscape for higher U.S. production under a Trump administration.

Severe thunderstorms forced an emergency shutdown of Mobil’s Joliet refinery in Illinois, causing significant price increases for gasoline and diesel. The refinery, producing about 300,000 barrels per day, will be down for at least a few weeks, impacting supply during the refinery maintenance season. Consequently, gasoline prices increased by nearly 30 cents per gallon and diesel by 20 cents per gallon, with prices expected to remain high into August.

Propane prices remained stable, trading in a narrow range alongside crude oil. Propane continues to offer excellent value, and we strongly recommend filling your tanks and locking in prices for the upcoming winter.

As always, please feel free to contact us with any questions, comments, or concerns.

Best regards,

Jon Crawford

Back to Economics

Happy Friday!

This week, crude oil prices closely tracked economic data, with WTI trading within a narrow range but maintaining a level above $80 per barrel. The early-week sell-off was driven by weak economic data, including reports of cooling U.S. inflation and Saudi Arabia’s decision to delay future infrastructure investments. Additionally, Federal Reserve data suggested a potential rate cut in the near future. Although these economic indicators slightly depressed crude oil prices, supply concerns prevented prices from falling below $80 per barrel. The EIA reported a significant draw in crude oil inventories, and the U.S. oil rig count continued to decline. This data supports the thesis that American oil producers are exercising discipline by reducing production in response to weak demand to sustain higher prices.

Geopolitical factors also contributed to bullish sentiment. The U.S. announced plans to send larger bombs to Israel as it continues its conflict with Hamas in Rafah. In Ukraine, reports emerged of a children’s hospital bombing, and President Zelensky spoke at the NATO summit, where continued military support for Ukraine was pledged. These geopolitical issues supported oil prices, but economic data was the primary driver this week.

In local news, the Chicago spot market experienced a significant drop in diesel basis, leading to expected lower diesel prices at the pump. The gasoline basis in Chicago continued to lengthen slightly against rising crude prices, keeping gasoline prices stable despite the increase in crude oil prices. Chicago is expected to remain long on basis until the next refinery turnaround, projected for late August or early September. Motorists in Wisconsin should benefit from the competitive pricing of refined products throughout the summer.

Propane prices have continued to rise in line with crude oil prices, with futures prices now exceeding the six-month average. Customers are strongly encouraged to fill their propane tanks and lock in their propane gallons for the upcoming winter. For more information, please contact our office.

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!

Good afternoon!

I would like to wish everyone a safe and happy 4th of July! Crude oil prices have risen throughout the week, along with finished products, ahead of the busiest travel weekend of the year. Additionally, the Federal Reserve holding rates steady and the approach of hurricanes in the south have continued to support higher crude prices. Consequently, I expect pump prices to increase. All finished product prices, including propane, ended the week higher. With many traders out of the office, trading volumes are light, which can lead to price volatility. Enjoy the rest of the holiday week!

Best regards,

Jon Crawford