Good morning,
Happy Friday!
I hope everyone made it through this week’s cold snap. It was certainly a reminder of winter’s arrival!
WTI crude oil pushed past the $70 per barrel mark this week and is poised to close above $70 for the first time since late November. The market saw a gain in crude prices this week, driven by a mix of shifting forecasts and geopolitical developments. The IEA surprised many by reversing its stance, now projecting increased crude oil demand in 2025. Canada is optimistic about rising U.S. consumption, anticipating that falling interest rates will boost manufacturing activity. The Biden administration imposed additional sanctions on Iran to further limit its crude exports. China increased crude imports for the first time in seven months, driven by expectations of monetary easing. However, some speculate this could simply be stockpiling at current lower prices. Interestingly, OPEC has adjusted its outlook downward, now predicting lower crude consumption after months of forecasting demand growth. Energy agencies and producers are presenting mixed projections, reflecting uncertainty across the board.
On the geopolitical front, the Trump administration is considering strikes on Iran’s nuclear facilities if negotiations fail. Meanwhile, global refining capacity is expanding, with the world’s largest refinery opening in Nigeria this week. This facility, which is 33% larger than the largest refinery in America and designed for direct exports, adds competitive pressure on OPEC.
In the U.S., inflation edged slightly higher in November, further solidifying expectations of a Federal Reserve rate cut at the next meeting. Trump’s cabinet picks and proposed policies could drive greater demand for gasoline and diesel. In addition, the EIA reported a draw in crude inventories but significant builds in gasoline and diesel stocks this week. The data in the US is predicting a lower dollar with stronger demand giving cause to higher crude oil prices.
Despite these developments, I remain bearish on crude oil heading into Q1 2025. The lowest prices of the year may occur early next year, although I anticipate a rebound in crude oil prices later in the year.
The Chicago spot market is well-supplied and has returned to a balanced state, with basis levels between the Chicago and Group markets now similar. While the rising price of crude oil has nudged up gasoline and diesel costs, I expect only modest increases at the pump. Prices should remain relatively low during the holiday travel season. For diesel customers, please ensure your supplier is properly blending diesel fuel for winter conditions. For stored diesel, blending with #1 ULSD is strongly advised to avoid issues during prolonged cold spells. For diesel purchased at gas stations, confirm the blending strategy in use to ensure reliable operation, especially as temperatures dip below zero in January.
Propane costs edged slightly higher this week but remain within a narrow trading range as winter adds seasonal volatility to pricing. There are currently no supply issues expected to cause significant price increases. As a reminder, please ensure driveways are clear of snow and ice, and there is an accessible path to your propane tank to allow for safe and efficient deliveries. In cases of heavy snowfall, we may be unable to complete deliveries if access is obstructed. We appreciate your cooperation and are happy to communicate if any challenges arise!
As always, if you have any questions, comments, or concerns, please don’t hesitate to give us a call.
Have a great weekend!
Best regards,
Jon Crawford
