Wow, myself and every hedge fund never saw this week coming. I am still perplexed by the last week in crude oil trading. Traders are now negative for the year on long crude oil trades. This week hedge fund managers removed all money from forward crude positions and dumped them into natural gas. Natural gas is seeing record price increases due to low inventory levels, high exports, and low production. Natural gas is shaping up to be nasty in price and supply this winter, much like propane in 2014. WTI Crude prices found a bit of support at $56/barrel after falling through the $57/barrel support price. OPEC, mainly Saudi Arabia is trying as hard as they can to convince traders that they are going to cut production. This week they announced cutting shipments but not production, but yesterday they finally announced that they are looking to cut 1.4M barrels/day in 2019. They are looking to drum up support for the upcoming December OPEC meeting. The IEA is also being very bizarre in their predictions as well. They continue to say that 2019 shows a slowing economy and world demand, but then turns around and says the world needs another 10M, yes 10M, barrel/day production in the next five years?! Basically, you can take it or leave it with the IEA announcements at this point. There is not much predictability in their news. For now, we can enjoy low gas and diesel prices going into Thanksgiving and wait and see what OPEC does in December. At the end of the day, I still can’t believe crude prices fell this far so fast. I expect the pendulum to swing back up closer to WTI $60/barrel in December. But for now, sit back and relax.
Local retail prices on gasoline have finally broke through $2.49/gallon. I expect the price at the pump to continue on the downward trend. Diesel retail prices are even getting close to $2.99/gallon. We might see $2.99/gallon diesel in the next week, especially with some farm demand starting to dry up in the Midwest.
Propane prices are slowly breaking away from the crude trade and starting to rise. We are experiencing colder than normal temps and expecting the cold to continue into December. Regardless of what NOAA is saying, the weather prediction services that I subscribe to are calling for a potential Polar Vortex showing in December. I should know more next week. For now, if you are a will-call customer, please keep a close eye on your tank as most users are going through more than normal this month. Heating demand is already up over 20% for the season!
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Jon Crawford – Pres.