Crude Prices Holding Steady

Good morning!

Crude oil prices continue to trade in a very narrow range based on the news of the day.  We seem to be bouncing along between $51-53/barrel on WTI.  I continue to believe we will stay in this range for a bit longer.  Refineries are making great money right now so supplies are ample.  But crude and refined exports to China are starting to show up again, so possible relief on trade tensions are being discussed as well.  Basically, as the US floods our local markets with additional refined products coupled with record crude harvesting, and as long as there are buyers, prices will stay steady.  If the US refineries hit a hiccup in production, crude oil inventories could build quite quickly in the US.  But OPEC, particularly Saudi Arabia, are drumming up continued support for their cuts and are offering side deals to anyone in the world that wants to work with them to help keep prices higher.  Canada is also joining in the party with cutting production.  Russia is slowly cutting back on production as long as prices don’t go up too fast.  The biggest area of concern for the year is the world economies.  If economies stay healthy in 2019, then I believe we have experienced the bottom in prices for the year.  But if we start to slow down demand for oil, I’m not so sure OPEC can cut fast enough to deal with the record production here in the US.  So as the last few weeks have been, it’s a “be patient” scenario.  I still believe that hedging diesel supply for the future months is a smart hedge.  Diesel inventory levels are lower than the five year average and if crack spreads decrease, we are going to run into some supply constraints later in the year.  In addition, the new IMO standard for marine fuel starts in 2020 and is going to push up prices due to production cost increases.

In local retail news, gasoline prices are trying to push back up above $2/gallon.  Cost has increased enough to justify pushing prices back up over $2/gallon, but retailers are hesitant to give in.  Diesel prices have increased a little, but hold on to your seats.  Diesel cost is 25 cents/gallon lower out of the Chicago Spot market due to insanely great crack spreads.  Once we have a production issue or a drop in supply, diesel prices in our local market are going to sky rocket.

Propane prices are holding steady with demand increases due to cold weather.  Our prediction services are calling for very cold temps the rest of January and possibly all of February.  So for now, we are preparing for increased demand in the coming weeks.  Please make sure an icy driveway is salted or sanded and that there is a clear pathway to your tank to make sure we can safely and efficiently deliver.

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

Best regards,

Jon Crawford – Pres.

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