WTI Crude price closed this week over $60/barrel for the first time since last fall. The rise in pricing has been attributed to tightening sanctions on Iran and Venezuela, OPEC and Russia continuing to deliver on production cuts, and strong world demand. In addition, the EIA’s inventory report showed a massive drop in crude, gasoline, and distillate inventories. So the bulls have been running with this info. However, there is caution in air. This week the FED released their report that they will not increase rates this year. The news at first caused crude prices to soar. But then as the information was digested, the price backed off. The FED also sees the economy slowing down by year end. Therefore, the combo of healthy demand coupled with a weaker dollar is in jeopardy. The US continues to produce oil at record numbers. So the potential for a supply glut to reappear could occur at anytime, especially if the world economy slows. The economic data from China has not been so hot either. As I always say, the devil is in the details. But for now, the bulls maybe have taken a breather, but I don’t think the rally is done just yet. And just like last fall, this year is looking ripe for another bust on crude prices. I firmly believe that “boom and bust” economics will be in play for crude prices for at least the next two to three years.
In local news, gasoline retail prices continue to rise as I have been saying. Most stations are nearing or over the $2.50/gallon retail price on regular gasoline. The big issue is that consumer behavior changes when gasoline prices go over $2.50. So we are hoping that the “bust” in price happens before driving season. Diesel prices have fallen below $3.00/gallon and will probably stay under $3.00/gallon now that winter blending for the year is completed.
Propane prices are ripe for a nice drop this summer. Our national inventory is 30% higher than last year, and we experienced a colder winter! Propane production continues to move at record levels. In comparison to crude prices, propane prices are shaping up for a disconnect from crude and drop this summer. More to come on this when winter ends. But don’t relax too much, we still have about three weeks of heating season remaining. 🙂
As always, if you have any questions, comments, or concerns, please feel free to give us a call.