As one oil analyst said this week, “It is impossible to predict the price direction of oil.” WTI crude prices went to $70/barrel in October 2018, down to $46/barrel in January 2019, and back up to $64/barrel in April of 2019. The massive amount of volatility really puts a lot of pressure on anyone who claims they know the direction of crude prices. As many oil analysts say, “we are experiencing boom/bust movements in crude prices and we should get used to it.” I could not agree more. Almost five years ago, I sat in a seminar from a famous oil analyst in Canada. When the US shale revolution started to get legs, he warned of these times. Man, he was spot on. The lifestyle of these prices swings could last as long as five to ten years depending on who you talk to. For right now, not much has changed. It’s all about the economic headlines for the day. But the fact remains, the US is still strong in crude supplies and production. The “swing” in production will be watched in Saudi Arabia, Libya, Iran, and Venezuela.
In local retail news, refinery maintenance season is underway in Chicago and prices for gasoline have continued to break out. Gasoline prices continue to inch ever so closer to the dreaded $3/gallon price. I’m not so sure that we get there, but I don’t see prices retreating any time soon. Diesel prices have slowly crept up as well. I expect us to see closer to $3/gallon diesel in the next month.
Propane prices are starting to reattach with crude price movements. But propane is very bearish: record production, supported by high crude prices, lower petrochem demand, full strength exports while experiencing inventory gains, over 30% higher inventory of US propane after a higher than normal demand winter. I’m sitting on the sidelines for a while with propane. For now, retail prices are getting close to $1/gallon. I expect to see excellent summer fill prices and contract prices very close to this season.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.