I hope everyone had a great week. Unfortunately, two major events happened this week that caused the price of crude oil to skyrocket. Iran shot down a US drone plane on Thursday. The response from Trump went from anywhere including retaliation to maybe it was just a mistake from someone in Iran. The geopolitical tensions between the two countries put the risk premium on full alert and traders bought in. The other main event was the FED announcement that rate decreases are back on the table. A rate decrease devalues the US Dollar and increases the price of crude. On the supply/demand side, crude stocks decreased over the past week more than expected and a refinery in Philadelphia suffered a large explosion forcing a shutdown. The refinery in Philadelphia is the largest on the East Coast and puts tremendous pressure on other East Coast refineries to fill the gap because no products from the robust Midwest have direct pipeline access to the East Coast. Hopefully supplies from the South will be able to be shipped, but it takes time. For now, we will wait and see. But the geopolitical and FED announcement just moved the floor on WTI to $55/barrel and put a stop to falling prices at the pump.
In local retail news, I would not expect to see the price of gasoline fall below $2.49/gallon at the pump. I also think diesel prices will stay in the $2.79/gallon range. With what happened this week, the sell off on refined products came to a screeching halt.
Although crude prices have risen dramatically, propane prices have only risen a bit. We are still at the lowest retail price in five years and we recommend everyone filling their tanks now. With a record amount of propane in inventory, spot prices will continue to be very low compared to forwards contracts. Once the glut starts to decrease, we will see spot prices rise. I expect that to happen in October, as we prepare for a potential record breaking corn drying year. Contracts for next season will be released in the next week or so. Stay tuned for more info.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.