Lots of Noise, No Movement

Good morning,

Crude oil ended the week with little change in price even though the headlines were packed full of influential data.  On the geopolitical front, Iran captured a ship from the UK, claimed to have caught US spies in Iran, and threatened the rest of the world’s Navies to stay out of the Persian Gulf.  In the past, these types of incidents would have triggered a 10-15% premium increase on crude prices.  But this week, the news did nothing to move the thermometer on risk premium in crude prices.  I believe this is because the risk of supply surplus is winning in the minds of traders.  Demand erosion is continuing.  This week, even after the largest reported for the year draw-down in US Crude Inventory, prices barely moved.  The lack of movement is because crude is being exported but not necessarily delivered.  Ships of crude oil are starting to appear without a home.  The scenario starting to form has caused much pain on prices in the past.  In addition, China’s economy seems to be cooling and the US is not far behind.  I don’t think recession fears are on, but maybe a pullback.  But any pullback in demand when production is at an all-time high, even with cuts in place from OPEC+, any movement to surplus will form a global glut in crude oil inventories and cause prices to crash.  I actually believe that if OPEC compliance does not continue through the end of the year, we have a risk of WTI crude prices plummeting below $50/barrel to start 2020.  And I don’t think that low of price would slow down the US production.  I really think we need to experience WTI prices closer to $45/barrel before we see US production dramatically slow up.  For now, it’s possibly sideways movement on crude prices until end of summer.

In local retail news, as I was writing last week, retail prices peaked and have come down like expected.  I don’t expect prices to drop much more at the pump though.  However, it’s better than an increase during summer travel!

Propane prices continue to stay very low with high volumes of national inventory.  Please take advantage of these prices and fill your tank.  We will deliver below the minimum requirement during this time to try and help everyone save some money!  We also suggest that you contract your propane for this coming winter.  The contract prices are lower than last year and are a good value.

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

Best regards,

Jon Crawford

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