The week started off with Libya’s production going offline due to internal civil war conflicts again. In the past, this type of conflict caused at least a 5% spike in prices. Instead, traders shrugged off the event due to the US hitting another week of record production runs and increases in inventory volumes. The IEA is still calling for decreasing prices in the second half of the year due to crude supplies going into surplus while under current OPEC+ production cuts. But the big news of the week is the Chinese Coronavirus. The virus continues to spread to other countries and has killed close to 100 people already. A city of almost 30M people is under quarantine in China. The last time this happened was with SARS and crude prices tumbled due to demand erosion. Well, history is proving itself to be true once again and crude prices tumbled to their lowest levels in the last three months. WTI crude is starting to point closer to $50/barrel than $60/barrel. For now, we are awaiting developments on the Coronavirus and taking cues from the WHO. Until we know where the virus is heading, I think the last rally in crude prices is on ice.
Local retail prices on gasoline and diesel are slowly decreasing. However, spot cash prices have not dropped as much as expected with the decrease in crude prices. Regardless, I don’t expect to see prices at the pump go up in the coming week or so.
Propane prices dropped once again this past week. The weather continues to be propane’s worst enemy. We are getting very close to experiencing the warmest January/December on record. The demand destruction on propane is very real, even though exports are at record levels. At the current inventory levels, we are one pace to end the winter with the most propane in inventory post winter in the history of tracking inventory! If the current state of propane holds, I would expect very low prices on summer fills this year.
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