I hope this message finds everyone safe and well. Crude oil prices are hopefully carving out some support to keep from falling into single digits or negative territory. Oil companies are beginning to finally cut production here in the US. In addition, oil companies are starting to do what I feared: cutting dividends. Shell announced a slashing of their dividend for the first time since WWII! The inventory report this week showed that maybe we have peaked in production and finally slowing down on building of inventory. The FED continues to put out offers for helping the economy which also help support oil prices. We are also seeing a slight, and I do mean slight demand pick up on gasoline which shows that people are slowly starting to move around. But I am not confident that oil prices will go much higher. We are not out of the woods by any means. So many oil companies burned through cash and restructured debt from 2018 hoping for the payoff in 2020. Well, that’s not going to happen. I imagine that bankruptcies and depressed oil stocks will continue through summer.
In our local market, gasoline cost has risen over 45 cents/gallon since the beginning of April. Do not believe what you read in the papers. Gasoline prices will not be staying under $1/gallon. The glut of gasoline supply in Chicago is now gone and market economics have balanced accordingly. The retail cost of gasoline is well above $1/gallon. I expect to see gasoline prices rise to almost $1.49/gallon in the coming week. Diesel cost has also risen by almost 30 cents/gallon. I expect to see diesel retail prices move up a bit in the coming weeks as well.
Propane continues to be a wild card. Exports diminished for the first time in weeks which helps building local supply, but as price of crude rises, propane price will also start to rise. There are a lot of chicken and the egg scenarios in propane. Right now inventory levels are not great, but they are not terrible. The main concern is Canadian rail propane. In years past, the US has been well supplied by Canadian propane. That does not look to be the case in the coming year. Therefore, we will be heavily dependent on the ability of the US cavern storage to meet consumer demand in 2020/21. I believe that the price on propane today has the potential to be the lowest price of the year. I am recommending that people fill up now if they can. Contract pricing will be coming out soon. I know for certain that next season’s price will be lower than this season.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.