WTI crude futures started off today sinking nearly 10% after peaking at $40/barrel. The peak pricing came on the heals of OPEC+ agreeing to keep record production cuts in place through July. But Wednesday was a battering of bearish news for crude. EIA Inventory Reported showed a large build in crude inventories which came as a surprise. With rig counts being down to the lowest level in 20 years last week, many are wondering if production is still outpacing demand. Then the FED released their statement saying they will keep interest rates near zero through 2022 because the economy is going to take a much longer time to recover. In addition, new waves of the coronavirus are popping up in the US sparking fears of a major second wave across the country. And finally this morning, unemployment numbers showed an additional 1.5M people applied for benefits last week. Although the unemployment number showed a slowing of claims, claims have still not stopped which gives concerns on the long-term sustainability of the economy as it stands. But the real head scratcher was the FED statement. If the FED keeps rates near 0%, the action devalues the dollar, which increases the price of crude because it’s traded based on the dollar. But the FED’s announcement caused crude prices to drop. I have never seen that before. But we are living in strange times and the market is behaving likewise. I believed that the crude market was a bit over-bought so I am not surprised at the recent profit taking. But I do not believe we will see prices fall down below $30/barrel anytime soon.
In local retail news, gasoline pump prices breached $2/gallon in some areas. Diesel retail prices have have barely held on below $2/gallon. I expect to see gasoline and diesel prices hover near the $2/gallon mark for some time as retail businesses continue to deal with decreased summer demand.
Propane prices have continued to remain strong. I continue to be bullish on propane. Although supplies are in better shape than they were a month ago, the volatility in crude and the unknown commitments from Canada and local US producers leave many wild cards on the table. I believe now is the time to fill your propane tank. I also urge everyone to lock in their next season’s prices. Our contracts will be available around the 4th of July. Stay tuned for more info.
As always, if you have any questions, comments, or concerns please feel free to give us a call.