OPEC+, FED, and Hurricanes

Good morning!

Surprisingly, crude oil prices increased 9% this week on the backs of circumstantial bullish news.  Multiple hurricanes and tropical storms are continuing to punish the Gulf of Mexico shuttering oil production temporarily.  Considering the weak demand across the globe, the supply disruptions are minimal and no damages have been reported to rigs or export facilities.  The FED announced this week that they will keep rates at zero for years and are willing to let inflation run higher.  The news is very bullish for crude prices because the announcement looks to keep the dollar weak.  Then the icing on the cake for the week was strong words from the Saudi Arabian Energy Minister saying they will do whatever it takes to keep oil prices above $40/barrel and punish anyone who tries to gamble on the market.  I have never read such strong words from Saudi Arabia in response to OPEC and other oil producers.  Libya is bringing another 1M bpd back online and other countries were discovered to have cheated on their quotas.  Basically, the run up in prices this week are reactions to circumstantial and temporary news events.  I am still seeing very weak demand on the horizon and do not believe that any there are any tailwinds to the rally this week.

In local news, surprisingly the Chicago cash market jumped dramatically on gasoline prices.  The spot cash market blew out almost 12 cents per gallon this week.  I’m guessing that with refinery maintenance season starting, a supplier is short on gasoline going into the turnaround.  Once again, temporary situation.  We might see retail prices on gasoline break above $2/gallon, but that will not last in my opinion.  Diesel prices have remained steady compared to gasoline.  Supplies of diesel are in great shape heading into the harvest.

Propane prices actually rose with crude prices this week despite healthy inventories.  Summer spot differentials are starting to wind down.  If you have not ordered your first fill for the winter, we highly recommend that you do so now.  Contract prices are very attractive and with all the uncertainty on the horizon, we recommend that you lock in your pricing for the winter.  Also, as a reminder, we are already starting the 2020-2021 heating season!  If you are a will-call customer, please make sure to start checking your tank to ensure a hassle-free delivery.

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

Best regards,

Jon Crawford

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