COVID Surge in Europe and the US

Good afternoon,

The surge in coronavirus cases across the US and Europe has triggered quite the selloff in some equities and commodities.  Crude oil prices have tumbled all week and look to finish at the lowest levels since the Q1.  I believe that most hedge funds are looking at the lockdowns in Europe and are worried about demand erosion coupled with increased supplies.  Libya continues to pour out more crude and OPEC does not meet again until January.  At least in January we will hopefully know who the new President is and OPEC will act accordingly.  I believe that prices could be temporarily deflated until after the election.  I do believe that a Biden victory will give a $10/barrel bump on crude prices.  So for now, everyone is on pins and needles waiting for the election and watching the surge of COVID take over Europe and the US.

In local news, we are seeing demand starting to slow up in Wisconsin as COVID-19 rages through the state.  I don’t expect to see any ramp up in gasoline usage going into Thanksgiving weekend unless the recent surge shows a peak very soon.  Gasoline prices will remain under $2/gal for some time and diesel prices are continuing to hold great value.  Any diesel pump prices below $2/gallon at the pump are great value buys.

Propane prices continue to cause head scratching.  National inventories showed a build this past week when demand would be at a high level.  Futures did not react.  In fact, the disconnect between supply/demand economics in propane are leaving many to wonder if algorithm trading has entered the propane futures market?  Maybe a platform like a Robinhood has allowed access into the market, or an ETF is out there trading with propane futures.  Who really knows!  But we do know that the price of propane is very heavy based on supply and demand.  I expect to see a “bust” in prices if temps warm up at all going into the holiday season.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.  Please stay safe and remember to vote.

Best regards,

Jon Crawford

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