New President and Propane Short Squeeze

Good morning,

I hope this message finds you well.  The crude oil market ended the week fairly flat.  WTI prices are holding above $50/barrel and I do believe the current floor at $50/barrel will hold.  As demand for crude looks to increase in the coming months, as well as President Biden’s plan to print more money for stimulus, I expect crude prices to move higher.  The two scenarios that could potentially cause a collapse in crude prices are new variants of COVID-19 spreading that resist vaccines or OPEC increasing production faster than anticipated.  For the time being, the vaccines seem to be handling the new variants.  And we seem to have a plan in place to roll out distribution faster and more efficiently.  If the US is able to meet or exceed 100M doses administered in the next 100 days, the US has a shot at returning to more normalcy by summer and into the fall.  If lockdowns in Europe and emerging markets continue to depress demand and OPEC increases production, we could see the bottom fall out of crude prices.  However, Saudi Arabia, the largest swing producer, has made it very clear this month that their intention is to not let that happen.  For now, I think we have a very firm floor on crude prices with much more risk to the upside than the downside.

In local retail news, gasoline and diesel retail prices continue to hold firm.  Gasoline retail prices are mostly over $2.19/gallon and diesel retail is holding firm around $2.49/gallon.  Once again, I do not expect to see retail prices go down in the coming week.

Propane is continuing to experience a “short squeeze” due to record exportation out of the Texas hubs.  The cost of propane out of the Midwest hub continues to skyrocket in order to keep supplies from being shipped south for exporting.  Propane cost has risen almost 40 cents/gallon in six weeks!  I do not expect to see this continue through February.  There are already rumors of canceled and decreased purchases from China and others in February.  The only wild card is the weather.  If local demand stays very strong, we could see some support in prices holding.  However, the forecast for February seems to be warmer than normal.  I do not expect to see production slow down, so for now, we will wait and hope February brings some price relief.  I am hopefully that the current retail price will be the highest for the season.

As always, if you have any questions, comments, or concerns, please feel free to reach out.

Best regards,

Jon Crawford

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