Good afternoon,
There is not much new information to report this week. Crude production continues to be strong, but refining capacity is lagging. The stimulus bill was signed by President Biden fueling fears of inflation along with increased demand. The virus situation in America continues to look positive adding to hopes of robust economic rebound. Couple the positive news in the US with OPEC holding firm on production cuts, and we now have WTI crude prices and refined products at the highest level in years. The interesting dynamic to watch is the relationship between spot crude prices and long contracts. The higher crude prices go now, the lower the back end of the curve moves. Therefore, traders are hedging on crude prices being too frothy at the moment and the situation will incentivize OPEC and Russia to start pumping sooner than later. We might have a year where the cheapest prices of the year are in summer. Honestly, there is no real road map to our situation. Only time will tell.
Refined products are at their highest levels in years. Gasoline retail prices will break $2.75 and diesel retail prices might even break $3.00/gallon. I don’t expect any price relief in the short term.
Propane prices are slowly unwinding with the end of winter. However, given the low levels of inventory and continued exports, I do not expect next season’s cost or summer fill prices to be as low as this year. If you have contract gallons remaining until the end of April, I tend to recommend that you use them up rather than waiting for cheap summer fill prices. There is just too much uncertainty in the market right now.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford