Crude Trying To Push Through A Psychological Barrier

Good morning,

Despite rising production in the US and OPEC+, a lackluster US jobs report, and an absolute disaster in India, traders continue to try and push WTI prices through the psychological and technical barrier of $65/barrier.  If WTI is able to hold gains above $65/barrel, then traders are going to try and go to $70/barrel.  The issue with the continued push higher is that gasoline and diesel retail prices will hold steady above $3/gallon.  Once retail hits these prices, many organizations, producers, and countries take notice.  I am still under the impression that major investment firms took long positions on crude contracts and need to push prices near $70/barrel before they can sell and regroup.  OPEC+ will be meeting again in June and I can’t imagine there will be any barriers to holding back production.  We are starting to see OPEC+ offer discounts on exports as well.  Another issue floating is the Fed interest rate.  Although Treasury Secretary Yellen is saying rates might need to bounce this year to cool things off, the Fed Chair Powell is saying “steady as she goes”.  At this point Powell has not even mentioned reducing the bond buying program.  So as long as we continue on this track, the strength of the dollar will be held down keeping crude prices higher.  But if India continues on their path and the US holds stagnate, eventually demand for crude will overtake the weaker dollar and cause commodities to fall in price.

In local retail news, I was wrong.  I did not expect to see diesel retail prices break $3/gallon, but they have and will continue to hold at this rate.  Gasoline retail prices are also inching closer to $3/gallon as well.  There does seem to be some exuberance in the air unwinding out of COVID and the school year.  We could possibly see the old fashioned run-up on prices to Memorial Day weekend, then sell-off in June.  Only time will tell.

Propane prices are holding firm.  Spot markets are not going any lower at the moment.  With colder weather hanging around, propane inventory building season is off to a slow start.  I am cautiously optimistic that prices will ease, but probably not until July.  I also do not expect next season’s contract pricing to be out until mid-July due to the longer heating season and current future’s pricing economics.

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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