WTI Crude Oil Falls Below $65/Barrel Support

Good morning,

This week crude prices tumbled on the news of Iran and US approaching a new nuclear deal.  The deal would allow Iran to sell crude through transparent channels on the open market.  With the additional crude supply from Iran hitting the market, Saudi Arabia would have a hard time allowing Iran to take customer share.  Therefore, traders are thinking that crude has the potential to fall into surplus if demand does not ramp up quickly.  In addition, with inflation running hot, COVID-19 making a resurgence in East Asia, and supply chains a mess, portfolio managers are starting to move from risky assets into more stable investments.  Along with the small crude correction, crypto currencies experienced nearly a 30% correction this week as well as sell-off’s in tech investment.  As managers look to place their bets for the remainder of the year, some are saying the FED will announce a taper of their bond buying program in the second half of the year.  I think that WTI might trade in the range of $60-65/barrel until we get closer to the OPEC+ meeting in June.

Local retail prices have peaked for the time being given the slight correction in refined products this week.  I would expect to see some cheaper street prices on gas and diesel towards the end of next week possibly, but not much.

Propane prices are holding very firm.  Inventory continues to be very low in the country at a time when levels should be building.  Exports remain high and demand is still holding stronger than normal.  Production is also high, so if demand tapers at all we can start to rebuild quickly.  However, we are under the 5-year average at this time.  I do not expect to see summer-fill prices get much lower this year, if at all.  The only good news in propane is that Canadian inventory levels of propane are building at levels greater than last year.  So if the US falls short, with rail economics being attractive for the coming year, we should be able to supplement large amounts of propane from Canada.  But, this is also dependent on the reliability of the railroad transport system which has been very chaotic the past few years.  I am looking to release next season’s heating contract pricing the last week in June.  More info to follow.

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

Best regards,

Jon Crawford

Posted in Uncategorized and tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , .