WTI Crude Over $70/Barrel and Propane Prices Climbing

Good afternoon!

WTI price continued the climb this week and finally broke $70/barrel.  Demand coupled with a weaker dollar and overall exuberance are keeping prices inflated.  When I look at the data coming out of the inventory report this week, I am seeing a picture that feels very heavy on crude prices.  Supplies are great, refinery runs are increasing, and refined product levels are increasing.  Even though crude inventories diminished again this week, the details are showing that we are only refining more crude to store gasoline and diesel.  If China continues to shut down parts of the country and there are any other setbacks across the globe or a demand drop comes to the US, crude prices could tumble.  I have a feeling that OPEC+ will continue with their plan to keep crude production increasing, especially after the US said they will not be lifting sanctions on Iran until time has passed in a possible new nuclear deal.  Other data showed a 5% CPI increase in May and the spread is making it’s way into all areas of travel vacation.  Time will tell if eventually demand starts to take a breather in the US.

In local retail news, Bp Whiting finally put their refinery back online.  Although spot market cash differentials dropped a bit on the Chicago exchange, the continued increase in crude prices has offset much of any relief in retail prices at the pump.  However, current prices at the pump will at least hopefully take a breather from much more upside movement.

I have been ringing the alarm bell for months.  Propane prices continue to rise this summer.  Nine times out of ten, propane prices drop dramatically in the summer.  This is that one year.  Propane price is coupled much with crude prices.  So as crude prices remain high, so goes propane.   In addition, national inventories are still below average, although some good builds hit the market the last two weeks.  For now, propane has ignored cues on inventories and is following the price of crude.  I do not expect to see propane prices fall to normal summer lows.  I also recommend that everyone contract their anticipated propane needs for next heating season.  I hope to have our contract pricing out by the end of June or right after the 4th of July.

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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