Crude prices took a ride on a pogo stick and are looking to end the week just slightly lower than where they started. The week started with a failed deal at OPEC+ on agreement over increased production runs. UAE decided that the deal does not work for them since the baseline quotas look back to 2018 and do not take into account the investments made over the past couple of years. The markets reacted very strongly signaling WTI crude prices could roar past $80/barrel. However, by the end of the day, the markets realized that maybe a non-agreement would cause all members to cheat and open the export valves. I have been writing that eventually someone in OPEC+ is going to cheat and start exporting more than what they agreed upon. As the week closes, a deal has still not been met. During the week, crude prices fell on the news that the delta variant is starting to shut down places across the globe that have low vaccination rates. Tokyo declared a state of emergency and banned spectators from the Olympics. Sydney is imposing new measures, and South America is still out of control with COVID spread. In addition, back at home the delta variant is starting to rapidly spread in states that have low vaccination rates. The world news on OPEC+ and COVID, started a sell-off, but was quickly brought to a floor on a whopping 8M barrel draw in crude inventory here in the US! Couple the inventory draw with good economic data and a weaker dollar, and crude prices bounced back to just under where they started the week. The volatility experienced this week will continue throughout summer and possibly until the end of the year due to COVID and OPEC+. So I hope you like pogo sticks because we are going to be riding on one for quite some time.
In local news, gasoline retail prices have peaked for the moment under $3/gallon in our market and diesel retail prices have held near $3/gallon. As long as crude continues to bounce in the current range, we should continue to see retail prices hold near current levels.
Propane prices continue to go up, up, up. We are on pace for the lowest inventory building season in almost ten years! We prefer to have 100M barrels of propane in US inventory by the end of September and right now, at the current pace, we are looking more like 78M! Going into winter with potentially 20% below need is keep propane prices high. So unfortunately, until we see our inventory builds gain pace closer to hitting 100M by end of September, I just don’t see much relief in propane prices. Even with a massive drop in crude oil prices, I don’t that scenario equating to a reciprocal drop in propane price. We have our contract prices out for this coming season. Please feel free to call our office for more information.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.