New Holding Pattern For Crude Prices?

Good morning,

After an epic collapse in crude prices on Black Friday, the energy markets seem to be carving out their new ceiling and floor.  For now, WTI seems to be carving out a floor of around $64/barrel and a ceiling of $69/barrel.  The difference in price from last week seems to be the profit taking of hedge funds and a bit of skepticism on the world recovery due to the introduction of the omicron variant.  OPEC+ met this week and is still planning on increasing production in January.  In addition, US oil firms have said they will be moving more rigs online starting in Q1 of 2022.  Therefore, crude supplies are looking to be very robust in Q1 of 2022.  The US jobs report was less than stellar for November and the FED is talking more and more about raising rates.  I believe this week was a rebalancing act and crude price are currently sitting in the middle of a larger potential range.  The range is as much as $15/barrel in my opinion!  So at the current price of $69/barrel, the low end potential is $55/barrel and the high end potential is $84/barrel!  Volatility is EXTREMELY high right now with crude prices!

In local news, the large drop in crude prices is making its way into the retail supply chain.  Gasoline retail prices are falling below $3/gallon, and diesel prices have eased around 10 cpg.  Diesel prices are supported at a higher rate due to some supply issues in Chicago, but once the issues are resolved, I could see diesel retail prices falling further.

Propane prices have fallen due to lack of demand going into December.  Our board price has fallen again this week and I am shocked at how over-sold propane is.  Any sort of demand bump is going to firm up propane prices quickly, so beware.  I don’t believe this mid-winter price relief is going to last long-term through 2022.  I remember about four years ago I put up my Christmas lights in December in shorts and a t-shirt, then in Jan/Feb we had -30 degree wind chills!  But for now, prices will be lower.

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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