Starting To Peak???

Good morning!

I hope this message finds you safe and warm.  Winter is upon us!  Crude prices hit their highest level since 2014.  The geopolitical events in the Middle East along with Russia/Ukraine are adding some risk-premium to the bullish sentiments around crude oil supply.  In addition, OPEC has been unable to fully produce their quotas the past two months.  However, supplies look to surpass quotas moving forward and the US crude oil production is in full swing.  I expect to see crude supply move to surplus by Q2 of this year.  In addition, interest rates are probably going to increase sooner than later.  The faster interest rates rise, the cheaper crude will be to purchase on the open market.  So one can hope that has interest rates go up, crude prices will come down.  Crude prices ended the week off of highs based on supply forecasting and the strength of the dollar.  And China CUT interest rates at a time when most are raising!  These actions all are giving pause to this unreliable recent rally in crude prices.  However, the market is on pins and needles right now, so any further events that are interpreted as bullish could try and push WTI crude price to $100/barrel!  It’s truly mindboggling when you take a 20,000 foot view.  Part of me is seeing the market behave in a “pump and dump” scenario.  Banks and hedge funds are pumping the price up to dump it before full supply/demand economics take over.  I also saw that Goldman Sachs reported a Q4 loss and they are VERY long on crude oil hedge contracts.  As I’ve been writing, it’s time to get your popcorn and sit back!

In local retail news, I expect to see gasoline retail prices hold at or above $3/gallon for some time yet.  And I would also expect to see diesel retail prices near $3.50/gal.  Hopefully we start to see prices ease by Memorial Day this year.

Propane demand has been very strong with cold temperatures.  Supplies have remained steady and prices relatively stable.  Fingers crossed, and we could be going into a calm February for the first time in a few years.  If the crude markets play out as anticipated, I am seeing lower prices for propane next year.  In addition, China is canceling shipments of propane due to high prices which will help build national inventories putting downside pressure on future pricing.  As a reminder, please make sure your driveway is plowed and there is a clear path to your propane tank to ensure a safe and efficient delivery.

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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