Russia Head Fake?

Good afternoon,

After a wild ride the past weeks watching stocks sell off and crude oil prices gain momentum higher, the possibility of a Russia head fake is on the table.  As I have been writing, the downside risk to a Russian invasion of Ukraine is greater than the potential upside gains.  Russia is using the situation as an opportunity to claim relevancy in the East as well as the ability to influence Western policies.  Russia certainly got everyone’s attention and many took the bait hook, line, and sinker.  I just do not see a full scale invasion happening.  Today, there are glimmers of hope for some diplomacy and negotiations.  WTI price has finally taken a breather on the news after breaking through $87/barrel.  There is a lot of selling pressure setup at $90/barrel.  In my opinion, major banks are talking $100/barrel as much as possible to try and push prices through the $90/barrel ceiling.  There is so much crude oil production coming online in the next few months from the US and OPEC.  Even if the Ukraine situation relaxes, we are not out of the woods.  I believe prices will relax maybe only $10/barrel because there is still not a lot of spare crude production capacity available at this moment.  Any unforeseeable supply disruptions could cause some headaches for the time being.  But once spare capacity is on the table, I believe prices could fall another $10/barrel.  So I am still on the side of believing higher prices are with us for the foreseeable future and probably into Q2.  But once we get into Q2, all bets are off!  For now, take some antacids, grab your popcorn, and continue watching the show!

In local retail news, gasoline prices are starting to inch higher again.  Gasoline costs are primed for retail prices to stay above $3/gallon for quite some time.  Diesel retail prices are all over the map.  Some retail prices are being sold at cost, some much higher depending on winter blending.  I expect diesel retail prices to hold near $3.49/gal.

Propane prices have gone up over the past week as rail issues and pipeline breakdowns have caused supplies to get backed up.  Allocations are in place at many terminals and rail shipments are hoping to arrive first part of February.  Although the recent price increase from supply could be temporary, I expect prices to remain elevated in February as demand should continue to remain strong.  Please make sure to keep your driveway plowed and a clear path to your tank in order to ensure a safe and efficient delivery of propane.

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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