Good morning,
Happy Friday! Well, we experienced one of the most volatile trading weeks in the crude oil trade since 2008. Crude oil prices traded in a $25 range for the entire week! One day this week, WTI crude oil traded as high as $15/barrel on the spot higher, and then dropped as much as $18/barrel!…during the same day!… The volatility is causing disruptions in locking down future supply price. The chaos of the trade in turn makes pricing spot products much like throwing darts at a dart board. The news affecting the crude oil trade this week included many developing stories. Russia is trying to meddle with the Iran nuclear deal causing panic that the deal will go sour. Iran is saying that Russia’s desires in the deal are not in Iran’s best interest, but we have yet to see the final draft. The US also reached out to Venezuela to inquire about lifting crude sanctions on imports to the US. The US has banned all crude from Venezuela since 2018. Russia and Ukraine held a peace talk in Hungry that went south causing markets to shoot higher. But then they announced today that a potential peace deal could be on the table. The announcement today is quieting the crude market a bit. The IEA (International Energy Agency) also announced that 60M barrels of strategic crude reserves is not enough and they are prepared to do more. (I have been saying that for weeks….) UAE and Saudi Arabia are also testing the market waters by SAYING they MIGHT pump more oil just to see how the market reacts. The power of their words has much influence on the market. In the past they will SAY that they are CONSIDERING a crude oil production increase just to see the market reaction. Then they gauge their future actions based on the market response. The US continues to be strong on crude production and by the end of the week, WTI crude is carving out around $109/barrel and trading a bit more narrow. I hope that the crude oil trade is finding a range with the the new world environment. Although prices are higher, having stability in the trade allows futures pricing to be more predictable, which in turn allows spot pricing of the day be more accurate. I am still optimistic that fuel prices will be much lower by Memorial Day.
In local news, gas and diesel spot pricing traded at rates I’ve never experienced. I can tell you that your local gas station is not gouging the public. One major cost of selling fuel that has not been discussed is credit card fees. Credit card companies receive a percentage of a total sale and make up over 80% of all fuel purchased at gas stations. As fuel cost DOUBLED in price, so did credit card fees. There were some days the past two weeks that the credit card companies were making more than a store owner on the sale of a gallon of gasoline! And…since Visa/MC abandoned business in Russia, Visa/MC announced an INCREASE to American credit card fees starting next month! Many believe that higher retail fuel prices equal higher profit margins for gas station owners. The opposite usual occurs. Gas station owners earn much less, and sometimes lose money in volatile bull market runs on refined product costs. Please do not take your anger and frustration out on gas station owners or cashiers. They are truly doing their best and so many variables are out of their control right now.
Propane prices thankfully have remained quite stable the past week. Propane hasn’t experienced much of the extreme volatility as crude oil, gasoline, and diesel did last week. For now, we are recommending all propane customers to use up the remainder of their available contract gallons and wait until summer for hopefully better prices. Also, if you are a will-call customer, don’t forget to keep an eye on your tank level! March and April can play tricks with warmer days and cooler nights! Running out of propane likes to sneak up on will-call customers during March and April. 🙂
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford