Happy Friday! “Plop, Plop, Fizz, Fizz…. Oh what a relief it is” Well, after some nice drops in crude oil prices this week, and some “fizzling out” in spot market differentials, consumers are starting to see some relief at the pump. Unfortunately, the cause of the drops in prices is based on negative economic data. Banks are starting to prepare for a recession by building up cash reserve positions to cover bad loans. Inflation data ran even hotter in June at over 9%. The labor market continues to lag at a ratio of 2 jobs open / 1 person looking for work. China is locking down more of the country to combat Covid which puts further pressure on supply chains. And the Euro value officially tanked below the dollar in parity for the first time in over twenty years. Biden is on his way to Saudi Arabia to try and repair the strained relationship since the Khashoogi murder. Biden hopes to convince Saudi Arabia to “open the oil spigot” and keep oil prices under $100/barrel. But there are rumblings that Saudi Arabia’s proposed maximum capacity is less than what they are saying. Even if Saudi announces a large increase in production, the markets will be watching to see if they can deliver.
In local news, differentials between the Group and Chicago have moved towards balance. Although diesel supply is very tight and price spreads are wide, the retail price of diesel has moved below $5/gallon in many markets. Gasoline continues the downward trend and some markets have dropped below $4/gallon. I expect to see retail diesel below $5/gallon and gasoline below $4/gallon in more markets next week.
Propane prices are holding fairly steady even with the selloff in crude. Propane continues to flash signs that the bottom is here. Propane inventories are tight in the US and Canada. Any sort of early cold spell or heavy corn drying demand could cause a massive blowout in price this winter. I recommend everyone fill their tanks this summer and lock in some propane for the heating season. The war in Ukraine is still going and there is not a lot of room for error in the propane supply chain. Feel free to contact our office for summer fill and contract options for the upcoming heating season.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.