$80 WTI Floor Holding Firm Like Concrete

Good morning!

Crude prices fell again this week with WTI price moving closer to $80/barrel.  A lot of “technical selling” took place as traders repositioned to the upcoming winter after summer driving season.  The next major floor for WTI is $80/barrel and the resistance to push lower looks very strong at this time.  Although the EIA released a massive build in crude oil inventories on their weekly inventory report, the majority took place outside of Conway, meaning that exports were down.  The US is still drawing down crude supplies at a decent clip.  Europe announced price caps on heating bills as well exploring a cap on Russian crude import price.  Countries are trying to convince India to come on board with the Russian crude price cap, but that will be a heavy lift.  China is really showing signs of weakness in their economy.  Shipping rates are decreasing, productivity is dropping, and a new “election” is taking place soon with an emphasis on more isolationist economic policies.  The US and Australia responded with a massive trade meeting to try and work out deals between countries including Vietnam, India, and Indonesia.  All three of these countries could provide incredible relief on the trade markets if China starts to pull back.  The labor rates in China have increased dramatically in order to promote the rise in common wealth, so other nations are seizing the opportunity to bring economic prosperity to their citizens.  The development of new global trade partners will be very interesting to watch over the next couple of years.

In local news, gasoline and diesel retail prices continue to drop.  Chicago spot market has continued to give back their delta compared to other markets.  I expect to see diesel retail prices ease a little bit more at the pump.  Gasoline prices will easily hold under $3.49/gallon next week.

Propane prices continue to stay steady going into winter.  Although inventories are up from last year, our national volume is still lower than average.  If corn drying ends up being a nothing-burger, we should be in pretty good shape for the winter.  However, we must be conscious that Eastern Canada is 50% below last year’s inventory level which means there is no spare capacity coming from Canada this year.  As long as there are no major supply hiccups in the US or major “Polar Vortex” situations, we should scoot through the upcoming winter.  However, we highly recommend filling your tank right now at the current price.  I still believe that propane prices will go up this winter as supplies start to fall.

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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