Crude Oil Correction… Will It Last?

Happy Weekend!

As predicted last week, with the light trading during the holidays, crude was a bit overbought.  Crude oil gave up all the gains of last week and ended at the lowest price in the past two months.  The opportunity brought in a lot of buyers on Friday, especially after a decent jobs report.  But as I say, the devil is always in the details.  Many jobs are shifting around and true growth is not happening at the clip many believe.  China is not out of the woods with their Covid wave, and the Russia/Ukraine conflict is possibly approaching a path to diplomacy.  The FED made their voice loud and clear that current rates will be sticking around for quite some time.  Congress is in gridlock and attrition continues to run rampant at major US companies.  I had a call of low $60’s for WTI pricing at some point this year.  WTI has yet to break through $60/barrel at this time, but I believe there is a slight chance in Q1.  If you are trying to hedge your fuel price for the year, I highly recommend cost averaging and taking a slice at these current values.

Gasoline prices stayed fairly neutral even though crude prices tumbled.  The Chicago market is now getting shorter after being very long last month.  Diesel spot prices soared in the Chicago market this week.  When these situations occur, confusion enters the marketplace.  Customers read about dropping crude prices, but retail prices on gasoline and diesel go up at the pump.  WTI Crude Oil is traded on a global scale and gasoline and diesel are traded on a spot marketplace.  The Chicago mercantile was very long on products to end the year and are now tightening up as they move products east out of market.

Propane continues the steady trend.  Warm weather and high levels of production are keeping prices in check.  Although spot prices are cheaper than prices that most customers locked in for the season, I would like to remind customers that propane prices could still run higher in February.  And in years past, when propane spot prices sometimes climb to over $1/gallon higher than contract price, customers who contracted saved a ton of money.  Contracting is a cost average over time, and over a ten year period, those customers who contract usually come out ahead.  There is no perfect scenario in the game of commodities; especially in the new world of volatility that we experience on a daily basis.

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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