Too Good To Be True

Well, we questioned how long the crude oil correction downward last week would last.  Unfortunately not very long.  The market this week was in full up-swing mode and brought everything along with it, including the price of crude oil.  Although large businesses continue to cut jobs at over a 20% clip and earnings have not been great.  And then couple that with a slight dip in inflation and unemployment, and you would think we are having the rally of the year!  I am not believing that the FED will cut rates in 2023.  The United States has been addicted to low interest rates for too long and Powell will not make the mistake of allowing inflation to run higher again.  When looking at inflation, the areas that are seeing increased cost are the areas Americans are looking to spend this year: travel and food.  Credit card debt hit a record average of 19% interest.  Plain and simple, the American consumer is running out of money.  The consumer was very used to a certain lifestyle coming out of the pandemic and unfortunately I think the lifestyle is going to end with a bit of pain.  Markets are very irrational and right now the markets seem to be grasping at straws to move higher.  Crude oil is always a wild card, but when looking at China going fully open and having to deal with multiple large waves of Covid before they calm down to a normal like in the US, coupled with incredible production of crude oil on the stateside and many more sources of crude coming online in 2023, I think crude oil is being setup to fall.  How far crude will fall is yet to be determined.  I’m also not sure how long this irrational market will run.  Sometimes markets get caught up in a frenzy and the party lasts longer than anticipated before the rug falls out from underneath.

In local news, gasoline and diesel prices continue to climb as Chicago refineries move barrels down to Nashville to help out the East Coast.  In addition, we are still waiting for Superior, WI as well as Toledo, OH refineries to come back online.  I think our market will be well supplied for the year as these refineries return.  Right now every little bit helps.

Propane continues it’s record inventory run.  Right now, propane inventory is 25% higher than last year.  And production is not slowing down.  I also do not expect to see production or exports slow down.  We can’t export anymore than we are currently completing, so I believe that propane prices could fall off a cliff this summer.  The good news to the consumer is that although prices on contracts might be higher than rack this year, next year’s prices are looking to be incredibly great in value compared to natural gas.

To sum up everything from crude oil, to diesel, to gasoline, to propane:  patience and cost average. Micro actions. Macro patience.  I will continue to update as 2023 unfolds.  I believe we are going to have a very interesting year.

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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