$80/Barrel WTI the New Price Floor for Crude Oil?

Good morning!

Happy Friday! WTI crude oil prices held above $80/barrel this week. OPEC+ confirmed Saudi Arabia’s announced production cuts of 1M bpd happened in July. In addition, the IEA increased their outlook on crude demand for the end of year and into 2024. The US seems to be experiencing a softer landing around inflation which will continue to fuel demand for more crude oil. Producers seem to be determined to try and keep oil prices as high as possible. I believe that the world economies can survive at $80/barrel WTI. Therefore, I don’t see any incentives for a producer to go after market share by flooding the market with crude oil and collapsing price. Although the war in Ukraine is a wild card, the US Presidential election is coming next year and many voters are starting to rank ending the war in Ukraine as a top priority. So politics at home could play a major role in how the US government continues to send money to Ukraine. I would have to write for now that crude oil prices are nicely supported and I don’t see too many headwinds besides a complete collapse in the Chinese or American economies. But both countries have tools in the toolbox to heed any major recession.

In local news, diesel spot prices continue to be volatile as harvest approaches and two major refiners are going into maintenance mode. I could see diesel prices at the pump blowing out higher this fall for a brief period of time. Gasoline spot prices continue their slow burn higher. I expect to see gasoline prices peak towards end of summer. However, prices of gasoline could remain higher if refiners choose to produce more diesel due to the potential tight diesel market in the fall. The next few months will be very interesting in our local spot market.

Propane prices have followed crude oil prices higher. Spot prices have moved almost 20 cents/gal higher from the bottom. I recommend everyone to top off their propane tanks now and contract for the upcoming heating season. It’s hard to believe that colder temperatures are right around the corner!

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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