The Bears Had Breakfast, Lunch, and Dinner This Week

Good morning!

Happy Friday! Crude Oil prices fell off of a cliff this week. Crude oil prices just got hammered on fears of recession and betting that the jobs report today would be awful. Not only was the jobs report MUCH stronger than predicted, but nothing changed in market fundamentals surrounding crude oil. OPEC decided to keep deep cuts in place until the end of the year. The US crude oil inventory continued to draw down this week. President Biden is probably going to meet with Xi Jinping to try and heal relationships with China. And the US consumer seems to be in better shape that previously reported. Many banks came out this week with bearish sentiment for crude oil out of left field. The majority of the drop in price was due to options being liquidated on the market and then causing contagion. When statements from banks turn bearish and prices fall, usually this means that banks are liquidating their positions and looking to buy back in at lower numbers. Crude oil hitting $100/barrel started to look unattainable by year end, so the banks did their old “switch-a-roo” and traders outside fell for it hook, line, and sinker. Although spot prices collapsed, WTI has yet to fall through $80/barrel. I have been calling a hard floor at $80/barrel. We need to remember there is still a war going on and economic growth continues to accelerate in countries like India and Vietnam. Once again, all economic situations remained neutral this week. The only changes were the statements being made by banks and the news running with the stories all over the airwaves. As a reminder, the market can be very irrational. Volatility is in full-swing right now.

The price of diesel and gasoline collapsed in our spot market as well. However, the differential spread between the Group Spot and Chicago Spot remains at 50+ cents/gallon for diesel! The Group Spot is more in-line with the NYMEX, so I still believe it’s not a matter of “if”, but a matter of “when” Chicago Spot price on diesel jumps dramatically higher.

Propane price continues to slowly follow crude oil prices. Now that we are into winter economics, producers are reluctant to give too much back on dips because demand is fairly weak right now. I believe propane will take back all the pricing it gave away this week if crude prices go back up. Inventories remain healthy but exports could stay at record levels if business deals are cut with China, India, and Vietnam.

If you are a business, I also wanted to mention that there are rebates for installing certain appliances and machinery with propane as the source of fuel. https://focusonenergy.com/business/propane

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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