Good morning,
Happy Friday! This week was completely focused on the largett attack from Hamas on Israel in 50 years. The response from Israel is sending shockwaves through the markets as the world braces for a potential full invasion of the Gaza Strip by Israel. A full invasion would be a humanitarian crisis. In addition, Iran has offered support to Hamas and Saudi Arabia is panicking. Not too long ago, Saudi Arabia was looking to be a possible peace broker along with China, between Israel and Palestine. Now Saudi Arabia is stuck in the middle. The US responded this week by freezing nearly $6B in oil payments to Iran from UAE. In addition, the US placed further sanctions on Russia for violating the terms of the oil price cap with the G7. China is also opening up sovereign wealth fund to buoy the commercial real estate disaster in the country. Also, the FED minutes from last month’s meeting seem to say that rates will hold higher for longer. Many believed this would would lower crude prices. However, producers are being very vigilant in keeping production quotas tight around the world to support higher oil prices. But the biggest driver of the bulls this week is the conflict in the Gaza Strip. Many are now worried that the conflict will spill over to many other countries, including those in the Middle East that would affect oil production. The US moved an aircraft carrier into the region and Saudi Arabia announced that they would increase production if needed to keep oil prices under control. As of today, WTI oil price has it’s eyes on $90/barrel when just last week the price was about to fall through the floor of $80/barrel. If traders start to take some risk with long positions leading into the end of the year, I believe that $100/barrel WTI crude oil could be possible. For now, we are hoping for a miracle that could de-escalate the potential for a disastrous humanitarian crises in Israel and Palestine.
In local markets, gasoline prices continue to trade in a narrow range but have slowly started to climb higher again. After diesel prices collapsed last week, diesel prices are recovering this week and seem to have carved out a bottom for the time being. As harvest goes into full speed ahead along with the conflict in the Middle East, I believe that prices in our market will be be supported and start to move higher.
Propane prices have not moved around too much the past week. As I’ve stated before, propane producers are drawing a line in the sand going into the winter months that they will just not produce propane for much cheaper than the price of today. As interest rates stay higher for longer and the prediction of a warmer winter, propane producers are hesitant to move the floor price. However, if crude prices start to rocket higher, propane price will follow.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford