Good morning!
Happy Friday! Well, again the tug of war on crude oil prices continued this week. WTI prices dropped from $90/barrel back down below $85/barrel and looking to move closer to $80/barrel. As I have been writing, I believe that WTI crude oil prices will trade in the $80-90/barrel range. The war between Israel and Hamas doesn’t seem to be throwing as much fear into the markets this week compared to last week. In addition, the US launched air strikes into Syria last night putting the US officially in the middle of the conflict. Even the strikes from last night did not cause crude oil prices to climb much higher. The big news of the week was that the US reported the highest GDP growth at 4.9% in the third quarter. Most would think that the report is great news of a healthy growing economy, but the devil is in the details. As the consumer looks to run out of cash going into the high spending time of the holidays, most large banks are now convinced the GDP bubble will burst. If the economy moves into recession, crude demand could drop. In addition, a recession in the US could cause contagion to other parts of the world. Therefore, the futures bears won this week on the crude oil trade. Throughout all the chaos, there was some positive news between China and the US. Xi Jinping met with a couple of US Senators and US Secretary of State Blinken expressing that there are thousands of reasons for the US to come together rather than grow apart. The willingness from Xi Jinping to push for reconciliation is a dramatic shift in China policy. Many believe that a summit between Biden and Xi will occur sooner than later. If the US and China are able to strike some trade deals that are transparent and manageable, then I believe China will inject cash bailouts into their failing real estate market. If everything falls into place between China and the US, the cooling tensions could spark a boost to both economies. A boost to both economies would cause an increased appetite for crude oil. Time will tell and we will see what happens next week. As of now, we are truly living on a week-by-week basis with the crude oil trade. There is so much volatility all over the world, and I don’t see situations calming anytime soon.
In local news, diesel cost has come down from their highs following lower crude oil prices. The spread in diesel cost between the Group and Chicago spot markets has settled down. Diesel supplies are starting to loosen up as harvest moves over the hump to the west. Gasoline prices have dropped as well following lower crude oil prices.
Propane price has remained fairly flat and moving a bit higher as winter economics continue to drive the vehicle. With an early cold snap on the horizon, I expect propane prices to remain firm independent from crude oil prices. You can still lock in your propane price for winter if you have not done so already.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford