Bears Were Hungry, But The Bulls Formed A Strong Defense

Good morning!

Happy Friday! Again this week, the news of terrible economic data poured out over the news wires. The stock market ripped as traders looked for places to possibly make more money than long-term treasuries/bonds. China’s exports continued to dwindle. The EIA lowered their demand forecast for 2023. Chairman of the Fed Powell said that they are not done fighting inflation. Overall world economic slowdowns were reported. And Russia announced that they will lift their ban on refined fuel exports. Russia exports the most diesel in the world. The combination of all this data caused WTI crude to fall below $75/barrel for a brief moment. $75/barrel WTI has not been hit since July. As I have been writing, if WTI gets close to $70/barrel, I believe that is a good place to start slowing dipping toes into future crude purchases. This morning, Saudi Arabia announced they believe the economic slowdown is “overhyped”. The news was interpreted as Saudi Arabia will do whatever it takes keep prices higher. As their Sovereign Wealth Fund reported economic gains this past month, their strategy of keeping crude oil prices higher and selling less oil is working. I do not see Saudi Arabia changing their strategy anytime soon. In fact, I believe they will cut more production if necessary. As they also enter the LPG export business for the first time this year, a new revenue stream will flow into their economy. At the end of the day, I believe there could be a “black swan” event once the American consumer’s back is truly broken economically, which in turn will produce a nice futures buying opportunity for crude oil. However, if the event does occur, Saudi Arabia and even other oil companies outside of OPEC, including American companies such as Occidental, will cut production quickly to keep prices from free falling. As I have been writing, I am still bullish on crude oil prices long term, and one should be patient for the short lived opportunities that will most likely present themselves in the coming months and into 2024.

In local news, diesel prices out of the Chicago spot market continue to be inflated compared to our neighbors in the Group spot market. But I believe that once harvest winds down, we will see diesel prices fall back into the normal trading range out of Chicago. Gasoline prices fell this week in tandem with the price of crude. Gasoline is tracking crude oil prices very closely.

Propane continues to trade narrow and is ticking up a little bit in price due to demand increase. As a reminder, please keep your driveway clear and salted in the winter, and a clear path to your tank. We want to ensure safe and efficient deliveries. It’s hard to believe that snow is 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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