Good morning!
Happy Friday! I hope everyone had a great Thanksgiving break! The markets digested a lot of data this week. The big news was the OPEC+ meeting that ended up being delayed and virtual instead of in person. The consensus was that the 1M bpd cut would continue into 2024, and Saudi Arabia would continue their additional 1M bpd cut as well. The markets reacted bearishly to the news, as this was just the status quo of the past year. There was no “true new agreement” met. Most of the consensus was just “word play” and not in writing. The news headlines tried to spin the cuts as “additional to last year”, but the headlines were misleading. Many of the African countries, including Algeria, said they will not adhere to the cuts of last year. And in addition, the 1M bpd cut that all countries agreed to last year was never really fulfilled! Therefore, the news was a giant “nothing-burger”. The news fell after the US national inventories showed builds in crude oil and all refined products on Wednesday. And inflation ended up being adjusted higher for October, along with the housing market continuing to stay inflated. Chinese economic data was lackluster as well. Couple all these news events together, and there was not much to drive crude prices higher. WTI price retreated from near $80/barrel back down to $75/barrel. Although the S&P 500 had the best November on record, JP Morgan is calling for an 8% downturn next year. I am continuing my call that Q1 of 2024 is going to be very messy and crude oil prices could collapse for a brief moment. The collapse will produce heavy buying for long positions in 2024. I just don’t see the FED cutting rates until mid/end-of-year in 2024. If China injects cash into their economy to save their commercial real estate disaster, the event will continue to support the price of the US dollar, which in turn makes crude oil prices cheaper. I believe the US markets are living in hubris going into year-end and better opportunities to lock-in refined fuel prices will come in Q1 of 2024.
The local Chicago spot market sold off a bit this week. I expect to see retail prices of gasoline and diesel remain near the same as last week. Diesel is now being blended for winter. Please make sure if you are purchasing diesel to ask the seller if the product is treated for winter. Diesel should be at least treated with winter additive at this point. We are starting to treat with a bit of #1 diesel because December can be very unpredictable. You do not want to be cut off guard.
Propane prices remained firm and are ending the week higher. As a reminder with the first snowfall of the year, please make sure to keep your driveway clean and have a clear path to your propane tank to ensure a safe and efficient delivery. It’s hard to believe we are approaching the heart of the winter delivery season!
As always, if you have any questions, comments, or concerns, please feel free to give us a call. Have a great weekend!
Best regards,
Jon Crawford