Battle Of Words

Good afternoon!

WTI crude price seems to have a ceiling at about $75/barrel. Although there was a drawdown in domestic crude oil inventories, refined products reported large builds. In addition, the housing market slowed in 2023 to the lowest level in 28 years, and the FED continues to beat the drums that rate cuts in Q1 of 24 are probably off the table. The IMF (International Monetary Fund) is saying that world-wide crude oil production will go into surplus at some point this year. The IMF doubled down after China released less than stellar economic data again. ALthough US retail spending was up in December, the devil is in the details considering how much was purchased on credit that is not being paid. OPEC responded very vocally this week that demand for crude oil is growing around the globe and production will go into deficit at some point in 2024. The “war of words” is winning the ears of bears in the market, hence the lid on WTI jumping through $75/barrel or BRENT through $80/barrel. As domestic refined product inventories continue to grow in comparison to crude oil, demand worries are spooking traders from pushing prices higher. However, the US launched five strikes on the Houthis this week. Pakistan now got involved exchanging fire with Iran adding further disruption to the mess in the Middle East. The instability in the MIddle East is very real and could cause major problems for crude production pushing prices much higher. Shell Oil Co ordered all ships out of the Red Sea. As more companies continue to reroute ships out of the Red Sea, Europe is starting to feel the pain of supply disruptions. Oh, and the war in Ukraine and Gaza are still going strong. Although the battle of words was won by the IMF this week, I believe that bulls could strike the crude oil market in a moment’s notice if production is attacked in the Middle East. For now, we will continue to look for signs of economic slowdown in the US and other large economies.

In local news, gasoline and diesel prices came back down fairly quickly after the large spike last week due to a supplier being short and purchasing heavily in the Chicago Spot Market. I don’t expect to see prices at the pump change much because cost came back down as fast as it went up.

Propane cost continues to follow crude oil higher, and demand has increased dramatically over the past ten days. Although very warm weather is coming to end the month, February is a wild-card and producers are going to squeeze every penny they can. The squeeze eventually trickles down to the retail level. As a reminder, please keep your driveway clean and a clear path to your tank in order to ensure a safe and efficient delivery. Our drivers are extremely busy with the cold snap and massive snowfall. Any help is always appreciated!

Any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

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