Good morning!
Happy Friday! The news cycle was fairly slow and uneventful this week regarding crude oil. Crude oil prices traded in a very narrow range all week. Most of the issues discussed were geopolitical instead of supply/demand. Ukraine suffered a setback this week with the loss of Avdiivka. The Western Nations and the UN are struggling to come up with a plan for continued Ukrainian funding. Russia, in addition to the victory this week, announced that they were considering putting a nuclear weapon in space to take out other countries’ satellites. The US and many other countries vehemently oppose any such action from Russia. Also, Alexei Navalny died in a Russian prison this week, along with another Russian war defector. The incident forced the United States to place further sanctions on Russia. In the MIddle East, not much has changed. Israel refuses to negotiate a peace deal that does not include releasing all Israeli hostages. The US, Egypt, and others have desperately been trying to force Israel to the table. The US blocked a ceasefire resolution in the UN this week because there was no provision forcing the full release of Israeli hostages, and the deal also included the release of Iranian backed prisoners. Israel continued to beat the drums that they will invade on March 10th. About 1.5M refugees will need to evacuate Gaza within about two weeks to avoid any potential conflict with the Israeli invasion. Hopefully a peace deal can be struck. There has been little progress between the US and the Houthis conflict in Yemen. Another ship was taken over by rebels this week. Although shipments through the corridor caused crude oil supply disruptions, those ships are now reaching Europe from around the Horn of Africa are easing some of the supply constraints. China also announced stop-gaps to control their collapsing stock market and real estate disaster. For now, the government programs seem to have maybe placed a floor under the crisis, but there is a long way to go before China is back to business as usual. The EIA reported another build in crude oil inventories, but draws on refined products. Due to some deep freezes in the south, a lot of crude harvesting was shut down. Most oil rigs are back online so we expect oil supply to be back at record levels soon. Exports remain very strong, especially with the shipping distance issue with the Red Sea in the Middle East. In addition, the FED speakers this week announced that a rate cut by June might still be too soon. Home Depot reported their 5th straight quarter decline in revenue. However, inflation is remaining a bit high. So possibly, the economy is showing signs of slowing, but the FED is adamant that they will not take the foot off the gas until inflation is tamed and steady. So overall, the push-and-pull of all the aforementioned issues placed equally downward and upward pressure on crude oil prices making the trade very narrow this past week. We will see what happens over the weekend and into next week as to how some of the current geopolitical issues start to play out.
In local news, the Bp Whiting refinery seems to be back to full operation next week. The announcement relieved a ton of supply pressure in the Midwest. Spot basis in the CME dropped back to normal levels offering some relief in prices. Therefore, we should start to see some retail prices at the pump go down a little. The worst of the supply issues seem to be behind us.
Propane prices rocketed higher to start the week and then fell a bit to end the week. The tug-of-war with propane is based on high crude prices high, low demand in the US, but record exports. Due to record exports, national propane inventories are now at/below the 5 year average even with record low demand in the US. Whereas back in November, propane inventories were above the 10 year average! Exports are going to be very high for the remainder of the year. So for right now, it’s hard to tell where propane prices will head this summer.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford