Good morning!
Happy Friday! The news cycle this week continued with much of the same old same old as last week: Houthis continuing their threats in the Red Sea, the war in Ukraine slowly grinding in the favor of Russia, the FED sending mixed messages on rate cuts, China’s economic data still being poor, the IEA saying oil demand will decrease, OPEC+ saying oil demand will increase, and a “devil in the details” EIA report. The news of the week continued to support WTI crude oil prices, even though in my opinion, the news was bearish. Again, the market continues to act irrationally. The EIA report announced a smaller than expected build in crude oil inventories. However, there was an outage on the Keystone Pipeline that supplies Conway with storage barrels. Therefore, the smaller build in inventory was due to restricted crude oil shipments flowing into storage. And FED Chairman Powell reported on Wednesday that rate cuts are almost ready to go. But today the jobs report was red-hot showing that the economy is still going strong. So within two days, Powell’s speech was basically pointless. The economic data is still showing inflation stronger for longer. All the news this week continued to keep WTI prices in a narrow trade range between $78/barrel and $80/barrel. For now, the bulls seem to be holding on to anything that will keep prices high. I still see rate cuts coming later this year, but maybe only one to three total cuts. I also tend to put my money on history. History shows that crude oil prices usually drop going into a Presidential election. Again, I believe patience will win this year and opportunities for buying crude oil at lower prices will come to fruition at various times throughout the remaining year.
In local news, the supply of gasoline in the Chicago spot market seems to have finally balanced out. The cost of gasoline dropped in our market since last week. Therefore, I do expect to see gasoline retail prices drop. Diesel prices in the Chicago spot market continue to be stubborn and remain higher compared to our neighbors in the Group spot market. Diesel cost on the CME followed NYMEX crude oil prices in tandem. Therefore, since diesel cost increased a bit in our local spot market, I do not expect to see diesel retail prices drop in the first part of next week.
Propane prices traded in a very narrow range again this week. Even though warm weather is demolishing heating demand, exportation of propane remains at record levels. Our national inventories are now officially below the 5-year average, even though we are possibly experiencing the warmest winter on record. But the out months on propane futures are firming up due to the possibility of supplies being short if there is a colder winter in the future. Many companies are starting to place long bets on propane futures over the next two to four years. I still believe we will have some better retail prices on propane for the summer. But I could see next year’s contract pricing being almost the same price as this year.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford