Good afternoon!
Happy Friday! Well, the crude oil markets traded in a very range this week. WTI crude oil price fluctuated between $77/barrel and $79/barrel. WTI was looking to push through the $80/barrel support level, but just didn’t quite get the momentum….until today! On day close today, WTI price closed above $80/barrel for the first time in a month. Right now the majority of traders are still shorting WTI at $80/barrel. But if traders switch positions and go long at $80/barrel, WTI price will push through $80/barrel and probably move closer to $85/barrel. Seems like the traders are digesting a ton of spaghetti being thrown at the wall of the crude trade. There is plenty of news supporting higher prices, as well as some reports supporting lower prices. The support for higher prices includes Israel continuing their move on Rafah, along with the US sending another $1B in weaponry. Ukraine is receiving more weaponry for defense against RUssia. Russian petroleum exports have tightened due to Ukrainian attacks on refineries. China and Russia held a summit to solidify an alliance promising to resist all Western interference with trade as well occupation of territories close to both China and Russia. OPEC+ and others continue to call for increasing demand this summer that will slide crude oil inventories into deficit by year end. In bearish news, other agencies are calling for an economic slowdown in the US, China, and Europe. Any slowdown could put downward pressure on crude oil prices. However, FED cuts could provide support for higher prices due to the devaluation of the dollar. I am also convinced that no oil producer is going to let WTI price fall below $75/barrel. In addition, I believe Saudi Arabia and others will continue to implement supply cuts to prop up prices for the remainder of the year. Also, hurricane season and a presidential election are on the way! Get your popcorn and enjoy studying the spaghetti on the wall!
In local news, the Chicago spot market gave back a lot of spot basis this week. I expect to see retail prices on gasoline and diesel at the pump go up next week. I would suggest purchasing gasoline or diesel sooner than later. The Chicago spot basis is still 15 cents below our neighbors in the Group spot. Therefore, our Chicago market is still providing good value for gasoline and diesel prices.
Although crude prices traded narrowly, propane spot prices dropped a bit more but firmed up on the out months. Many suppliers are looking at a floor for futures saying they are unable to profit if the price gets much cheaper. What’s scary, is if that happens, producers will cut back on production. Right now inventories are healthy and we are experiencing a great balance between supply, demand, and exports. Spot price is holding great value and I recommend everyone filling their propane tank. Also, next season’s heating contract pricing will be available on Monday! Please call to setup your contract for the coming winter!
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford