Happy Friday!
This week, crude oil prices continued to trade within a narrow range, with WTI holding above $80 per barrel. Geopolitical news was relatively quiet. Ukraine is grappling with a severely damaged electrical grid, potentially increasing diesel consumption for generators. Russia shows no signs of de-escalating, and tensions are rising in Palestine as Israel killed a Hamas commander in Rafah. Additionally, the Philippines constructed an aircraft landing strip near Manila in contested waters with China, potentially escalating tensions regarding Taiwan. The Shanghai Cooperation Organization (SCO), which includes China, Russia, and several other nations, met and pledged mutual military and economic support, posing a potential challenge to NATO. These developments underscore a possible economic conflict and a cold war-like military structure emerging globally.
Crude oil supplies remain tight worldwide as producers exercise disciplined production. The U.S. is recovering from Hurricane Beryl, which temporarily halted exports and refinery operations. Normal operations are expected to resume in a few weeks. The Federal Reserve’s anticipated rate cut in September could weaken the dollar, putting downward pressure on crude oil prices. However, producers have signaled continued production cuts if rates decrease. Former President Trump announced plans to make the U.S. the leading global producer and exporter of crude oil, though U.S. producers remain focused on maintaining higher prices through disciplined production. OPEC agrees that reducing production during a recession is essential to sustaining higher prices. The consensus among global oil companies is “less barrels for more money,” suggesting no imminent price reductions despite a potential landscape for higher U.S. production under a Trump administration.
Severe thunderstorms forced an emergency shutdown of Mobil’s Joliet refinery in Illinois, causing significant price increases for gasoline and diesel. The refinery, producing about 300,000 barrels per day, will be down for at least a few weeks, impacting supply during the refinery maintenance season. Consequently, gasoline prices increased by nearly 30 cents per gallon and diesel by 20 cents per gallon, with prices expected to remain high into August.
Propane prices remained stable, trading in a narrow range alongside crude oil. Propane continues to offer excellent value, and we strongly recommend filling your tanks and locking in prices for the upcoming winter.
As always, please feel free to contact us with any questions, comments, or concerns.
Best regards,
Jon Crawford