Happy Friday!
WTI crude oil prices are nearing $70 per barrel once again, a key support level for various reasons. At this price, most refiners can operate profitably. Interestingly, geopolitical news has not been the primary driver pushing prices higher. Many traders believe the market was oversold. Russia continues to face challenges selling its product on the open market, and Libya has yet to return to full export capacity. Meanwhile, Hurricane Francine temporarily halted most production in the Gulf this week. Additionally, U.S. national crude inventories continued to decline despite high refinery runs and crude production levels, signaling there is still demand somewhere.
Analysts remain divided on the outlook for future demand, with institutions like the IEA, EIA, OPEC+, and various large banks frequently adjusting their projections for crude oil consumption. While China’s recession is a real concern, many believe that the country will eventually regain its economic footing, possibly as soon as next year. On the geopolitical front, tensions between Russia and Ukraine could escalate if the U.S. permits Ukraine to launch ballistic missiles into Russian territory. Russia has issued stern warnings, indicating that such an attack would be viewed as an act of aggression from NATO. The ongoing conflict in Gaza continues without a clear resolution, though it has not significantly influenced oil prices.
Locally, the Chicago market firmed up this week, signaling that the low prices of the past two weeks may be behind us as we move into October. Harvest season will likely put added pressure on refined products in our region. However, despite this anticipated increase, retail prices for both gasoline and diesel should remain relatively low compared to historical averages.
Propane prices continue to stay weak, with national inventories remaining robust. However, there is potential for a strong corn-drying season and a colder-than-expected winter. Once exports resume after the disruptions caused by Hurricane Francine, I anticipate that many countries will increase their propane imports in preparation for the winter months. As such, I highly recommend that everyone top off their propane tanks now and consider contracting some gallons for the upcoming winter season.
As always, if you have any questions, comments, or concerns, please don’t hesitate to reach out. Have a great weekend!
Best regards,
Jon Crawford