After weeks of downward momentum, crude oil finally found some support in the last couple of days on a falling dollar and draw in U.S. petroleum inventories. The data caused some traders to cover some short positions and in doing so has developed some support for crude prices. I am reluctant to call a “bottom”. Summer demand is in full swing and consumption has not been stellar. In addition, storage facilities on the East Coast are filling up and the oil rig count continues to rise. In addition, Nigeria and Libya increased production in June and even Saudi Arabia increased exports in June. Unfortunately, I am not seeing where demand is outstripping the glut of crude we continue to keep on hand. Therefore, I am calling the last few days as a short covering rally and nothing to be too excited about. I am still calling that we will not see crude above $50 by the end of summer. The EIA reported national crude inventory draws of 1.3MM barrels, gasoline draws of 900k barrels, distillate draws of 200k barrels, and propane builds of 3.9MM barrels. The draws were all in line with expectations and better than some. Propane’s large build was mainly offset by the tropical storm in the south. All exports were shut off due to the storm last week. So if you take that into account, the build in propane inventory was modest at best and still leaving us well behind the inventory levels needed for winter. I am still calling for a quick rally in propane prices at some point in the next two months.
In local retail news, gasoline prices are holding around $2.17/gallon and diesel prices are around $2.39/gallon. Propane is at the lowest price of the year. I recommend that everyone fill up their propane tanks this summer. I also recommend that everyone lock in their price for next year. There is a major risk of propane price spikes in 2017-2018 due to low inventories and the potential for larger than average crop drying demand.
As always, if you have any questions, comments, or concerns, please feel free to give me a call.
Jon Crawford – Pres.