WTI Breaks $50/Barrel

Good morning,

I hope everyone enjoyed their week and is ready for a beautiful weekend. Crude prices and refined products were very volatile this week. With refining capacity coming back online from the hurricanes, crude started a mini rally midweek. The rally continued its run after OPEC released their monthly report showing a true cut in production for the first time in months, coupled with talks of extending cuts until June 2018. And then, out of nowhere, the IEA releases a statement saying that they underestimated demand growth in the US and Europe. Toss in anther missile launch from North Korea and we have ourselves a nice little crude rally. Now WTI crude has broken $50/barrel earlier in the year on what I would call even more bullish situations. So I am not convinced that this rally is going to take off on a long run. China has been purchasing a lot of crude to replenish their inventories, but they are almost full. In addition, IEA changes their position on a dime throughout the year, so I don’t put much stock in their “demand forecasting”. The EIA Inventory report was still all over the board due to the hurricanes. So I’m waiting to see what the report looks like next week. But the interesting inventory data was in propane this week. Exports were practically closed last week from hurricanes. The expectations were for over a 3M barrel build and the number came in at 2.3M barrels. Peak inventory is going to be under 90M barrels which is very low, especially with exports, corn drying demand forecasting high, and a potential for a cold winter. Propane prices have jumped dramatically over the last two weeks.

In local retail news, gasoline and diesel prices are all over the place. With costs fluctuating and inventories all over the map from the run up in price, I expect retail prices to have high spreads between locations for another week or so. As I stated early, propane prices have risen dramatically and I expect the trend to continue, especially if corn drying demand becomes strong. Although spot prices and contract prices have increased, I still recommend that if you have not locked in your price to please call and do so.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

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