Not too much has changed since last week. OPEC decided to wait on discussing extending cuts in 2018. US production is still going strong. North Korea is still sending some jitters, but China’s and Russia’s involvement is easing the situation a bit. Hedge fund long positions on crude flooded the market in the past week without any real changes to economics. WTI closed at the highest price of year near $53/barrel. I am short on crude in the near term and still calling for a $55-60 ceiling next year. The only situation that has me concerned right now is propane. Propane inventories dropped almost 2MM barrels. This puts our peak inventory at 78MM barrels. With strong exports, we don’t have enough in inventory to keep up with a cold winter. The situation has already been priced into the market. Now if corn drying demand ends up being weak from all the heat, and the winter is warm, I expect to see a slight sell off in propane this winter. Propane is really over bought at the moment. We’ve had almost a 30 cent/gallon increase with no demand event. October is going to be an important month for propane retailers to see where this situation might be headed.
In local news, gasoline prices have settled out and are averaging around $2.39/gallon, while diesel fuel is averaging around $2.69/gallon. Propane prices are at the highest for 2017. I expect propane prices to edge a little higher before a possible retraction. But if winter comes early and stays, hold on to your seats because propane prices will soar.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Jon Crawford – Pres.
Crawford Oil and Propane