The WTI crude oil market seems to have found a floor at around $55/barrel. After the announcement of the OPEC extension, there was a little uptick in crude prices at the end of last week. However, on Friday, the U.S. continued to show growth by adding more production rigs. Some traders took a little profit and the volatility train kicked in this week. In addition, the U.S. announced a large drawdown in crude inventory this week (5.6MM barrels), but skyrocketed supplies of finished product (8.5MM barrels) due to very attractive crack spreads. Also, WTI continues to be very competitive to Brent making the U.S. a competitive player on the open market. Another big surprise this week was the large build in propane inventory (1.3MM barrels). Due to the large drop in corn drying demand, some are thinking that production will keep up with demand. For now propane prices have steadied, but any large increase in demand or a drop in crude causing drops in production could cause propane prices to spike due to low inventory levels.
In local retail news, the retail price of gasoline is near $2.30/gallon, down from almost $2.49/gallon a month ago. Diesel prices have steadied to about $2.79/gallon. However, most diesel is now blended with winter additive and #1 oil adding almost a 10cent/gal cost to the product. If crude prices stay in a tight range, I expect to see these lower prices going into Christmas driving season which would be great for everyone!
Propane retail prices have not moved since last week. I believe we have potentially reached the highest price for the month. For now we will wait and see what happens if the cold weather holds on. For those who contracted, you are still way under the market which is a good win going into the holidays.
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