The Bears Are Still Trying
Good afternoon!
I hope this message finds you well. The bears in the crude oil trade are trying to move the floor price below $90/barrel. But they failed to accomplish the job, in spite of strong bearish sentiment and news. The dollar continues to gain strength which increases the purchasing power for crude oil. The action usually lowers the price of crude on the market. In addition, the amount of savings in the hands of consumers is dropping fast. Student loan repayments are beginning. And inflation is starting to sting in many areas of the economy. And China is still struggling with their commercial real estate problem. However, Saudi Arabia and Russia remain lock-step in limiting crude oil and refined supplies to the market. And the US reserves of crude oil continue to drop to lowest levels in years. As demand for crude oil in the US ramps up with the harvest, suppliers and refiners are remain disciplined and not oversuppling the market at home. The actions of world oil producers and the US oil industry are winning the battle between the bears and bulls. Therefore, even though the world economic data was awful this week, WTI crude oil still closed above $90/barrel to finish the week.
Diesel prices out of Chicago started to move higher as differentials changed in cycle timing. Although Chicago is still cheap for diesel in comparison to other spot markets, I am still betting that harvest is going to cause diesel inventories to drop and prices to rise. Gasoline continues to be very long in the market and remains trading flat-to-down. I don’t expect to see any major jump in gasoline prices anytime soon. Even though diesel prices rose this week, I remain firm on my recommendation to keep your diesel tanks full.
Propane continues to trade in a narrow range. The heating season is officially underway, although it doesn’t feel like it! I expect propane to move higher as the winter goes along. Producers of propane are sounding alarms loud and clear that they just won’t sell propane for much cheaper than the current trading price. Keep-fills have started and before we know it, the weather will be cold and the holidays will be here! Enjoy the hot weekend while you can!
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford
Hold Steady
Good morning!
Happy Friday! I wish I had positive news to report, but this week was a “hold steady”. WTI Crude Oil prices maintained a floor of $90/barrel. I do believe that traders are going to try and push crude prices to $100/barrel by the end of the year. With the current capital gains structure, traders can ring the register as close to $100/barrel and pay a “known capital gains tax”. Everything surrounding taxation could change when the “Trump Tax Cuts” run out. There has been support for crude prices around the world to remain strong as well. Japan continues to provide stimulus to their economy. China continues to work hard to push their economy forward. India’s economy is strong. The United States economy also looks like a “soft landing” from FED policy is possible. In addition, Russia announced cuts to exports of gasoline and diesel into the world market to help support the current price of crude oil. In other words, the world economic sentiment has strong support for higher crude prices. But a recession in 2024 is a very real possibility. However, I continue to sound the horn that if recession hits, all major oil producers will cut production to keep prices higher. As I’ve said for the past few months, I believe that WTI Crude will trade in a range of $70-80/barrel for a long time. When crude prices hopefully drop at some point towards the end of the year when traders “ring the register”, the drop in price could be a possible futures buying opportunity depending on how far the price falls.
In local news, gasoline prices continue to trade in a narrow range. Gasoline supply looks to be long in Chicago. But diesel prices are still primed to jump 30-40 cent/gal at any point. If you are a bulk diesel purchaser, I highly recommend keeping your tanks as full as possible. The jump in diesel price is not a matter of “if” but “when” and the jump will happen quickly.
Propane prices continue to trade in narrow range as well. Summer allocation building ends in September. I expect a small bump higher in price starting in October due to the fundamental change to winter spot pricing. Regardless, propane prices continue to be cheaper than last year which is incredible considering the massive inflation inflicted upon our economy. There are small potentials for propane price blow outs this winter depending on weather. But supplies are healthy and logistics will be the only issue to deal with this winter.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford