Warmer Than Normal Winter?..

Good morning,

I hope this message finds you all well.  I do not have much to report this week on crude oil.  The news has been fairly quiet.  The only news was that refined product inventories experienced a major draw this week.  If the US crude production starts to return sooner than expected, Saudi Arabia is being very serious about punishing the markets.  Also, the economy seems to be running out of steam based on durable good purchases and unemployment filings.  WTI is holding around $40/barrel, but I am still bearish on crude oil going into the fall.  I just don’t see demand picking up coming out of summer as more people go indoors.  For now, it’s the same-old-same-old.  We will be watching the election and anything coming out of OPEC to see if pricing will be pushed out of its current trading range.

In local news, differentials on Chicago spot pricing continue to be very volatile.  Gas and diesel prices have been very jumpy as cash markets look to cover refiners that are short going into maintenance season.  I expect to see gas and diesel prices remain near or above $2/gallon for the foreseeable future.

Propane looks to be in good supply going into the winter.  The 2021 weather forecast from a group that I enjoy following was released today.  Every single model is calling for a warmer than normal winter.  However, looking at historical winters, when every model predicts the same weather event, the opposite usual occurs.  In recent memory, the coldest winter in 10 years was actually predicted by every model to be above average, and the exact opposite happened!  The models are showing a risk of Polar Vortex movement into Wisconsin.  We are also looking at frost next week which is the earliest frost in over 10 years.  Basically, it’s too early to call, but if a few things move around I think we will have a jumpy winter with some periods of deep cold.  If it stays as predicted, our coldest month looks to be December with tons of moisture in February and March.  I will continue to keep you updated as we go into winter.  If you you have not contracted your propane or filled your tank at lower prices, it’s still not to late! 

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

Best regards,

Jon Crawford

OPEC+, FED, and Hurricanes

Good morning!

Surprisingly, crude oil prices increased 9% this week on the backs of circumstantial bullish news.  Multiple hurricanes and tropical storms are continuing to punish the Gulf of Mexico shuttering oil production temporarily.  Considering the weak demand across the globe, the supply disruptions are minimal and no damages have been reported to rigs or export facilities.  The FED announced this week that they will keep rates at zero for years and are willing to let inflation run higher.  The news is very bullish for crude prices because the announcement looks to keep the dollar weak.  Then the icing on the cake for the week was strong words from the Saudi Arabian Energy Minister saying they will do whatever it takes to keep oil prices above $40/barrel and punish anyone who tries to gamble on the market.  I have never read such strong words from Saudi Arabia in response to OPEC and other oil producers.  Libya is bringing another 1M bpd back online and other countries were discovered to have cheated on their quotas.  Basically, the run up in prices this week are reactions to circumstantial and temporary news events.  I am still seeing very weak demand on the horizon and do not believe that any there are any tailwinds to the rally this week.

In local news, surprisingly the Chicago cash market jumped dramatically on gasoline prices.  The spot cash market blew out almost 12 cents per gallon this week.  I’m guessing that with refinery maintenance season starting, a supplier is short on gasoline going into the turnaround.  Once again, temporary situation.  We might see retail prices on gasoline break above $2/gallon, but that will not last in my opinion.  Diesel prices have remained steady compared to gasoline.  Supplies of diesel are in great shape heading into the harvest.

Propane prices actually rose with crude prices this week despite healthy inventories.  Summer spot differentials are starting to wind down.  If you have not ordered your first fill for the winter, we highly recommend that you do so now.  Contract prices are very attractive and with all the uncertainty on the horizon, we recommend that you lock in your pricing for the winter.  Also, as a reminder, we are already starting the 2020-2021 heating season!  If you are a will-call customer, please make sure to start checking your tank to ensure a hassle-free delivery.

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

Best regards,

Jon Crawford

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