Happy New Year!
Good morning!
I just wanted to wish everyone a Happy New Year and a thank you to all of our customers in 2023. I hope your New Year’s celebration is safe and enjoyable. I also wish that we all have an excellent 2024! As far as crude oil prices are concerned, there are so many geopolitical issues at play ending the year. In addition, with so many traders on vacation there is little trading liquidity in the market. The Red Sea situation with the Suez Canal seems to be getting better, as 75% of the daily traffic is starting to move through again. The entire Middle East is still a powder keg. Israel is worried that Lebanon will not take care of Hezbollah, causing Israel to intervene. Iran is so close to nuclear weapons grade uranium. The Houthis in Yemen and Iranian rebels in Iraq continue to attack the US Embassy in Iraq and occasional ships in the Red Sea. In addition, Saudi Arabia and UAE are getting worried that they will not be able to hold OPEC+ together and be dragged into a possible conflict with surrounding countries in the Middle East. Also, the war in Ukraine continues to hold steady as Ukraine sunk a major Russian battleship in the Crimea port this week. And with a surprise, North Korea launched rockets and displayed nuclear capabilities that now threaten the United States. All of the geopolitical issues are bullish for crude oil prices. However, prices dropped this week due to many investors believing that the FED and Central Banks across the globe will cut interest rates in Q1 causing oil demand to increase globally. Even though the US is at record oil production with 13M bpd flowing, Saudi Arabia has almost 5M bpd of spare capacity. THerefore, many believe that oil production will start to surpass global demand needs and move into surplus. Crude oil prices are ending the year closer to $70/barrel.
In local news, the Chicago Spot market continues to be well supplied offering prices much lower than the NYMEX. THerefore I expect retail prices at the pump to stay at current lows for sometime into the New Year.
Propane prices gained a bit of momentum this week. The major cause was the EIA “adjusting” their inventory report for the Midwest and other markets. Propane inventories shrunk by 9M barrels to end the year. Therefore, we are BARELY above the five year average for national propane storage at this time of year. If demand picks up strong in January and February, I do expect to see retail prices of propane climb.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford
Safe And Happy Holiday Weekend!
Good morning!
I wanted to take a moment and wish everyone a safe and happy holiday weekend with friends and family! I hope the extended weekend is enjoyable and full of laughter!
There is not much liquidity in the commodities markets going into year end, so prices always go a bit wonky. But here’s the news that will start driving prices into the new year. Angola left OPEC+ this week, just as Brazil joined. The amount of crude exported from Angola won’t affect global supplies significantly, but the action is showing that cracks in OPEC+ and their strategy could be starting to develop. Bp announced they will not be moving any crude oil through the Red Sea as Houthi’s in Yemen continue to launch rockets at any ship moving north towards Israel. This week the US moved two battleships into the area to try and help the situation. But then today, Iran just announced that they will be providing support and intelligence to help the Houthi’s keep up their offensive in the Red Sea. I believe the situation is a huge “risk on” for crude oil. However, the US passed ANOTHER milestone this week breaking a record of 13M+ barrel/day crude oil production and more is on the way! The EIA is starting to report builds in crude and refined product inventories. And if world economic slowdown occurs, the world oil market could move to surplus very quickly. Even if the US decides to refill the SPR, there will still be plenty of crude oil in the marketplace at the current rate of production. The US oil producers did a “head-fake” and announced that they will continue to push production as high as they can go. In addition, the sanctions on crude oil exports continue to be lifted in Venezuela, the possibility of crude oil producing nations flooding the market and going after market share is back on the table. Oh, and there are still major wars taking place in Gaza and the Ukraine. I never thought the aforementioned scenario would be possible, but situations seem to be starting to line up for bearish calls on crude prices. I might end up changing my long call on crude oil prices 2024 to neutral or slightly lower. If crude oil collapses hard, then prices might hold lower for a long time. I guess at the end of the day, in one week’s time, my entire forecast for crude oil prices in 2024 is changing. The past week just shows how volatile the crude oil trade is in general.
Local retail prices on gasoline and diesel will remain around the current price at the pump. This is great news with increased travel occurring over the next two weeks. Customers will save a bit of money as they make their way to holiday destinations.
Propane prices continues to trade sideways. However, January weather forecasts have been updated to much colder. Therefore, an increase in demand next month could push propane prices higher. As a reminder, please make sure your driveway is kept clean and there is a clear path to your propane tank in order to ensure a safe and efficient delivery. 🙂
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford