Crude Prices Skyrocketing

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Good morning,

I hope everyone had a great week.  Unfortunately, two major events happened this week that caused the price of crude oil to skyrocket.  Iran shot down a US drone plane on Thursday.  The response from Trump went from anywhere including retaliation to maybe it was just a mistake from someone in Iran.  The geopolitical tensions between the two countries put the risk premium on full alert and traders bought in.  The other main event was the FED announcement that rate decreases are back on the table.  A rate decrease devalues the US Dollar and increases the price of crude.  On the supply/demand side, crude stocks decreased over the past week more than expected and a refinery in Philadelphia suffered a large explosion forcing a shutdown.  The refinery in Philadelphia is the largest on the East Coast and puts tremendous pressure on other East Coast refineries to fill the gap because no products from the robust Midwest have direct pipeline access to the East Coast.  Hopefully supplies from the South will be able to be shipped, but it takes time.  For now, we will wait and see.  But the geopolitical and FED announcement just moved the floor on WTI to $55/barrel and put a stop to falling prices at the pump.

In local retail news, I would not expect to see the price of gasoline fall below $2.49/gallon at the pump.  I also think diesel prices will stay in the $2.79/gallon range.  With what happened this week, the sell off on refined products came to a screeching halt.

Although crude prices have risen dramatically, propane prices have only risen a bit.  We are still at the lowest retail price in five years and we recommend everyone filling their tanks now.  With a record amount of propane in inventory, spot prices will continue to be very low compared to forwards contracts.  Once the glut starts to decrease, we will see spot prices rise.  I expect that to happen in October, as we prepare for a potential record breaking corn drying year.  Contracts for next season will be released in the next week or so.  Stay tuned for more info.

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

Best regards,

Jon Crawford

Prices Continue to Collapse

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Good afternoon,
 
I hope everyone is enjoying their Friday and looking forward to the weekend. WTI Crude prices have continued to skip along the $50/barrel floor. The slowing world economies and the continued ramp up in the China / US trade war has most speculators spooked on the potential for crude prices to break out higher. In fact, many traders believe that even an OPEC cut is already priced in. Basically, traders are saying that no matter what, the slowing economy is the most damaging issue affecting crude prices. The one potential for a spike in price that is always hanging around is a geopolitical event. And just like that, on Thursday two ships in the Middle East were attacked. Crude prices soared to start the day but reversed course to settle up not even 3%. The IEA and world economists believe that production is far outweighing demand if the economies across the world continue to slow. The US inventories of crude, gasoline, and diesel experienced more builds this week. In addition, jobless claims were higher than expected on the National Jobs Report. For now, you can sit back and watch the prices at the pump continue to fall. But look out. If someone does something to escalate the situation in the Middle East and traders believe that a “risk premium” is back on, crude prices could jump $10-15/barrel in a blink of an eye.
 
In local retail news, retail prices on gasoline and diesel continue to drop. I expect to see prices continuing their downward trajectory until something changes on the world stage.
 
Propane retail prices dropped again this week! The prices of propane are unbelievable. As we sit, propane storage inventories in the US have the chance of breaking the 100M barrel mark, which has only happened three times in history! That being said, if the winter is warmer and the crop yields are low, we will be swimming in cheap propane for the entire year! For now, it’s a game of guessing “how low will propane go?” And no one knows! Please call for a summer fill. These prices are too good to pass up. We will send out next season’s contract information closer to the 4th of July.
 
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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