Trade War Jitters Are Winning
Good afternoon!
Although news of unrest in the Middle East continues to ramp up in reporting from news outlets, the fallout from the trade war between the US and China is winning out on the battle to move crude oil prices. Crude oil prices have relaxed from last week highs and are now moving closer to the lower leg of recent support values. WTI is moving closer to $59/barrel which is the current floor. Today the EIA reported large builds not only in crude oil inventories but also in gasoline and diesel inventories. The builds were surprising considering that refinery utilization was low and crude production dipped just a bit. For now, as long as the temperature in Iran does not heat up anymore, crude prices are losing some support. In addition, hedge funds moved out of long positions and are now at the lowest ratio of long-to-short since last year. In other words, hedge funds are putting their money on cheaper prices later in the year. I gotta say that the first five months of this year has been one roller coaster of a ride for the crude oil markets!
In local retail news, Chicago spot prices finally fell back down in line with Group spot. I expect to see retail prices on gasoline continue to drop just a bit. I was not expecting to see a drop before Memorial Day, but I think the consumer will see a little relief. Diesel prices are holding more steady on good demand right now.
Propane prices continue to drop with large national inventory builds and a huge stockpile compared to last year. I don’t see propane prices falling off a cliff, but I think the current spot prices of propane will be here for quite some time this summer. If you own your own tank, retail prices are now under $1/gallon! If you can hold any propane I strongly recommend purchasing at these values! Contract prices for next season will be released closer to July 4th. 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
Iran Tensions Sending Prices Higher
Good morning,
This week crude prices have increased based on tensions with Iran in the Middle East. Reports of attacks on crude ships, drones attacking Saudi Arabia pipelines, Iran carrying missiles at sea, UK and US evacuating embassies in Iraq, and the US sending aircraft carriers and defense systems to the region are all putting a huge risk premium on crude prices. Crude prices would be going even higher, but the tensions with China and the trade war are keeping a lid on a full breakout to the upside. President Trump is sending messages that he wants to talk with Iran. If diplomatic talks can be scheduled and firepower starts to recede, I expect to see prices fall right back down. Next week will be a big week for crude. In addition to the geopolitical issues, the US is about to enter its peak demand season. World demand is staying neutral at the moment and on pins and needles with the trade war. Supplies are ample, but if Venezuela and Iran truly can’t get crude to market, then we could experience some supply tightness in Q3 and Q4. Next week will be very interesting to watch.
In local news, just as retail prices were starting to recede a little, prices have jumped right back up. I expect to see retail prices hold or climb on both gasoline and diesel going into Memorial Day weekend.
Propane prices are at the lowest level of the past three years. I recommend everyone filling their tanks right now. There is much more risk of upside price movement in propane. Contracts will be coming out in a month 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