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
All Sights On $90/Barrel WTI Crude Oil
Good morning and Happy Friday!
I hope this email finds everyone ready for the weekend. This week WTI Crude Oil price pushed through $90/barrel for the first time since November 2022. The US economy possibly experienced increased inflation in August, but the cause was mostly due to increased cost in of gasoline as summer finished. The world economy is looking healthy and the potential for a soft landing continues to win out on the news airwaves. In addition, as I’ve said all along, don’t bet against China. China had some commercial real estate issues and a slower than anticipated reopening GDP which caused a panic sell-off in crude late spring. China instituted a full bailout for the commercial real estate and added further stimulus to the economy. Within one month, China is seeing an increase in GDP and their stock market is roaring higher. World demand for crude continues to be strong and the US crop harvest looks to be a fast harvest which puts supply pressures on markets to stay wet with refined products. The supply pressure in turn supports crude oil prices, pushing them higher. I am still convinced that $80/barrel is the new floor for WTI crude and any dip in price below $80/barrel is a great futures buying opportunity. For now, we just sit back and let the market do it’s thing.
In local news, our neighbors to the west are finally calming down on as harvest is on the down slope. However, Chicago Spot is so heavy with diesel that an increase in cost of 30 cents per gallon could occur at any moment in our market. My advice is to keep all your diesel tanks full. It’s not a matter of IF diesel prices in our market skyrocket higher, it’s a matter of WHEN. And I believe the blowout will happen within two weeks. I think when the futures October contract expires at the end of this month, we better strap on our seatbelts for a roller coaster in volatility in the Chicago Spot Market. Gasoline prices have continued the slow grind higher so I don’t expect to see retail prices of gasoline go down at the pump anytime soon.
Propane prices have climbed higher and retail prices have followed. Our board price is getting closer to our contract price to start the winter, even though we have a record level of inventory of propane in the US. I believe higher crude oil prices will continue to support higher propane prices all winter long, especially if the winter is warmer than average.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford