The Trump Effect

Good morning!

Happy Friday! The big news this week was the inauguration of the 47th President, Donald Trump. Wasting no time, President Trump began implementing his agenda, which includes expanding access to American fossil fuels. Following the inauguration, WTI crude oil prices dipped below $75 per barrel for the first time in several weeks. Many traders sold on the news, influenced by indications that Trump may impose fewer tariffs on China and other countries than initially expected. His stated approach is to limit tariffs wherever possible while keeping the option to increase them if necessary. Trump also called on OPEC+ to increase production, though the request seemed to fall on deaf ears. Geopolitical developments added to the mix, with the Houthi rebels announcing they would cease attacks on ships in the Red Sea and Iran stating they will no longer pursue nuclear weapons. Additionally, China expressed a willingness to negotiate with the Trump administration. Trump has also prioritized refilling the U.S. Strategic Petroleum Reserves and increasing petroleum product exports. Overall, the tone in the crude oil market is leaning bearish. Chinese demand remains weak, and while NATO and Trump disagree on the best approach to ending the war in Ukraine, there is an increasing sense of urgency to bring Putin to the negotiating table. However, negotiations with both China and Russia are expected to be more challenging this term, as their economies have become more interconnected under the pressure of global sanctions on Russia. For now, crude oil prices are stabilizing and have shifted into a “wait-and-see” mode.

The Chicago spot market mirrored the dip in crude oil prices this week. As a result, I expect retail prices of gasoline and diesel at the pump to decrease slightly. However, with lingering uncertainty in the market, any decreases may happen gradually.

Propane prices saw a spike during the recent cold snap due to increased index prices from suppliers. Thankfully, supply distribution is beginning to improve across the East of the Rockies. I anticipate propane prices could ease in February as January contracts expire, distribution issues improve, and temperatures return to normal winter levels. As always, we kindly ask that you keep your driveway clear of ice and snow and ensure there is an accessible path to your propane tank. This helps our drivers make safe and efficient deliveries.

If you have any questions, comments, or concerns, please don’t hesitate to give us a call. Have a great weekend!

Best regards,

Jon Crawford

Juuuuuuussssst A Bit Outside

Happy Friday!

Today I felt like paying respect to the loss of “Mr. Baseball”, Bob Uecker this week. Ueck was a pillar of Wisconsin his entire life of 90 years. Wisconsin and baseball in general will never be the same. Thank you “Mr. Baseball” for amazing memories my entire life. His famous line, “juuuuuusssst a bit outside” fits in perfectly with the crude oil trade this week. WTI crude oil prices continued their frothy run higher and look to close the week on a continued four-week gain. WTI broke through the psychological ceiling of $80/barrel for a brief moment. But the rally above $80/barrel seems to be “juuuuusssst a bit outside.” Although sanctions on Iran and Russia look to tighten, the amount of crude oil trading in the market is still long. China announced that their yearly GDP of 5% was right in line for 2024. I do not believe any economic data that comes out of China. A survey released this week announced that most citizens in China feel worse off today than two years ago. China also decreased refining of diesel fuel in 2024. The decrease is a strong signal of recession. China continues to announce large economic stimulus into renewable energies. The plan is that if the cost of energy continues to decline, the low cost will spur economic development. Under the upcoming Trump administration, there is a reluctance to allow China to do business in America, as well as strict guidelines for US companies doing business in China. For example, TikTok looks to be shutdown this Sunday. Trump is taking security measures against China very seriously. In summary, I do not believe that China is firing on all cylinders. Therefore the decline in Russian crude oil purchases due to sanctions from the US is sort of irrelevant.

Israel and Hamas announced a ceasefire deal this week along with some prisoner swaps. Yemen piggybacked on the deal and stopped attacking ships in the Red Sea. Geopolitical events seem to be taking a break as Trump takes office on Jan 20th. My belief is that the “Trump trade” is in a bit of caution. Traders and big banks alike are taking a pause and biting their nails as announced policies from Trump on day one are jumping all over the place. Next week is going to be very interesting to say the least. I honestly have no prediction on commodities for next week. I do believe that most trades will move on emotions rather than economics. Again, I would like to reiterate that I believe the world will move to “surplus crude oil” in 2025.

In local news, Chicago spot basis continued to jump all around this week. In good news, spot basis in Chicago compared to Group spot basis has balanced out. Diesel in Chicago spot is over 30 cents/gallon cheaper than the NYMEX Heating Oil Contract. Therefore, that means Chicago is very long on diesel. However, that did not stop diesel prices from rallying much higher along with the price of crude oil this week. Gasoline prices also followed diesel prices higher this week in Chicago. Unfortunately, I do expect to see retail prices of gasoline and diesel at the pump move higher next week. Our area is expected to have extreme cold next week. In my opinion, if you are running diesel trucks over the road, a winter-blended diesel with some #1 oil will be needed. Monday will truly be a test to see which companies and gas stations blended their diesel properly over the past week.

Propane prices have soared higher. The extreme cold across most of the East of Rockies has caused a bit of supply disruptions. There is not any shortage of propane. There are just distribution issues on pipelines and railroads. The spike in price should be short lived once the colder than average temperatures leave the area. I expect to see these higher prices through mid-February. Again, please make sure to keep your driveway free of snow and ice, and have a clear path to your propane tank. Also, if you are a will-call customer, please keep an eye on your tank over the coming seven days. We want to try and ensure that everyone stays safe and warm next week.

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

Best regards,

Jon Crawford

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