Meeting Expectations
Good morning,
Happy Friday! This week’s crude oil and refined products market updates were relatively uneventful. WTI crude oil failed to break through the $70 per barrel mark, as bearish sentiment continues to dominate. The volume of traders shorting crude oil futures for 2025 is on the rise, reflecting widespread skepticism about a near-term price recovery. China’s economy remains stagnant, with crude oil inventories already near capacity. While the U.S. economy remains strong, U.S. crude oil production is also highly robust, adding to downward pressure on prices. OPEC+ announced that current production cuts will remain in place through Q1 of 2025, with a gradual unwinding of cuts extended into 2026. However, since this move was already priced into the market, crude oil prices actually dipped following the announcement. On the geopolitical front, Israel and Lebanon have been relatively quiet, and news from the Russia-Ukraine conflict was limited. In light of these factors, I remain short on crude oil going into 2025. A move toward surplus inventories seems likely, with a high probability of WTI crude falling below $65 per barrel. That said, I do not expect these lows to hold for the entire year. A rebound to the $70–$75 per barrel range by mid-to-late 2025 seems plausible.
In local news, inventories of gasoline and diesel are plentiful, and prices continue to trend downward. I anticipate these lower pump prices will persist through the busy holiday travel season. For diesel consumers, I want to remind you of the importance of ensuring your supplier is treating diesel with the correct additives. Additionally, I strongly recommend blending #2 diesel with #1 diesel, as sudden cold snaps can occur, and blending helps ensure vehicles start and remain operational during harsh winter conditions.
Propane prices remain steady despite ample supplies, as demand has picked up with colder temperatures in early December. Traders are cautious about allowing propane prices to fall further at this time. As a friendly reminder, snow and ice can create challenges for propane deliveries. Please ensure that driveways are clear and there is an accessible path to your propane tank. This will help us deliver your propane safely and efficiently. Thank you for your cooperation!
As always, if you have any questions, comments, or concerns, please don’t hesitate to reach out. Have a great weekend!
Best regards,
Jon Crawford
Black Friday Clouds On The Horizon
Good afternoon,
Happy Friday! I hope everyone had a wonderful Thanksgiving! One notable perk of this year’s holiday was the drop in fuel prices at the pump. As we approach the end of the year, the outlook suggests that lower fuel prices may persist for a while longer. Crude oil prices closed firmly below $68 per barrel heading into the Thanksgiving weekend, reinforcing a bearish sentiment in the market. Crude oil inventories worldwide are expected to move into surplus in 2025, driven by stagnant demand growth in China and other regions. Chinese GDP growth remains flat, with stimulus measures viewed as short-term fixes rather than pathways to sustained recovery. Chinese crude imports and refinery runs are both decreasing, reflecting a sluggish economic environment.
Further downward pressure came from President Trump’s announcement of new tariffs: a 25% tariff on all goods from Mexico and Canada and an additional 10% tariff on goods from China. These tariffs strengthened the U.S. dollar, which in turn pushed crude oil prices lower. However, many analysts believe Trump’s move is a negotiation tactic aimed at bringing other countries to the table. Tariffs on Canadian crude oil imports could lead to significant price increases in parts of the U.S. due to the dependence of many refiners on Canadian crude, but negotiations are already underway with leaders from China, Mexico, and Canada. Meanwhile, OPEC+ delayed their production quota meeting from December 1 to December 5, with traders anticipating that current voluntary production cuts will remain in place. The U.S. continues to set records as the world’s largest oil producer, now exceeding 13 million barrels per day—a milestone no other country has reached. Even with significant spare capacity in OPEC+, American producers and other oil-exporting nations have pledged to maintain a price floor, likely around $60 per barrel.
On the geopolitical front, the ceasefire between Israel and Hezbollah in Lebanon has reduced tensions in the Middle East, though some violations have already been reported. Escalation between Russia and Ukraine remains the only significant bullish factor in the market, though the conflict appears to be losing momentum. Both Russia and Ukraine have expressed interest in negotiating peace under a Trump administration. Additionally, Trump’s proposed sanctions on Iran are set to go into effect on day one of his presidency. These sanctions could significantly reduce Iran’s export revenue and weaken financial support for groups like Hamas, Hezbollah, and the Houthis. Satellite technology is now effectively tracking Iran’s use of ghost ships and mid-ocean cargo transfers, further tightening enforcement.
Overall, the crude oil market is decidedly bearish, with a price floor likely around $60 per barrel. I expect WTI crude to trade between $65 and $75 per barrel in the long term. With global refining capacity steadily recovering, there appears to be no urgency to lock in futures prices at this time.
The BP Whiting refinery issue has largely been resolved, with the Chicago Spot Market realigning with the Group Spot. Both markets have moved to the January futures contract, and pricing has stabilized. I anticipate that these lower pump prices will continue through the holiday season. For those looking to lock in fuel prices for next year, January and February may provide the best opportunities.
Propane prices remain well-supported due to early cold weather and robust export demand. While crude oil prices have dropped below $70 per barrel, propane prices have ticked slightly higher. This firmness is driven by strong demand, signs of low natural gas inventories in Europe, and the potential for increased exports if China experiences a colder winter. Additionally, the proposed 25% tariff on Canadian propane, if implemented in February, could send spot market rail propane prices sharply higher. Customers who contracted propane for the winter are well-positioned. For those who have not yet contracted, I recommend filling tanks before Christmas week to avoid potential price volatility later in the season.
As always, if you have any questions, comments, or concerns, please feel free to reach out.
Best regards,
Jon Crawford