OPEC and The Magic Number for WTI

Good afternoon,

Well, WTI continues to be on a wild ride into the start of Q4. Statically, WTI falls on average 7% every Q4! So I was calling for a potential cap on the rally going into the end of Q3 and some profit taking would probably start to happen in Q4. Well, it didn’t take long. WTI lost over 6% on the first two days of Q4 and is now back below $50/barrel after just three days! Mind you, last week on Friday, many folks were calling for no reason that WTI wouldn’t soar to $60/barrel by the end of this week! It just goes to show you always need to look at the facts. The facts are that no real demand scenario has occurred. Production continues to be strong. The U.S. continues to add oil rigs. And OPEC actually INCREASED production in September instead of cutting as promised. The pact between OPEC and non-OPEC members is starting to get really strained since the U.S. came out stating that they are making money above $30/barrel. Now many members of OPEC are believing that cutting production is only putting money in the pockets of the U.S. Regardless, WTI is in for some wild swings but within a tight range. The “over $50/barrel” and “falling under $50/barrel” is going to be the fulcrum for a bit.

In local news, gasoline prices and diesel prices are holding steady. Demand for the fall harvest is starting, so we can expect to see diesel and gasoline prices stabilize as local demand increases. Propane prices seem to be holding steady as well. With our recent heat waves, the corn drying demand seems to be dropping a bit which is helping to ease the recent price rally. However, just today, Europe bought a TON of future propane barrels causing a knee jerk 5% increase in cost. I’m curious to see if this was a temporary spot play by Europe or more of a long-term buying practice going into the winter. If so, we could still see some more upside risk with propane. If you have not locked in your propane prices, I would still advise doing so.

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

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

Record Close on WTI

Good afternoon,

Not too much has changed since last week. OPEC decided to wait on discussing extending cuts in 2018. US production is still going strong. North Korea is still sending some jitters, but China’s and Russia’s involvement is easing the situation a bit. Hedge fund long positions on crude flooded the market in the past week without any real changes to economics. WTI closed at the highest price of year near $53/barrel. I am short on crude in the near term and still calling for a $55-60 ceiling next year. The only situation that has me concerned right now is propane. Propane inventories dropped almost 2MM barrels. This puts our peak inventory at 78MM barrels. With strong exports, we don’t have enough in inventory to keep up with a cold winter. The situation has already been priced into the market. Now if corn drying demand ends up being weak from all the heat, and the winter is warm, I expect to see a slight sell off in propane this winter. Propane is really over bought at the moment. We’ve had almost a 30 cent/gallon increase with no demand event. October is going to be an important month for propane retailers to see where this situation might be headed.

In local news, gasoline prices have settled out and are averaging around $2.39/gallon, while diesel fuel is averaging around $2.69/gallon. Propane prices are at the highest for 2017. I expect propane prices to edge a little higher before a possible retraction. But if winter comes early and stays, hold on to your seats because propane prices will soar.

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

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane