Crude Confusion For Christmas?

Good morning!

Happy Friday!  WTI crude prices shot up through $70/barrel on the hype of continued increased world demand.  In addition, Saudi Arabia announced price increases for shipments starting in January.  However, the news also gives further support to the continued increased production from the US and OPEC+ going into 2022.  The FED continues to push for rate increases in 2022 and inflation data is off the charts!  I am still sitting on the sidelines waiting for the end of the year to pass.  Markets can behave irrationally, and I am seeing some irrationality taking hold into year end.  Besides the current economic facts surrounding crude oil, I am watching some of the smartest people sell their stocks.  Elon Musk, Jeff Bezos, and Chamath Palihapitiya are all clearing positions going into the the year end.  If a market correction happens, crude prices will sink as well.  I can also see world oil supply going into surplus in Q1 of 2022.  Therefore, in the meantime I am keeping Pepto-Bismol handy and hoping for some entry positions on futures buying to open up the first part of next year.

In local news, gasoline and diesel retail prices have stabilized.  There was a quick sell-off on pricing in the market, but Chicago quickly recovered due to some refinery issues in Toledo, OH.  As crude prices recovered, we are now stable in the market at current retail prices.

Propane prices have stabilized as well with crude oil, but I think propane is oversold.  Propane prices coupled with crude oil on the news of warmer weather.  Yes, propane supplies are getting better, but any sort of cold snap is prime for a whip-saw higher on propane prices.  Propane price has been de-coupled from crude price all year, so am skeptical on the current congruent movement.  For now, customer that didn’t contract at higher prices are getting a little relief, but I don’t see propane prices holding at current levels long-term.  There is too much winter left in the season.  As a reminder, please make sure your driveway is plowed and salted if necessary, and there is a clear path to your tank to receive your propane delivery.  The snow will be here before we know it!

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

Best regards,

Jon Crawford

New Holding Pattern For Crude Prices?

Good morning,

After an epic collapse in crude prices on Black Friday, the energy markets seem to be carving out their new ceiling and floor.  For now, WTI seems to be carving out a floor of around $64/barrel and a ceiling of $69/barrel.  The difference in price from last week seems to be the profit taking of hedge funds and a bit of skepticism on the world recovery due to the introduction of the omicron variant.  OPEC+ met this week and is still planning on increasing production in January.  In addition, US oil firms have said they will be moving more rigs online starting in Q1 of 2022.  Therefore, crude supplies are looking to be very robust in Q1 of 2022.  The US jobs report was less than stellar for November and the FED is talking more and more about raising rates.  I believe this week was a rebalancing act and crude price are currently sitting in the middle of a larger potential range.  The range is as much as $15/barrel in my opinion!  So at the current price of $69/barrel, the low end potential is $55/barrel and the high end potential is $84/barrel!  Volatility is EXTREMELY high right now with crude prices!

In local news, the large drop in crude prices is making its way into the retail supply chain.  Gasoline retail prices are falling below $3/gallon, and diesel prices have eased around 10 cpg.  Diesel prices are supported at a higher rate due to some supply issues in Chicago, but once the issues are resolved, I could see diesel retail prices falling further.

Propane prices have fallen due to lack of demand going into December.  Our board price has fallen again this week and I am shocked at how over-sold propane is.  Any sort of demand bump is going to firm up propane prices quickly, so beware.  I don’t believe this mid-winter price relief is going to last long-term through 2022.  I remember about four years ago I put up my Christmas lights in December in shorts and a t-shirt, then in Jan/Feb we had -30 degree wind chills!  But for now, prices will be lower.

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

Best regards,

Jon Crawford