Happy Friday! WTI crude prices took a little hit this week. China released less than stellar economic data, cut interest rates, and stopped reporting youth unemployment which has been at all time highs. The news caused crude oil prices to tumble and fall below $80/barrel for a brief second. But the strength of the US economy, the decreasing oil rig count in the US, and the cooperative discipline from OPEC+ to keep production cuts steady continue to support the narrative of tightening world crude oil supplies. In fact, regardless of China’s economy, crude producers seem to be in lock-step keeping production low in order to prop up prices and avoid a massive collapse. As I have been writing, I believe $80/barrel WTI to be the “new norm” moving forward for quite some time. Yes, we might have some dips below $80/barrel. But the timing will be brief as traders hedge bets at those prices which in turn prop prices right back up to $80/barrel. I also believe there is potential for upside price in WTI crude to breach $90/barrel. But for now, we should all start accepting the reality that current crude oil prices will probably remain the new norm regardless of what happens in the world economy.
In local news, diesel spot prices have come down from their highs. Diesel supplies in the US are still very tight and any major disruption in refining prior to harvest could cause a massive increase in diesel prices east of the Rockies. Most people in the industry are keeping their fingers crossed that the harvest is mostly completed before any hurricanes potentially affect Gulf Coast production. Gasoline prices have fallen a touch from their peaks as well. But again, as long as crude oil prices remain strong, both gasoline and diesel prices will hold firm.
Propane prices remain steady going into end of the summer. Although supplies are very high in the country, the appetite for exporting and Canada keeping more propane in house for manufacturing, prices will probably start to climb in Q4 of this year. If we have a mild winter, I also believe suppliers will increase their margin index to make up for lost volume. The action from suppliers will in turn raise the retail price of propane. I highly recommend topping off your tank by the end of September. We are being very liberal with our summer fill volumes.
As always if you have any questions, comments, or concerns, please feel free to give us a call.
Happy Friday! WTI crude oil prices held above $80/barrel this week. OPEC+ confirmed Saudi Arabia’s announced production cuts of 1M bpd happened in July. In addition, the IEA increased their outlook on crude demand for the end of year and into 2024. The US seems to be experiencing a softer landing around inflation which will continue to fuel demand for more crude oil. Producers seem to be determined to try and keep oil prices as high as possible. I believe that the world economies can survive at $80/barrel WTI. Therefore, I don’t see any incentives for a producer to go after market share by flooding the market with crude oil and collapsing price. Although the war in Ukraine is a wild card, the US Presidential election is coming next year and many voters are starting to rank ending the war in Ukraine as a top priority. So politics at home could play a major role in how the US government continues to send money to Ukraine. I would have to write for now that crude oil prices are nicely supported and I don’t see too many headwinds besides a complete collapse in the Chinese or American economies. But both countries have tools in the toolbox to heed any major recession.
In local news, diesel spot prices continue to be volatile as harvest approaches and two major refiners are going into maintenance mode. I could see diesel prices at the pump blowing out higher this fall for a brief period of time. Gasoline spot prices continue their slow burn higher. I expect to see gasoline prices peak towards end of summer. However, prices of gasoline could remain higher if refiners choose to produce more diesel due to the potential tight diesel market in the fall. The next few months will be very interesting in our local spot market.
Propane prices have followed crude oil prices higher. Spot prices have moved almost 20 cents/gal higher from the bottom. I recommend everyone to top off their propane tanks now and contract for the upcoming heating season. It’s hard to believe that colder temperatures are right around the corner!
As always, if you have any questions, comments, or concerns, please feel free to give us a call.