Slight Pullback On Price

Good morning,

Crude prices have retreated from the highs of last week.  Economic data in the US was not very strong this week.  Unemployment remains high with additional jobless claims filed.  The FED is looking at holding rates very low.  The earnings from most companies, other than Big Tech, were awful in Q2.  The coronavirus is spreading to more states as it weakens in others.  Most states are going to stricter mandates and fears of economic slowdown are back on the table.  In addition, the ability for schools to safely open in person across the country is looking like it will be very limited.  The US inventories of crude oil experienced quite a draw this week, but many believe it was a correction from last weeks report.  Around the world, Europe is possibly looking at a second wave of the coronavirus.  But the continued hopes of treatments and the race for vaccines are keeping markets steady.  So for now, $40/barrel on WTI seems to be the floor.  Next week will be a possible directional test and prediction for crude prices in August.  More info to come.

In local news, Chicago pricing differentials fell on the August contract expiration.  Gasoline retail prices have fallen back below $2/gallon and diesel retail are near $2/gallon.  Given the fundamentals in Chicago and crude bouncing along at $40/barrel, I don’t expect to see much movement on retail prices in the coming week.

Propane prices are still at very good value and we highly recommend that everyone fill their propane tanks now.  We also recommend writing a contract for the 2020-2021 heating season.  Contract prices are lower than last year and summer fill pricing is very attractive.  Please call our office today for more info.

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

Best regards,

Jon Crawford

China and the Surge of Coronavirus in the US

Good morning!

I hope everyone had a great week.  This week was another crazy ride on the commodities train.  We started out the week with crude selling off on the continued surge in spread of the coronavirus in the US.  But then announcements of breakthroughs in treatments and vaccine development stopped the selling and moved crude into buying territory on the hopes of recovery.  Crude prices gained further support as President Trump gave his first coronavirus press briefing in months and asked for Americans to wear a mask because the pandemic is going to get worse before it gets better.  Now, we would think that crude prices would drop on such news, but because the President was acknowledging the seriousness of the situation and asking Americans to change behavior to stop the spread, the news actually supported crude prices because hopefully the announcement will help the situation improve.  I know….crazy times….  In addition to the coronavirus, the US and other countries continued to pull out of Hong Kong in retaliation to the new laws put in place by China.  And then, the US announced that we would be closing the Chinese consulate in Houston due to reports of Chinese espionage.  The consulate had until end of day yesterday to evacuate and was seen burning items all day on Wednesday.  China retaliated by kicking the US out of one of our consulates in China.  And just to turn it up one more notch, Taiwan announced that they are afraid of a military strike by China since most of the world and superpowers are distracted with coronavirus.  Wow…that’s a lot to handle right there!  On the supply/demand front, the US inventories experienced a slight build this week showing that the surge in coronavirus is starting to hurt demand a bit.  The week is ending with crude prices near where we started for the week.  If the US/China relations continue to deteriorate, crude prices are in limbo.  Will demand destruction or devaluation of the dollar be the ultimate price driver on top of the pandemic?  Only time will tell….

In local news, Chicago supplies took a differential jump this week and cost for gas and diesel jumped almost 10 cents/gallon.  I believe the price jump is in regards to the futures contract month expiring and looking to fall harvest with high demand.  I expect to see gas and diesel retail prices hold near $2/gallon for the next week.

Propane prices are gaining some support with crude price movement.  However, propane supplies seem to be in much better shape and corn drying demand is looking very weak for the fall.  The increase in supplies will give us a cushion for a cold winter.  I am predicting a colder winter than normal due to the high heat over 90 degrees we have experienced this summer.  A general rule to follow is “a day over 90 degrees in the summer, is a day below 0 in the winter.”  If that holds true, we are looking at a much colder than normal winter.  I strongly suggest filling your tank now while the prices are low and contracting propane for the coming heating season.

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

Best regards,

Jon Crawford

Sign-up to receive weekly updates from Crawford Oil & Propane

Loading