Good morning!

Crude oil traded in the “Bizarro World” this week.  Meaning, if you thought the price of crude oil would drop, the price instead went up.  And when all the data pointed to a price increase, the price decreased.  I felt like I was in the episode of Seinfeld “The Bizarro Jerry” where everyone meets their opposites in real life.  Almost every day this week, the crude oil market performed in the opposite direction of expectations.  And let me tell you from experience, it’s not fun hanging out with the “Bizarro Crude Oil Market!”  🙂  We went into the week on the news from Saudi Arabia that Aramco posted the largest ever quarterly profit.  Aramco announced they would be investing more than $20B of the profit into expanding capacity and improving crude oil refining downstream operations.  The markets sold off on the news as expected.  But then the rest of the week everything went bizarro.  Poor retail data from large American corporations: crude price went up…  Inventories of crude oil in the United States decreased according to the weekly report: crude price went down.  Housing data was awful and the FED looks to continue raising rates: crude price went up.  China announced a joint deal Russia and North Korea on crude supplies going forward:  crude prices went down.  All week long, the opposite of what was expected to happen occurred; very bizarro.  We will see how the week ends.  WTI price is looking to once again end up right about where it started for the week after living in “bizarro world.”

In local news, the price of gasoline and diesel in the Chicago spot market seems to have leveled off.  So I would expect to see the current average retail pump prices hold going into the weekend.  We are getting into the end of summer driving season, so all bets are off on the price of gasoline going into September.

Propane prices continue to hold steady.  The corn maturity data was released this week and most of the crop around the country looks to be in good shape compared to the five-year average.  If we continue to have warm weather in September with a little rain, the anticipated increase in corn drying demand compared to last year could end up being a dud.  If the corn drying season ends up being a “nothing burger”, then I would expect propane prices to continue their flatline trajectory into the holidays.  If you have not ordered a summer fill, please do so.  And we recommend contracting at least come of your propane gallons for the winter heating season.  There are still many volatile markers out there and it’s better to be safe than sorry.

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

Best regards,

Jon Crawford

Good morning!

Happy Friday!  The update this week is based entirely on national issues.  There is not much to report on international news.  After weeks of falling crude prices, the crude oil trade found some legs this week.  WTI price is now moving back closer to $95/barrel.  The EIA had an interesting report showing gasoline demand higher than expected based on a large draw in inventory, but also showed a much larger build in crude oil and distillates.  Couple the supply data with the 8.5% CPI print and markets reacted with joy believing the worst is behind us and nothing but glory days ahead!  But as I have written before, the devil is in the details.  The drop in CPI inflationary data was mostly due to the drop in price of gas/diesel.  So a slight drop in CPI was expected in my opinion.  But our economy is not going to sustain at a 8.5% CPI.  And if crude prices rebound, 8.5% CPI will not continue to decline.  Also, refining utilization stayed strong.  And with the much larger increase in diesel inventories reported, basically refiners made more diesel than gas last week.  The decline in gasoline inventories was mostly due to less gasoline being refined, not demand, in my opinion.  I believe that markets react irrationally and therefore the WTI trade is possibly in a dead cat bounce right now.  I am not going to say that these prices are going to hold into the end of the year.  We are seeing gasoline demand back at 2020 levels which was the first summer in the pandemic!  Consumers are starting to change behavior.  The calls are basically now how deep of a recession will occur.  We are receding, but I chuckle that after this week’s data the markets react like everything is now perfect and back to normal!  The irrationality of the markets create opportunity and right now, it’s time to just sit back.  I really do believe the current rally is a head fake and we are experiencing a dead cat bounce after weeks of declining prices.

In local news, gasoline and diesel prices have bottomed.  You might even see prices at the pump go up next week.  Gasoline cost rose almost 20 cents per gallon this week and diesel cost rose over 30 cents per gallon!  The volatility remains very high in the spot refined markets.  Supplies are tight but manageable.  Once summer ends, the spot markets will get very interesting.  🙂

Propane prices rebounded this week a bit as well.  I am not excited about our national inventory levels.  Our exports are strong, Canadian supplies in the East are low, and our national levels are still below the five year average.  At the moment, propane price is also considerably cheap when comparing the value to diesel and natural gas.  So even if we have a low corn drying demand and warmer fall, I don’t see propane prices falling.  Basically, propane prices look to hold around current levels, but have incredible potential upside movement.  I highly recommend topping off your tank this summer and contracting at least some of your heating gallons for the upcoming winter.

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

Best regards,

Jon Crawford