Coronavirus and Groundhog’s Day

Good morning,

Well, the coronavirus is not getting any better.  In fact, the virus has now infected 15k people and killed over 300.  The first death outside of China was reported, and a few major US cities are reporting cases.  China built a giant hospital in nine days (yes, nine days) to have beds on hand ready to treat.  For now, the markets are very nervous.  China is shutting down factories, US companies have closed operations, and travel/shipments are starting to stop.  The virus could cause the world economy to grind to a halt while contagion is contained.  With demand erosion on the horizon, crude prices have tumbled.  WTI crude briefly traded below $49/barrel for the first time since last spring.  OPEC+ is already planning an emergency meeting to try and keep crude prices from falling off a cliff.  The US would actually not want prices to go much lower in order to keep production high and taking market share.  For now, it’s time to sit back and relax until we know where we are heading with the coronavirus.

Local prices of retail gasoline and diesel continue to fall.  Retail gasoline prices have fallen below $2.29/gallon and retail diesel prices are in the $2.70’s.  I don’t expect to see prices move any higher in the coming weeks.

Propane prices continue to stay soft with warmer than average temperatures and high volumes of supply.  As always, we like to have fun with our local groundhog, Jimmy The Groundhog from Sun Prairie.  Jimmy did see his shadow on Sunday, so for what’s it worth, Jimmy is saying we will have six more weeks of winter.  The forecast is continuing to call for average temperatures.  For now, I think it’s safe to say that a major polar vortex is less likely to occur this year compared to years past.

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

Best regards,

Jon Crawford

Coronavirus Causing Market Sell Off

Good morning,

The week started off with Libya’s production going offline due to internal civil war conflicts again.  In the past, this type of conflict caused at least a 5% spike in prices.  Instead, traders shrugged off the event due to the US hitting another week of record production runs and increases in inventory volumes.  The IEA is still calling for decreasing prices in the second half of the year due to crude supplies going into surplus while under current OPEC+ production cuts.  But the big news of the week is the Chinese Coronavirus.  The virus continues to spread to other countries and has killed close to 100 people already.  A city of almost 30M people is under quarantine in China.  The last time this happened was with SARS and crude prices tumbled due to demand erosion.  Well, history is proving itself to be true once again and crude prices tumbled to their lowest levels in the last three months.  WTI crude is starting to point closer to $50/barrel than $60/barrel.  For now, we are awaiting developments on the Coronavirus and taking cues from the WHO.  Until we know where the virus is heading, I think the last rally in crude prices is on ice.

Local retail prices on gasoline and diesel are slowly decreasing.  However, spot cash prices have not dropped as much as expected with the decrease in crude prices.  Regardless, I don’t expect to see prices at the pump go up in the coming week or so.

Propane prices dropped once again this past week.  The weather continues to be propane’s worst enemy.  We are getting very close to experiencing the warmest January/December on record.  The demand destruction on propane is very real, even though exports are at record levels.  At the current inventory levels, we are one pace to end the winter with the most propane in inventory post winter in the history of tracking inventory!  If the current state of propane holds, I would expect very low prices on summer fills this year.

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

Best regards,

Jon Crawford