Same Old, Same Old

Good morning,

WTI Crude oil continued to trade in a narrow range between $70-75/barrel.  As the OPEC+ meeting approaches, the debate between Saudi Arabia and Russia is starting to heat up.  Saudi wants to keep production increases small to support prices, and Russia wants all limits lifted to put pressure on US producers and go after market share.  In more geopolitical news, Iran elected a new hardline-president that looks to further isolate Iran from a nuclear deal with the US.  The potential for a negotiation stand-off is back on the table which would keep Iranian crude exports from increasing with greater transparency.  At home, inflation continues to rise and crude inventories continue to fall giving support to prices.  Even though US production is strong, exports and domestic demand are strong.  So for now, we wait and see what happens with OPEC+ meetings.

In local markets, retails prices continue to rise with the cost of product.  Gasoline retail is inching ever closer to $3/gal and diesel retail has been holding fairly steady around $3/gal.  Unfortunately, until we experience any major drop in crude prices, these retail prices will be here for a bit.

Propane cost continues to go higher and higher.  The US is now officially at the lowest level of summer propane inventory in over eight years!  There is quite a possibility that the retail prices back in April will be the lowest for the year.  I highly recommend everyone locking in some of their heating season gallons.  Although Canada is flush with propane, rail shipments will be very volatile as backorders of goods and cars start to return to the market possibly end of year.  Unless crude oil prices fall over $15/barrel, I can see propane prices being in for a wild ride this year.

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

Best regards,

Jon Crawford

FED vs Supply/Demand

Good morning!

Happy Friday.  We received some much needed rain in our area last night which was a nice way to start to the weekend.  Crude prices continued their run higher this week as crude inventories continued to decline in the US with record demand.  Anticipation of continued world demand is also keeping a strong bullish sentiment on energy commodities.  However, the FED on Thursday dropped some hints that rate increases will be moved up as well as increases of their inflation forecasts.  The dollar rallied against the main basket of currencies yesterday causing a midday crash in crude prices of over $2/barrel.  However, the crude markets recovered by the end of day and are surging ahead to end the week.  The energy markets seem to be all-in on a bullish run believing that supply will be tight around the world by end of summer.  I am not fully convinced of the bullish attitudes considering there is still a staggering amount of world crude production sitting on the sidelines waiting.  Meanwhile, the US has recovered to 11M bpd crude production with 92% refining capacity, and crude inventories are still dropping.  What the scenario says to me is that possibly our crude exports are very healthy.  Eventually, our competition is going to want a piece of that pie.  I could see someone blinking over the next few months and causing a correction in crude prices.

Although crude prices have increased, gasoline and diesel prices eased a bit due to continued increasing refining utilization and building inventories.  I expect to see gasoline retail prices hold near $2.79/gal and diesel prices near $3.00/gal.

Propane cost has continued to rise and does not seem to be showing any signs of decreasing.  Future pricing also continues to hold even though we are going into summer season.  I would like to point out, that although propane prices seem high, when looking at the cost of propane in comparison to crude oil, the current pricing on propane has good value.  Until crude prices collapse, I just don’t see propane prices falling lower.  When coupling high crude prices with lagging inventory builds, unfortunately I think these current prices on propane will be here to stay for a while.

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

Best regards,

Jon Crawford