And Just Like That…. WTI Back Near $70

Good morning,

What a difference a week makes.  Crude prices rebounded very strongly this week.  The dollar started losing strength as investors looked to the FED to unwind the easing programs.  Crude inventories showed a larger than anticipated draw on Wednesday.  China announced a reopening of their economy with a call for increased crude imports.  The exit from Afghanistan is causing unrest in the Middle East.  And the delta variant looks to be peaking for the majority of the United States.  All of these issues combined gave an enormous tailwind to the crude trade and pushed prices much higher.  In technical trading, WTI displayed what we call a “Golden Cross”.  A golden cross occurs when an asset’s shorter-term moving average crosses above its longer-term moving average.  A golden cross has only happened twice in the past twenty years, and both times prices rebounded 20-50%.  Therefore, there is a lot of chatter that crude prices could breakout for the end of year.

In local retail news, Chicago refineries are showing problems with upcoming fall maintenance season.  Differentials for gasoline and diesel prices jumped nearly 20 cents per gallon!  Therefore, I do not see much price relief at the retail level through Labor Day weekend.

Propane prices continue to hold firm.  As I have been writing for months, this year is the outlier in the past ten years.  Every ten years, there is always one year where price goes up in the summer.  Unfortunately, the US continues to export record levels of propane to China.  China is expanding their petrochemical businesses as their economy reopens.  Although I believe corn drying will be less than expected, national inventories will be tight going into winter.  I am not concerned about running out of propane, but logistics in moving propane to the correct areas of the county will be choppy.  I expect a bumpy ride with prices this winter if we experience any “polar vortex” or any prolonged colder than average temperatures.  We are still locking in heating contracts for the season and doing summer fills before the cooler temps begin.

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

Best regards,

Jon Crawford

Relief For Crude Prices… Not Much For Propane

Good afternoon,

I hope this message finds you well.  Crude prices dropped dramatically this week as the delta variant continued to spook investors on world demand for crude.  Also, many large retailers started to show a slowing down of their burning hot sales over the past year.  And then the FED announcement looks to position towards a tapering of bond purchases signaling a rate increase maybe next year.  As demand threats pulled down crude prices, the FED announcement gave strength to the dollar which pulled crude prices down even further.  Now that WTI crude prices are below $65/barrel, the possibility of sub-$60/barrel is on the table.  WTI is approaching a price range that is more in the normal pre-pandemic years of healthy crude oil supply and demand economics.  However, with the unrest in Afghanistan and lock-downs in China, anything can happen.

Retail prices of gasoline and diesel will probably start to ease next week with the drop in crude prices.  Considering the tight margin markets and summer demand starting to diminish as school starts, I don’t expect to see dramatic drops in prices at the pump.

Propane price continues to hold very firm, even in a downward market momentum for crude oil.  Propane inventories are now officially at eight year lows and exports are kicking back up again!  I believe the only way out of the propane supply mess at this point is higher prices.  The arb between US and Middle East exports has to increase.  There has been small dips here and there but overall, the price of propane continues to hold and track towards higher as we go.  If you have not contracted your propane for the season, there is still time to call and lock it in.

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