Oil Prices Steady
Good morning,
Oil prices sold off earlier this week on surging coronavirus infections across the globe, lack of a US stimulus deal, and fears of demand erosion with an abundance of supply. The sell off was halted on Thursday when the US reported massive draws in crude oil and refined product inventories. The market really seems to want WTI to stay above $40/barrel. Even though fundamentals are quite bearish for crude, there are many qualitative factors affecting crude prices. We have the Presidential election coming up, rising coronavirus infections, world wide reports of vaccines from multiple countries, and overall anxiety about what the future holds. The anxiety of the unknown drives volatility in unexplained ways. I would say that right now emotions are driving much of the markets and until the Presidential election is behind us, it’s going to be a bumpy ride. Markets will still be volatile after the election, but we we will have at least one of the “unknowns” checked off the list.
In local news, retail gasoline prices are holding near $2/gallon and diesel prices on average are above $2/gallon. I do not see much relief in diesel prices until after the fall harvest. So far, the harvest is going smoothly and quickly. I expect harvest to be mostly completed by early to mid-November.
Propane is the biggest headscratcher of all commodities I follow. Prices have climbed dramatically and quickly going into winter index economics. Although propane inventories are at record levels and corn drying demand is the lowest in many years, prices are holding steady. Propane prices feel very, very heavy and unless the cold snap holds for the next month or so, I don’t see propane prices holding at these current levels.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford
Politics Like a Hurricane… Plus a Real Hurricane
Good morning,
I hope that this message finds everyone well. Crude oil markets went on a wild ride this week. After a steep sell off from Trump announcing his positive COVID-19 test and hospitalization, markets rebounded when Trump returned home. In addition, politics started to play out where stimulus packages would get passed in Congress. And then hurricane Delta poked its nose into the mix shutting down oil production and exports in the Gulf. To top off the rally back, US inventories experienced a draw due to production cuts. By Wednesday, crude prices were back to the highs of last week. And now with the hurricane hitting land soon, traders took WTI over the $40/barrel mark and will probably hold until next week sometime. Crude prices are very volatile. I was expecting crude prices to drop today based on increased numbers of jobless claims and 23.5M people out of work with unemployment benefits running out. Something needs to happen to support the economy. Our entire airlines industry is going to collapse and 23.5M people out of work going into winter and holiday season is not particularity great for oil demand. If Congress gets a deal done I believe that crude prices can hold. If there is no deal on stimulus, then I could see crude prices tanking into the end of year.
In local news, retail prices have finally started to catch up to the increased cost on gas and diesel out of the Chicago spot market. Although spot prices have eased a bit, I expect to see gasoline and diesel prices over $2/gallon for the coming week.
Propane production and supplies are ample, but prices continue to climb. The situation is much of a head scratcher. We are already at contract prices for our spot market pricing. I think propane prices are setup to ease if the winter is mild. You can still lock in your prices for winter though. If you are unsure if your account is keep-fill or will-call, please call the office to clarify. Hard to believe that winter is already sneaking up!
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford