Good morning!

Happy Friday!  Lots to get caught up on here.  I was on vacation last week so I’ll cut to the chase.  Going into this week, the big news was going to be whether or not WTI crude prices can hold above $80/barrel.  Last week crude prices sold off a bit but as prices started to touch closer to $80/barrel, support started to build.  In addition, the US announced that they would refill the petroleum reserves at $80/barrel which actually supported higher prices in crude!  Announcing the “strike price” on a reserve refill gives support to future pricing.  If the US wanted to refill reserves, the strategy should be to make no announcements and “slow and steady” purchasing.  Basically, you want as few as people to notice when you are buying.  So going into this week, support at $80/barrel was VERY strong.  By the time of this writing, WTI price fell BELOW $80/barrel, even after all the support built in last week.  The UK announced rates cuts at a time of record inflation pushing markets on Friday into a tailspin.  The strength of the dollar soared to new highs out of the gate this morning and the bottom fell out of the market.  I guess for now, it’s time to go to the kitchen and make some popcorn.  The next level of support is under $70/barrel.  The looming issues still causing mild jitters are Russia threatening to use nukes and hurricanes hitting the Gulf of Mexico.  For now, sit back and be patient.

In local news, as crude oil markets collapsed, gasoline cost soared over $1/gallon higher in the Chicago spot market.  Yes, you read this correctly.  Gasoline prices went up $1/gallon in three days.  A Bp refinery in Toledo suffered a massive explosion killing two people this week.  The loss of the refinery puts immense pressure on an already tight market due to short supplies in the neighboring Group market.  Diesel prices did not go up as much since gasoline supply is much tighter.  My recommendation is to fill up you car because prices could get ugly for awhile.  Once a roadmap to normal supplies is realized, prices will fall faster than you can blink!  Retail markets are going to be very interesting in Wisconsin for the coming weeks.  Harvest is starting to take shape so demand for diesel is going to skyrocket.  So far, markets seem to be prepared and we hope to scoot through the next month.  However, a hurricane to the south or east coast could mean disaster with the Chicago and Group struggling to find supply reliability during this time.  There will be no spare capacity in either market to help out the East Coast or Gulf Coast.

Propane prices continue to hold as supplies are looking better than last year.  However, we are still under the five year average in national inventory and corn drying has not been completed.  We will know in a couple of months how propane is positioned for winter.  But if crude prices truly collapse going into an economic downturn, propane prices might be held in check.  The winter is predicted to be colder than normal, so a potential offset to low crude prices might occur due to increased winter demand.  As always, only time will tell.  But for now, at least propane supplies are in better shape than a few months ago.

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

Best regards,

Jon Crawford

Good morning!

Crude prices fell again this week with WTI price moving closer to $80/barrel.  A lot of “technical selling” took place as traders repositioned to the upcoming winter after summer driving season.  The next major floor for WTI is $80/barrel and the resistance to push lower looks very strong at this time.  Although the EIA released a massive build in crude oil inventories on their weekly inventory report, the majority took place outside of Conway, meaning that exports were down.  The US is still drawing down crude supplies at a decent clip.  Europe announced price caps on heating bills as well exploring a cap on Russian crude import price.  Countries are trying to convince India to come on board with the Russian crude price cap, but that will be a heavy lift.  China is really showing signs of weakness in their economy.  Shipping rates are decreasing, productivity is dropping, and a new “election” is taking place soon with an emphasis on more isolationist economic policies.  The US and Australia responded with a massive trade meeting to try and work out deals between countries including Vietnam, India, and Indonesia.  All three of these countries could provide incredible relief on the trade markets if China starts to pull back.  The labor rates in China have increased dramatically in order to promote the rise in common wealth, so other nations are seizing the opportunity to bring economic prosperity to their citizens.  The development of new global trade partners will be very interesting to watch over the next couple of years.

In local news, gasoline and diesel retail prices continue to drop.  Chicago spot market has continued to give back their delta compared to other markets.  I expect to see diesel retail prices ease a little bit more at the pump.  Gasoline prices will easily hold under $3.49/gallon next week.

Propane prices continue to stay steady going into winter.  Although inventories are up from last year, our national volume is still lower than average.  If corn drying ends up being a nothing-burger, we should be in pretty good shape for the winter.  However, we must be conscious that Eastern Canada is 50% below last year’s inventory level which means there is no spare capacity coming from Canada this year.  As long as there are no major supply hiccups in the US or major “Polar Vortex” situations, we should scoot through the upcoming winter.  However, we highly recommend filling your tank right now at the current price.  I still believe that propane prices will go up this winter as supplies start to fall.

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

Best regards,

Jon Crawford

Good morning!

I just wanted to take a moment and wish everyone a safe and enjoyable Labor Day weekend!  As we head into the fall, prices are starting to ease a bit more on demand worries outweighing tight supplies.  Although the world crude oil market is in slight surplus, any hiccup could be a disaster.  Europe is trying to shore up more energy supplies and so far, things are starting to look a little better.  Countries are now talking about trying to cap Russian crude prices.  But the action would be fairly futile since India and China would never agree.  Russia has continued to make record profits as they sell crude oil to new customers at high prices.  For now, WTI prices are holding just under $90/barrel after jumping last week.  If economies around the globe start to slow down, the major peaks of oil pricing could be behind us.  The headwinds include hurricanes at the US and the upcoming severity of winter around the globe.  Although crude supplies are looking at being in deficit next year, the US production continues to slowly increase and I believe the rest of the world will catch up by next spring.  I’m not as “doom and gloom” as others for next year.  But, this is the world of commodities so anything is possible!

In local news, a fire at the BP Whiting refinery in Indiana halted the production of 300k barrels per day of gasoline to the market.  Thankfully the outage will be short lived and the heavy travel of summer will be behind us.  Gasoline prices will probably hold into next week.  Diesel prices have finally eased from record delta spreads to gasoline.  I expect to see diesel prices at the pump come down next week.

Propane is the broken record.  Propane prices are steady as she goes with great value compared to all other petroleum products.  We highly recommend filling up now before it gets cold, as well as locking in at least some of your winter usage.  Propane prices could catch a ride higher at any time when looking at the value prop compared to crude prices.

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! Well, petroleum commodity prices must be watching the Artemis launch to the moon with hopes of hitching a ride.  From July 4th until about last week, petroleum products were enjoying a nice downward trend into a manageable price range.  There was a palpable exhale in the air over the last month.  Moods of consumers were improving.  Farmers were optimistic.  And the markets were happy to see another sign that inflation was easing and lower-cost energy could soften the recessionary blow.  Wow…what a difference a week makes.  OPEC+ announced this week that they will support Saudi Arabia in cutting production, if necessary, to keep prices high.  The announcement came on the heels of a potential deal on the Iran Nuclear Accord, which Saudi Arabia is definitely opposed.  The markets went into full panic mode and crude prices shot higher.  The news was a definite blow to the Biden Administration in hopes that Saudi Arabia would help keep prices lower going into winter.  Saudi Arabia does not approve of Iran bringing 2M barrels/day back into the market and poaching Saudi customers.  However, the world NEEDS an addition 2M barrels/day of crude oil going into the winter.  Right now, any additional spare capacity in the market has come from the US selling their Strategic Petroleum Reserves.  The US has depleted 50% of the SPR and is now back at 1980’s levels.  The sale of the SPR ends in October, just as the world desperately needs more oil for winter.  The Iran deal was meant to plug the deficit after the SPR sale stops.  If the Iran deal does not go through, and Saudi Arabia cuts production, I’m not sure the US has enough SPR capacity to keep markets stable.  The world is in a definite “stand-off” on crude oil right now.  The situation developed very quickly and clearly the negotiations taking place behind closed doors broke down and the markets were not prepared.  I’m not sure what to anticipate at this point.  The US Energy Secretary is calling to possibly cut back our record 11M bpd exports of petroleum products.  But the US has also promised Europe we would help them.  Biden and company are in big trouble and I’m not sure how this situation will play out.  Regardless, US consumers are going to pay through the roof on heating bills this year for electricity, natural gas, and fuel oil.  Propane has escaped the same trajectory higher in price due to known upper bound limits on exports and better ability to forecast.  Although propane prices could blow out higher, most consumers are better price protected with future contracting.  I truly believe that the US consumer will be drained of excess cash due to heating/electricity bills over the next eight months.  Unless we have a silver bullet that pops the crude market, I see a hurricane disaster that popped up out of nowhere on the horizon.

In local news, prices of gasoline have stabilized but diesel prices have blown out to almost $1.50/gallon more in cost compared to gasoline!  I have never seen the spread that wide in cost between gasoline and diesel.  The Chicago market is incredibly tight going into harvest and spot cash markets are panicking.  Retail price on diesel will potentially go over $5/gallon again.  I’m hoping that maybe some of the ramping up in price is an end of month “short squeeze” due to refinery maintenance.  But we just won’t know until after Labor Day.

As I have been writing all summer, propane prices have been fairly stable and are providing an incredibly valuable opportunity.  The price of propane is relatively cheap compared to both natural gas and diesel.  If propane supplies become pinched this winter, a major blowout in higher prices is very possible.  Please take advantage of the current low prices and lock in 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

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

Good morning!

Happy Friday!  Crude prices are starting to do “the limbo” game.  The bar continued to be lowered this week and traders kept passing through without touching.  As of today, WTI prices are now LOWER than when the war in Ukraine started.  WTI crude price is looking at closing below $90/barrel this week.  The crack spreads on gas and diesel have collapsed as demand erosion spreads across the US and Europe.  The fear of continued economic recession has gripped markets tightly.  In addition, a higher than expected jobs report today gave further fuel to the FED’s tightening policy.  For now, we expect interest rates to continue to trend higher. The backwardation curve on crude prices has falling even lower.  Citi Bank is now calling for WTI prices to collapse towards $65/barrel.  However, unlike market collapses in the past, most believe that OPEC+ will step in at $55/barrel and start production cuts to keep prices from falling below the minimum sustainable operations and profitability price point.  OPEC+ is also expected to announce a minimal increased production level beyond the agreed upon quota to appease Biden from his visit last month.  The unknowns at this point are hurricanes.  Hurricanes could actually cause massive price spikes over the next couple of months.  Even though crack spreads are falling, we are still one refinery shutdown away from going into deficit production.  Hurricanes are already more common this year compared to last year.  We’ve had three named storms already this season compared to only one last year at this time.  And last season was one of the most active storm season’s in 50 years.  For now, we can enjoy some relief on prices at the pump, but be prepared to jump higher if hurricanes take out the Gulf Coast production.

In local retail news, gasoline and diesel prices continue to trend lower.  In looking at the spot market collapse this week, I expect to see prices at the pump to go even lower next week.

Propane prices continue their stable trend of bouncing along the bottom of low prices.  However, propane inventory data from Canada was confirmed that supplies are 50% lower in the East compared to last year.  This means that if we have to rely on Eastern Canadian propane for a cold winter, prices will be very high.  I still recommend filling your tank now and locking in some gallons for the upcoming season.  Cost averaging is the best form of price protection.  Market timing in these volatile times is luck, not skill.  🙂

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 data released this week is causing much confusion and forcing traders to take pause. For months now, the fear of recession has loomed over the markets.  Analysists have been waiting patiently for earnings and Q2 GDP data to be released that would either confirm their fears or maybe kick the can down the road.  Well, this week was a head scratcher.  Earnings from big retailers showed slow growth and guidance was weak.  Walmart showed slowing sales.  GM was down.  Facebook and other advertising-based tech companies all showed slowing growth and weak guidance. And then the GDP report for Q2 showed almost another 1% contraction, confirming two straight quarters of negative growth to start the year.  By mid-week, most folk were confident in calling the “down-cycle” to continue.  But then on Wednesday, the EIA reported draws on crude oil, gasoline, and diesel.  The draws were a surprise that possibly demand was still intact at current price levels.  Then Ford and Amazon hit their numbers out of the park reversing the negative earnings trend for the week.  Biden and Xi met and are trying to “mend the fence” for China and America to work better together.  Ukraine and Russia struck some food supply export deals.  Europe is starting to get control of their nat-gas situation.  And no one believes that OPEC+ can increase crude production into the end of year.  Basically, market started to shrug off the fears.  Oh, and did I mention that the FED officially raised rates another .75%, confirming the two largest back-to-back rate hikes in over 20 years?  Even the FED announcement on Thursday did nothing to stop the markets grip on positive sentiment.  WTI Crude prices are climbing back to $100/barrel.  Supplies are tight, but we are winding down from high demand seasons across the globe.  Is the rally real, or are we setting up another head-fake going into the end of the year?  I believe the reality of where we are heading will start to flush out by end of September.  Until then, emotions on news stories will run the market.

In local news, gasoline and diesel prices continue to slowly drop.  Unless we have a major refinery issue in the Midwest, I do not expect to see gasoline retail prices above $4/gallon, and retail diesel should remain below $5/gallon.  The foundation is shaky, but it’s much better than last month.  Now we need to hope for a staggered harvest.  A rush-harvest could really cause some supply issues in the Midwest.  But that’s a couple of months down the road.

Propane is continue it’s skip along the bottom.  I can not continue to stress enough the value of propane at current prices.  Propane inventories are not in great shape right now.  We did not build national inventories to levels that I am comfortable with for this time of the year.  If we have a strong corn drying season and a cold winter, propane prices will go up dramatically.  In the past, Canada rail propane has been our savior.  But this year, new petrochemical factories have opened in Canada which will take most of the excess propane that could be shipped to the US.  I am not sounding any alarm bells or asking for panic.  I’m just saying that don’t relax on propane based on current market conditions and past experiences.  If you have not filled your tank this summer, please do so.  And I highly recommend contracting some propane for the upcoming heating season.

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

Best regards,

Jon Crawford

Good afternoon,

After Biden’s trip to Saudi Arabia, oil prices have failed to maintain any rally this week.  Demand erosion continues to threaten markets as fears of recession loom in the US and Europe.  The European Central Bank finally raised interest rates this week. In addition, mortgage demand in the US plunged to a 22 year low.  And to top off the week, Russia reopened their main natural gas line to Europe showing signs that maybe Russia will be unable to economically self-support a complete shut down.  WTI oil prices took a ride this week above $100/barrel but have settled out around $95/barrel for the week.  The Ukrainian “War Premium” is getting close to being wiped out of the futures market.  If oil supplies start to build around the globe, a race back to $70/barrel will be very possible.

As discussed last week, in local retail news, gasoline prices fell below $4 and diesel prices fell below $5/barrel.  I expect gasoline and diesel prices to hold near current posting into next week.  The drop in price is a nice little relief going into the end of summer.  I don’t want to jinx it, but we might have peaked on retail prices for the year.

Propane prices continue to skip along the bottom.  I really don’t believe there is much more downside risk in propane.  However, I do believe there is much more upside risk to propane this heating season.  We highly recommend that you order a summer fill and contract some propane for the upcoming heating season.

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

Best regards,

Jon Crawford