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The Wild Crude Yo-Yo

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Good morning,

I hope everyone has been enjoying the most beautiful week of summer so far.  The weather has been fantastic!  Crude oil prices took a nose dive this week after Trump announced that he would break the truce with China on the trade war.  Trump says that he wants to put another $300 billion tariffs on Chinese goods starting September 1st.  The news was an absolute shock to the financial sector and WTI price broke through the technical floor of $55/barrel.  Once the price broke the floor, the bottom fell out and WTI closed at the lowest price of the year.  WTI dropped over $4/barrel which is the largest single day drop in over four years!  The week started with a rally in crude prices as the markets expected the FED to move towards a dovish pattern.  In addition, the US inventories of crude oil, gasoline, and diesel all experienced major draw downs.  So crude prices were primed for upward movement this week.  But the FED gave the tone that they remain hawkish in their views and the announced rate drop is only an adjustment.  And then Trump announced the September Chinese tariffs.  And the cherry on top was the report that China has purchased almost 12 million barrels of Iranian crude legally and has the crude in bonded storage at port in China which does not violate US sanctions.  This means that Iran has been able to offload crude to China at discounted rates for the work that China does in Iran without violating US sanctions.  Therefore, Iran has found a way around the sanctions.  If China decides to violate and start using the bonded crude oil, some traders believe another $5-7/barrel could come off of crude prices.  In other words, there is a glut of crude oil sitting out there just waiting to be used.  More will develop on this I’m sure.

In local retail news, retail prices have stabilized on gasoline and diesel.  Although there was a slight uptick in prices this week, I don’t expect to see any major changes on retail prices in the coming week.

Propane prices continue to move with crude.  As I have been writing, propane inventories remain very high, but the petrochemical companies started buying propane a couple weeks back.  The petrochems can blow through inventory pretty quickly, so we remained patient to see if a trend was forming.  Then this week, there was a fire at the largest Exxon/Mobil petrochemical factory in Houston.  This caused price spreads between the two storage hubs to collapse.  With the loss of more demand, propane just can’t seem to find any legs for upward momentum.  If you have not filled your tank this summer, please do so.  In addition, we have contracts for next heating season available.  Please call the office or go online to place an order!

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

Best regards,

Jon Crawford

Lots of Noise, No Movement

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Good morning,

Crude oil ended the week with little change in price even though the headlines were packed full of influential data.  On the geopolitical front, Iran captured a ship from the UK, claimed to have caught US spies in Iran, and threatened the rest of the world’s Navies to stay out of the Persian Gulf.  In the past, these types of incidents would have triggered a 10-15% premium increase on crude prices.  But this week, the news did nothing to move the thermometer on risk premium in crude prices.  I believe this is because the risk of supply surplus is winning in the minds of traders.  Demand erosion is continuing.  This week, even after the largest reported for the year draw-down in US Crude Inventory, prices barely moved.  The lack of movement is because crude is being exported but not necessarily delivered.  Ships of crude oil are starting to appear without a home.  The scenario starting to form has caused much pain on prices in the past.  In addition, China’s economy seems to be cooling and the US is not far behind.  I don’t think recession fears are on, but maybe a pullback.  But any pullback in demand when production is at an all-time high, even with cuts in place from OPEC+, any movement to surplus will form a global glut in crude oil inventories and cause prices to crash.  I actually believe that if OPEC compliance does not continue through the end of the year, we have a risk of WTI crude prices plummeting below $50/barrel to start 2020.  And I don’t think that low of price would slow down the US production.  I really think we need to experience WTI prices closer to $45/barrel before we see US production dramatically slow up.  For now, it’s possibly sideways movement on crude prices until end of summer.

In local retail news, as I was writing last week, retail prices peaked and have come down like expected.  I don’t expect prices to drop much more at the pump though.  However, it’s better than an increase during summer travel!

Propane prices continue to stay very low with high volumes of national inventory.  Please take advantage of these prices and fill your tank.  We will deliver below the minimum requirement during this time to try and help everyone save some money!  We also suggest that you contract your propane for this coming winter.  The contract prices are lower than last year and are a good value.

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

Best regards,

Jon Crawford

Demand Erosion In The Lead

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Good morning,

Despite continued tensions with Iran, demand erosion is winning on directing prices of crude oil.  WTI crude fell from over $60/barrel posting last week to now just over $55/barrel.  China has posted terrible economic data.  But we always need to remember that those numbers are not always trustworthy.  In addition, oil tankers from West Africa have been found in the ocean without a home.  In other words, buying is starting to slow down, even though OPEC+ has taken 1.2M barrels/day off the table.  If world demand truly slows down, then we might see crude prices drop another $5/barrel!  I am absolutely stunned at the lack of interest in traders biting on geopolitical issues right now.  With all the turmoil surrounding Iran, the data must be very convincing showing as long as the US continues to pump at current levels and world demand continues to decline, the oil market will move into surplus again, even with all the current OPEC+ cuts in place!  The next six months are going to be very interesting to watch.  If WTI crude breaks through $54/barrel, then we have a shot at seeing the floor fall out back down to $49/barrel.

In local retail news, gasoline and diesel prices have peaked following the landfall of hurricane Barry.  All oil fields have restarted and prices relaxed.  For now, I think we have experienced the highs for the month of July.

Propane prices continue to remain very low.  Propane continues to trade with crude oil, so if crude prices stay low and propane production stays strong, we should have robust inventories for the winter.  However, because propane prices have now fallen into competitive spreads against natural gas, petrochemical companies are starting to bite on stored propane in the south.  If crude prices stay low, I could see petrochemical companies taking a huge chunk out of inventories in the coming six months.  In addition, if corn drying demand is strong, we could see a further draw on inventories.  I do not believe that we will see major price spikes by Thanksgiving, but if the winter is very cold, we could start to see prices spike after Christmas into 2020.  If you have not filled your propane tank this summer, please do so!  Contracts for next heating season are also available.

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

Best regards,

Jon Crawford

Hurricanes, Iran, the Fed, and More….

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Good morning,

Crude prices went on a wild ride this week with a frenzy of information.  Iran apparently tried to intercept another crude oil ship in the Straight of Hormuz.  Iran is denying the accusation, but the UK is adamant that their navy fended of some of Iran’s Revolutionary Guard’s ships.   Back at home, crude oil inventories decreased again by a whopping 8M barrels.  Then the FED gave notice that rates cuts are back on the table causing the Dollar to drop in value, which increases the cost of crude.  Then, the Gulf of Mexico is preparing for Tropical Storm Barry.  Shut downs of crude harvesting in the Gulf were announced mid week.  But then a big piece of bearish news came out of OPEC yesterday which stalled the rally.  OPEC believes that oil demand will drop in 2020 and a potential for a crude oil surplus at current production levels is possible.  And then forecasters lowered the potential destructive impact of Tropical Storm Barry.  So we started the week back below $60/barrel crude on WTI and ended the week back above $60/barrel on WTI.  Wild ride this week!  As always, we will continue to monitor headlines and see where these recent developments take us next week.

In local news, I would prepare for higher prices at the pump.  Gasoline costs have risen compared to the retail price.  Most stations in our surrounding area are selling gasoline at or below cost.  As we continue to hold higher costs, eventually retail will catch up.  I expect to see 2.69-2.79/gallon on gasoline retail in the coming week.  Diesel cost has increased as well and I expect to see diesel retail prices climb a little.

Propane prices have continued to remain very, very low.  If you have not filled your tank for the summer, I recommend doing so sooner than later.  We have also released our contract prices for the next heating season and can help you with choosing which option is best.  Please call our office for more information.

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

Best regards,

Jon Crawford

Crude Prices Taking Pause

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Good afternoon,

After another run up on WTI price this week, the rally has taken pause to wait on the results of the G-20 meeting this weekend and OPEC next week.  WTI has reached $59/barrel after a massive draw down in crude supplies here in the US.  In addition, most traders are expected to see OPEC continue with supply cuts.  The US announced that China has agreed to terms on a trade deal and the details will be released soon.  All of this news is holding WTI at current levels.  For now, markets are taking pause and a “wait and see” approach is currently in place.

Local gasoline prices have continued to rise and will probably continue into the week of the 4th.  Diesel prices have climbed as well.  Prices at the pump will hold until the world meetings next week are completed.

Propane prices are continuing to stay low!  Please contact us now for a summer fill.  Also, contract prices for next heating season will be released next week.

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

Best regards,

Jon Crawford – Pres.

Crude Prices Skyrocketing

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Good morning,

I hope everyone had a great week.  Unfortunately, two major events happened this week that caused the price of crude oil to skyrocket.  Iran shot down a US drone plane on Thursday.  The response from Trump went from anywhere including retaliation to maybe it was just a mistake from someone in Iran.  The geopolitical tensions between the two countries put the risk premium on full alert and traders bought in.  The other main event was the FED announcement that rate decreases are back on the table.  A rate decrease devalues the US Dollar and increases the price of crude.  On the supply/demand side, crude stocks decreased over the past week more than expected and a refinery in Philadelphia suffered a large explosion forcing a shutdown.  The refinery in Philadelphia is the largest on the East Coast and puts tremendous pressure on other East Coast refineries to fill the gap because no products from the robust Midwest have direct pipeline access to the East Coast.  Hopefully supplies from the South will be able to be shipped, but it takes time.  For now, we will wait and see.  But the geopolitical and FED announcement just moved the floor on WTI to $55/barrel and put a stop to falling prices at the pump.

In local retail news, I would not expect to see the price of gasoline fall below $2.49/gallon at the pump.  I also think diesel prices will stay in the $2.79/gallon range.  With what happened this week, the sell off on refined products came to a screeching halt.

Although crude prices have risen dramatically, propane prices have only risen a bit.  We are still at the lowest retail price in five years and we recommend everyone filling their tanks now.  With a record amount of propane in inventory, spot prices will continue to be very low compared to forwards contracts.  Once the glut starts to decrease, we will see spot prices rise.  I expect that to happen in October, as we prepare for a potential record breaking corn drying year.  Contracts for next season will be released in the next week or so.  Stay tuned for more info.

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

Best regards,

Jon Crawford

Prices Continue to Collapse

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Good afternoon,
 
I hope everyone is enjoying their Friday and looking forward to the weekend. WTI Crude prices have continued to skip along the $50/barrel floor. The slowing world economies and the continued ramp up in the China / US trade war has most speculators spooked on the potential for crude prices to break out higher. In fact, many traders believe that even an OPEC cut is already priced in. Basically, traders are saying that no matter what, the slowing economy is the most damaging issue affecting crude prices. The one potential for a spike in price that is always hanging around is a geopolitical event. And just like that, on Thursday two ships in the Middle East were attacked. Crude prices soared to start the day but reversed course to settle up not even 3%. The IEA and world economists believe that production is far outweighing demand if the economies across the world continue to slow. The US inventories of crude, gasoline, and diesel experienced more builds this week. In addition, jobless claims were higher than expected on the National Jobs Report. For now, you can sit back and watch the prices at the pump continue to fall. But look out. If someone does something to escalate the situation in the Middle East and traders believe that a “risk premium” is back on, crude prices could jump $10-15/barrel in a blink of an eye.
 
In local retail news, retail prices on gasoline and diesel continue to drop. I expect to see prices continuing their downward trajectory until something changes on the world stage.
 
Propane retail prices dropped again this week! The prices of propane are unbelievable. As we sit, propane storage inventories in the US have the chance of breaking the 100M barrel mark, which has only happened three times in history! That being said, if the winter is warmer and the crop yields are low, we will be swimming in cheap propane for the entire year! For now, it’s a game of guessing “how low will propane go?” And no one knows! Please call for a summer fill. These prices are too good to pass up. We will send out next season’s contract information closer to the 4th of July.
 
As always, if you have any questions, comments, or concerns, please feel free to give us a call!
 
Best regards,
 
Jon Crawford

Bottom Forming in the Crude Market?

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Good morning,

Well, the price floor carved out last week on WTI gave way under the announcement for tariffs in Mexico, coupled with a dramatic increase in US crude inventories this week.  Much of the increase in inventories is being blamed on demand erosion in the Midwest from flooding.  Farmers are almost 50% behind in most parts of the Midwest which greatly affects demand.  Others are chatting that the EIA has reported false inventory numbers.  Regardless, WTI Crude broke through the $52/barrel technical mark and fell to $50/barrel for a brief moment.  The massive dive in crude prices has caused OPEC to up the talk around extending or increasing production cuts through the end of 2019.  In addition, the trade war with China continues to spook traders on potential economic erosion in China and possible recession in the US.  So then the FED announced this week that potentially a rate cut is on the table.  The chatter from OPEC as well as discussion of a FED rate decrease is putting upward pressure on crude prices and possibly carving out a floor for now.  I do believe that we have experienced a bottom in prices until the OPEC meeting on June 26th and 27th.  So for now, sit back and watch as prices at the pump slowly come down!

In local retail news, gasoline and diesel prices are starting to slowly come down.  I expect to see the downward trend continue into next week.

Propane prices have also stayed very, very low.  We are now at the lowest price in almost five years.  I recommend that everyone fill their tanks as soon as they can to take advantage of the current market condition.  Contracts for next season will be out the first part of the July and will be lower priced than last year!  It’s always nice when we can announce good news. 🙂

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

Best regards,

Jon Crawford

Crude Prices Become a Falling Knife

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Good afternoon,

Well, May officially became the worst performing month for WTI and Brent in the last six months.  Not only did the China trade war heat up to a new level this past week, but Trump sent a shock wave to the markets this morning with an early morning tweet announcing tariffs on Mexico.  WTI crude officially fell through the support level of $57/barrel and will now try and target $52/barrel.  Without any change in tone or action on the trade front, I believe that WTI is finding a new home under $60/barrel for a while.  In addition, China’s manufacturing data was weak, showing that maybe the trade war is slowing the second largest economy.  However, there are some geopolitical developments that could cause a pop in price.  In Libya, infighting is continuing and on the verge of another civil war.  If this happens, crude exports could be shut off to zero.  And most market analysts will say that none of this current conflict is priced into the market.  Also, China is about to receive a shipment of Iranian crude which would violate sanctions.  But countries are already figuring out ways to get around the sanctions.  And, major hedge funds have not only left their long positions in crude, but also their short positions!  Basically, “Big Money” is exiting the crude trade.  So for now, crude prices are in free fall.  What a difference a month can make!  The wild ride of crude oil prices has been the most volatile I’ve seen in a few years and I don’t see the pattern changing anytime soon.

In local retail news, terrible flooding in the Midwest has not only eroded demand but also put major bottlenecks in supply chains.  Prices out of the local Chicago and Group markets spiked to their highest differentials in years.  But prices are starting to ease as the bottlenecks are being worked out.  I could see prices at the pump starting to retreat in the next week.  Diesel prices are slowly coming down as well.  The US remains very strong in supplies and not much out their for major supply shocks at the moment.

Propane prices continue to stay very low.  In fact, we are currently at the lowest retail price in almost three years.  I strongly suggest that everyone fill their tanks at these prices.  There is a greater risk of prices going up from here rather than going lower.  Contract prices for next year are shaping up to be cheaper than last year and will be released in the coming weeks.  Stay tuned for more info on contracts.  But in the meantime, fill your propane tank!

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

Best regards,

Jon Crawford

Trade War Jitters Are Winning

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Good afternoon!

Although news of unrest in the Middle East continues to ramp up in reporting from news outlets, the fallout from the trade war between the US and China is winning out on the battle to move crude oil prices.  Crude oil prices have relaxed from last week highs and are now moving closer to the lower leg of recent support values.  WTI is moving closer to $59/barrel which is the current floor.  Today the EIA reported large builds not only in crude oil inventories but also in gasoline and diesel inventories.  The builds were surprising considering that refinery utilization was low and crude production dipped just a bit.  For now, as long as the temperature in Iran does not heat up anymore, crude prices are losing some support.  In addition, hedge funds moved out of long positions and are now at the lowest ratio of long-to-short since last year.  In other words, hedge funds are putting their money on cheaper prices later in the year.  I gotta say that the first five months of this year has been one roller coaster of a ride for the crude oil markets!

In local retail news, Chicago spot prices finally fell back down in line with Group spot.  I expect to see retail prices on gasoline continue to drop just a bit.  I was not expecting to see a drop before Memorial Day, but I think the consumer will see a little relief.  Diesel prices are holding more steady on good demand right now.

Propane prices continue to drop with large national inventory builds and a huge stockpile compared to last year.  I don’t see propane prices falling off a cliff, but I think the current spot prices of propane will be here for quite some time this summer.  If you own your own tank, retail prices are now under $1/gallon!  If you can hold any propane I strongly recommend purchasing at these values!  Contract prices for next season will be released closer to July 4th.  Stay tuned for more info!

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

Best regards,

Jon Crawford