Good morning,

Well, not much has changed since last week. The news on the open market is fairly calm. However, hedge fund managers are enjoying making their predictions of where WTI might head this year. My feelings are that WTI is over bought. There has not been this much hedge fund money on long position in the crude market since 2013. No wonder all the news is trying to “push” the market higher! I’m not sure without a major even there is much steam left in the crude rally. Russia is starting to float the idea of leaving the OPEC deal. When that event would occur is up in the air. Possibly at the June meeting or sooner is my guess. Now that prices of crude have gone higher than anticipated, I am watching for someone in OPEC to start the old fashioned cheating game. In addition, if we can make some moves to get the strength of our dollar moving positive, crude will also face another headwind. Even though crude inventories continue to fall in the U.S., production is starting to grow again. Finished product inventories are above average, and I expect to see some builds in crude inventories soon. I’m just not sold that we are truly at these prices based on current market conditions. I guess time will tell!

In local news, gasoline prices bumped up a smidge due to local Chicago market differential jumps. Diesel prices have continued to remain in a tight range. Propane prices ended up climbing a small amount due to some unanticipated supply disruptions. However, due to the warmer weather and forced allocations, supply is starting to ease back to normal. I am thinking that we are at about the peak price for the year. As I have said before, if warm weather continues into February, I expect to see propane prices fall. Exports of propane are not holding up to what was expected and demand is actually off a bit.

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

Best regards,

Jon Crawford – Pres.

Good morning,

Well, the stock market exuberance bug seems to have found its way into the crude oil market. Crude prices continue to climb with bearish fundamentals forming. At the moment, geopolitical tensions have eased in major oil production areas. Asia has cut imports on crude due to high costs. This will cause imports of refined product to increase, but the world is very rich with refined product at the moment due to great refining margins from the U.S in particular. The U.S. continues to move in the direction of more production and increasing refining capacity. Also, the fundamentals on the crude oil charts are shaping up exactly as they did in September 2014 right before the November bloodbath sell off. The ratio of long positions versus short has hit levels not seen since 2014. Therefore, the recent rise in price is based somewhat on an emotional movement. We all know that OPEC will not extend cuts any further. And some members are starting to complain that prices are now TOO high. Imagine that! So the first person to blink in the coming weeks could trigger up to a 15% sell-off in my opinion. Personally, I believe that WTI crude oil is about $10/barrel over bought. I’m thinking that February could be an interesting month. More to come on this in the following weeks and month.

As crude prices continue to climb, prices at the pump are following. Since the start of the year, base cost on gasoline has increased almost 9% causing gasoline prices to move towards $2.39-2.49/gallon. Diesel retail prices have also climbed, especially as winter blending elements such as #1 ULSD have increased in premium. Diesel retail prices for the most part are over $3.00/gallon.

Propane prices have steadied since the three week cold snap. Propane exports are looking to dry up in February due to cost fundamentals and lack of demand in Europe. There is now a possibility of seeing propane retail prices drop in February. It’s amazing how fast the propane situation can change since we now can export up to 1MM barrels/day of propane. If the exports dry up, we can build inventory quite quickly if the winter is mild. The exporting game has become quite the wild card in the U.S. propane trade.

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

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

Good morning,

There was an announcement late last week from the Governor’s office issuing an Executive Order lifting the Hours of Service limits on drivers delivering propane due to a shortage. The information released was not true. The press releases misunderstood the actually problem. The problem we are facing is a transportation issue, not a shortage of propane issue. Due to the high volume demand from the longer than expected cold snap, most propane terminals have put customers on allocation to make sure that all Wisconsin companies have steady access to propane. With allocations in place and some terminal areas running low, long lines can form at these terminals. A driver’s logged hours include the wait time to load. Under these circumstances, most drivers fill their log book waiting in line and not delivering propane. So the Executive Order lifts the hours mandate so drivers can deliver the propane after waiting in line. Lifting these restrictions also allows companies such as Crawford Oil and Propane to deliver extra hours at night and on the weekends. We delivered over the weekend last weekend and we will probably do so this weekend in order to stay on top of all our orders and take care of our customers.

I have also included a link below to an article from the Wisconsin Propane Gas Association retracting the information in regards to a “shortage”.

http://wxpr.org/post/no-shortage-propane-driver-shortage-led-walker-order#stream/0

We have received many phones calls about a potential shortage. The media coverage on the issue has also spurred additional “panic buying”. I wanted to make sure you all knew that the current situation is transportation and logistically due to high demand, and not a shortage of propane coming to Wisconsin. Please keep this in mind as you order. Our crew is extremely busy and working overtime to meet the demand of this cold snap and panic buying based on news of a false shortage. We are meeting all demands of our customers at this time and see no issue with access to product. We expect to be all caught up by the end of the weekend.

Once again, thank you for your business and if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

Good morning,

Happy Thursday. Oh, what a difference a week makes. For the past few weeks the markets have been digesting the OPEC cut extension set to move through 2018. These cuts are looking to remove a giant glut of crude in the world marketplace and bring the fundamentals back into a shortfall scenario. The “fly in in the ointment” is non-OPEC production in 2018, and most importantly the United States. The IEA came out with a bearish report for crude going through 2018. The IEA predicts that the non-OPEC supply of crude will rise to 1.6MM barrels/day versus the 600k in 2017! This incredible surge in production could potentially wipe out the cuts from OPEC by mid-year in 2018. OPEC concurred that the non-OPEC production, particularly from the U.S. is of concern. One potential scenario is that if crude grows to surplus inventory again, Saudi Arabia and Russia will go toe-to-toe. Russia will want to increase production to flood the market and wipe out future production for the U.S., and Saudi Arabia will threaten to cut as much as Russia over-produces to keep the market in balance. Saudi Arabia likes the current crude price for their IPO offering in 2018, and Russia does not like this price because the U.S. is starting to take their customers.

In local inventory news, the EIA showed another dramatic drop in U.S. crude inventories, but an incredible build in gasoline. The offset displays the robust refining margins on the current crack spread for WTI and the WTI/Brent spread for export. Propane inventories actually showed a small increase during one of the highest potential demand months of the year. Propane markets are starting to sell off a bit due to the lack of demand events that were predicted. We are not in the “falling knife” scenario yet, but if January doesn’t get cold, I expect propane prices to fall dramatically.

In local news, gasoline prices continue to remain stable and fall slightly averaging around $2.25-2.29/gallon. Diesel prices remain below $3/gallon, even though most sites are using winter additive and #1 oil for winter blending which increases costs. I predict gasoline to be around $2.25/gallon for Christmas. Propane prices are starting to move downward, but still well above contracted prices. Therefore, all customers who have contracted their fuel have done very well in the first half of winter. January through March is yet to be determined as demand has yet to show itself due to warmer temperatures.

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

Best regards,

Jon Crawford – Pres.
Crawford Oil and Propane

Good morning!

Crawford Oil and Propane hopes everyone had a safe and enjoyable Thanksgiving! We are so thankful for all of our customers and a safe delivery season in 2017. We look forward to another safe and successful year in 2018!

Jon Crawford – Pres.
Crawford Oil and Propane