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A Third War?..

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Good morning!

Happy Friday! This week was a roller coaster ride ending on top of the hill where we ended last week. The week started off with many bearish fundamentals. Crude oil demand decreases were being reported globally. The US consumer officially entered the largest default on credit card debt in history. Saudi Arabia announced cuts to their oil price on the open market causing crude oil prices to fall. The US national crude oil inventory prediction reports were all showing major builds in crude oil reserves. But then the roller coaster started. The dollar started to weaken with the belief that rate cuts were still on the table for early 20024. In addition, the SEC approved Bitcoin ETF’s which moved more money out of the US dollar. But the inventory report on Wednesday showed a less than stellar build in crude oil inventories. And then on Thursday inflation data released displayed indications that inflation is not slowing at the pace traders were hedging. Then, the Houthis took control of an Iranian crude oil tanker that was once seized by the US due to sanctions on Iran. And then, out of nowhere last night, the UK and the US announced air strikes directly on Houthi targets in Yemen. The provocation pushed the Houthis to announce that a larger retaliation is now on the table. In solidarity with the Houthis, the Iran-backed rebels in Iraq heavily bombed the US Embassy in Iraq. Russia increased their bombing in Ukraine. And Israel showed no signs of negation or stopping their war in Gaza. To start the week, WTI crude oil prices were moving back towards $70/barrel. And by the end of the week, $75/barrel was in sight. This week, the bulls took over the market with “risk-on” back in the crude oil trade. I believe the geopolitical issues in the Middle East are going to continue to escalate and $80/barrel WTI crude price is the next target. Even though production is high and demand is weakening, there are so many possibilities of catastrophe. The possibilities include an attack on Saudi Aramco storage or production, shutting down the Straight of Hormuz, putting a hold on all trade ships in the Red Sea, and the complete leveling of the US Embassy in Iraq. All of the current events seem to answer the question that the US is willing to enter into a third war. There is a Presidential election this year and I do believe that all three of these wars will be the number one priority. These wars also piggy-back on border security. I was absolutely dumbfounded by the events last night in Yemen. We can not afford another war. And this third war could lead to massive increases in cost of energy for the American people. Unfortunately, I am not very hopeful going into the weekend. In fact, I am somewhat saddened that more people are going to die from the current situation, including Americans. At this time, we must hope that nothing leads to full-out escalation and invasion in the Middle East.

In local news, a supplier/buyer was extremely short in the Chicago market for the month of January and placed massive buys of gasoline and diesel causing the price of both gasoline and diesel to jump 20 cents/gallon. Therefore, the blowout in differentials in Chicago fundamentals along with the increased price in crude oil will move retail prices at the pump higher. The prices are coming at the worst time as the consumer is running tight on free cash flow.

Propane prices jumped over 10 cents/gallon this week due to increased demand and the price of crude oil climbing higher. Retail prices moved higher as well. I expect that with extreme cold coming, propane prices have room to run even higher. Unfortunately, all energy commodity prices increased this week due to the geopolitical risks around the glove. Also, with the record snowfall this week, a friendly reminder to all of our customers to please keep your driveway clean and a clear path to your tank. Our drivers are extremely busy and with your help our drivers will be able to make more deliveries safely and efficiently each day.

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

Best regards,

Jon Crawfords

Starting Off 2024 With A Bang!

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Happy New Year and Happy Friday!

Well, WTI prices were moving closer to $69/barrel to end the year, and now they are rocketing towards $75/barrel. The unrest in the Middle East does not seem to let up. ISIS claimed responsibility for the largest terrorist attack in Iran since the 1970’s. Iran is vowing revenge. Russia assaulted the Capital of Ukraine, Kyiv, for the first time in months. However, this time, the attacks were using North Korean missiles which brings a whole new dimension into the war. In the US, the FED minutes were released and some cold water was dumped on the idea of rate cuts coming in Q1 of 2024. The minutes explained that there is no real timeline for rate cuts. In addition, jobs picked up in December, along with wage increases. The data release gives support to inflation going flat and possibly increasing again. The EIA finished the year with crude oil inventories drawing down again, even though production remained at all-time highs. Therefore, the New Year has started off with all bullish news and “risk-on” situations for supporting higher crude oil prices. As I have been writing, I truly believe WTI price will carve out a range of $70-80/barrel in 2024 with the possibility of one or maybe two “black swan” events below $70/barrel. But these “black swan” events will be extremely short lived and offer a very tiny buying window for futures purchasing and options.

In local news, gasoline and diesel prices have climbed along with the price of crude oil. However, since prices dropped dramatically at the end of last month, retail margins were unable to catch up to the bottom. So now with the increase in price, margins have criss-crossed. Therefore, even though cost has increased, I don’t expect to see much change in retail prices at the pump.

Propane prices soared 10 cents/gallon to end the year following the trend in crude oil prices higher. Retail prices have risen a bit as well. I expect retail prices to remain at current levels and possibly move higher due to lack of demand. Retailers will have to make up demand loss with higher prices. So far from September of 2023 to January of 2024, this current winter is 17% WARMER than last year! Bananas! However, some colder weather is in the forecast along with snow. And February is always the wild card. As we start the new year, just another reminder to please keep your driveway clean and have a clear path to your propane tank to ensure a safe and efficient delivery. Working together will make sure that drivers can deliver to as many customers as needed each day. 🙂

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

Best regards,

Jon Crawford

Happy New Year!

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Good morning!

I just wanted to wish everyone a Happy New Year and a thank you to all of our customers in 2023. I hope your New Year’s celebration is safe and enjoyable. I also wish that we all have an excellent 2024! As far as crude oil prices are concerned, there are so many geopolitical issues at play ending the year. In addition, with so many traders on vacation there is little trading liquidity in the market. The Red Sea situation with the Suez Canal seems to be getting better, as 75% of the daily traffic is starting to move through again. The entire Middle East is still a powder keg. Israel is worried that Lebanon will not take care of Hezbollah, causing Israel to intervene. Iran is so close to nuclear weapons grade uranium. The Houthis in Yemen and Iranian rebels in Iraq continue to attack the US Embassy in Iraq and occasional ships in the Red Sea. In addition, Saudi Arabia and UAE are getting worried that they will not be able to hold OPEC+ together and be dragged into a possible conflict with surrounding countries in the Middle East. Also, the war in Ukraine continues to hold steady as Ukraine sunk a major Russian battleship in the Crimea port this week. And with a surprise, North Korea launched rockets and displayed nuclear capabilities that now threaten the United States. All of the geopolitical issues are bullish for crude oil prices. However, prices dropped this week due to many investors believing that the FED and Central Banks across the globe will cut interest rates in Q1 causing oil demand to increase globally. Even though the US is at record oil production with 13M bpd flowing, Saudi Arabia has almost 5M bpd of spare capacity. THerefore, many believe that oil production will start to surpass global demand needs and move into surplus. Crude oil prices are ending the year closer to $70/barrel.

In local news, the Chicago Spot market continues to be well supplied offering prices much lower than the NYMEX. THerefore I expect retail prices at the pump to stay at current lows for sometime into the New Year.

Propane prices gained a bit of momentum this week. The major cause was the EIA “adjusting” their inventory report for the Midwest and other markets. Propane inventories shrunk by 9M barrels to end the year. Therefore, we are BARELY above the five year average for national propane storage at this time of year. If demand picks up strong in January and February, I do expect to see retail prices of propane climb.

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

Best regards,

Jon Crawford

Safe And Happy Holiday Weekend!

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Good morning!

I wanted to take a moment and wish everyone a safe and happy holiday weekend with friends and family! I hope the extended weekend is enjoyable and full of laughter!

There is not much liquidity in the commodities markets going into year end, so prices always go a bit wonky. But here’s the news that will start driving prices into the new year. Angola left OPEC+ this week, just as Brazil joined. The amount of crude exported from Angola won’t affect global supplies significantly, but the action is showing that cracks in OPEC+ and their strategy could be starting to develop. Bp announced they will not be moving any crude oil through the Red Sea as Houthi’s in Yemen continue to launch rockets at any ship moving north towards Israel. This week the US moved two battleships into the area to try and help the situation. But then today, Iran just announced that they will be providing support and intelligence to help the Houthi’s keep up their offensive in the Red Sea. I believe the situation is a huge “risk on” for crude oil. However, the US passed ANOTHER milestone this week breaking a record of 13M+ barrel/day crude oil production and more is on the way! The EIA is starting to report builds in crude and refined product inventories. And if world economic slowdown occurs, the world oil market could move to surplus very quickly. Even if the US decides to refill the SPR, there will still be plenty of crude oil in the marketplace at the current rate of production. The US oil producers did a “head-fake” and announced that they will continue to push production as high as they can go. In addition, the sanctions on crude oil exports continue to be lifted in Venezuela, the possibility of crude oil producing nations flooding the market and going after market share is back on the table. Oh, and there are still major wars taking place in Gaza and the Ukraine. I never thought the aforementioned scenario would be possible, but situations seem to be starting to line up for bearish calls on crude prices. I might end up changing my long call on crude oil prices 2024 to neutral or slightly lower. If crude oil collapses hard, then prices might hold lower for a long time. I guess at the end of the day, in one week’s time, my entire forecast for crude oil prices in 2024 is changing. The past week just shows how volatile the crude oil trade is in general.

Local retail prices on gasoline and diesel will remain around the current price at the pump. This is great news with increased travel occurring over the next two weeks. Customers will save a bit of money as they make their way to holiday destinations.

Propane prices continues to trade sideways. However, January weather forecasts have been updated to much colder. Therefore, an increase in demand next month could push propane prices higher. As a reminder, please make sure your driveway is kept clean and there is a clear path to your propane tank in order to ensure a safe and efficient delivery. 🙂

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

Best regards,

Jon Crawford

Not Quite Enough Confidence To Go All-In

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Good morning!

Happy Friday! Demand fears continued to push crude oil prices lower this week. The IEA changed their forecast and said oil consumption will be less in 2024. The US EIA report showed a large build in crude oil inventories. And an analysis of OPEC+ showed that OPEC+ now only controls 51% of the entire global oil trade. Therefore, the power of OPEC+ production is not where it was even five years ago. The announcement sent a wave of long position selling into the marketplace causing WTI price to drop below $68/barrel for a hot minute. China released positive economic data, but the market called their bluff. And then the FED. Oh yes, the major FED announcement this week was interpreted as three rate cuts next year and one starting as soon as Q1 of 2024. The news caused the stock markets to rip higher along with crude oil prices. Crude oil prices were well on their way to the first weekly price gain in four weeks. But then today, people woke up to reality and the celebration settled down. The hangover after the rally Thursday started to wane, and today demand fears along with a potential economic slowdown hit the crude oil markets. The stock markets took a slight pause as well going into the end of the week. A FED governor announced this morning that even though three rate cuts are on the table for 2024, the cuts can easily be taken off the table. The news poured cold water on everything as everyone came back to the reality that 2024 is going to be a crapshoot of unknowns and lots of volatility. For now, crude oil prices are still at the bottom end of what I believe to be their trading range for next year. However, there is no “risk on” trading in the crude oil marketplace from the war in Ukraine and Gaza. If the Middle East starts to implode or the war in Ukraine escalates, traders could could pour back into the “risk on” trade with the wars causing crude oil prices could rip higher. For now, try and enjoy the end of the year and the holidays. Then we’ll see how 2024 starts! If you are looking to hedge positions on diesel for 2024, I highly recommend purchasing at least 25-33% of your fuel needs at this time. Prices for crude futures are still trading at the lowest range of the year. I believe in cost averaging for 2024.

In local spot market news, the Chicago market experienced a collapse in differentials on spot gasoline prices. Therefore, gasoline retail prices should stay low and possibly move even lower going into the high volume holiday travel season. Diesel differentials in Chicago ripped higher this week. There seems to be a bit of differential relief going into today. Therefore, the bottom of diesel spot prices for the year might have been early this week. I do not expect to see retail prices of diesel change that much at the pump for the rest of the year.

Propane prices continued to follow crude. Winter so far in our area is 10% warmer than last year. Demand across the country has not been great either. The EIA reported a smaller than average drop in national inventories on Wednesday. Therefore spot market prices continues to skip along the bottom range of the winter season. I expect propane prices to trade fairly flat going into year end until demand increases in January. February is always the wild card to watch. So more to come on the propane side of the petroleum trade.

I hope everyone has a great weekend, and as always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

Another Baby “Black Swan” Was Born This Week

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Good morning!

I hope this message finds everyone well. There was not a lot of data released this week that should have caused major movements in crude oil price. However, WTI crude oil prices experienced a mini “Black Swan” event and dropped below $70/barrel for one day. The price of WTI $69/barrel has not happened since June of 2023. The largest issues driving the market were news that China’s economy is continuing to contract, and the possible risk of contraction to the US economy in Q1 of 2024. However, the majority of the drop was caused by “bot traders” clearing positions at the technical level of $70/barrel. Since the one day drop below WTI $70/barrel, WTI prices are now back up over $70/barrel. Therefore, I tend to agree that the sudden drop was more of an automated sell-off event. There are also many factors driving brokers to either clear positions or load up for next year. As I have been writing for months, Saudi Arabia has been the most vocal that they will not allow WTI prices to fall below $70/barrel for a long period of time. Well, guess what… Yesterday when prices fell below $70/barrel, Saudi Arabia announced that they were not afraid to call an emergency OPEC+ meeting in December and voluntarily themselves cut an additional 500k crude oil gallons/day on top of their already pledged and accounted for 1M bpd. The markets firmed up a bit and ripped higher this morning on a good jobs report and lower unemployment. The news sparked the traders to lower their risk tolerance of a Q1 2024 demand erosion. However, many of the jobs could be temporary for the holiday season. Only time will tell. Overall, commodities are always volatile going into year end as well as the start of the year. I am still long on crude oil prices for 2024 regardless of demand. I also think that right now is a good time to maybe purchase a piece of future fixed price diesel for 2024.

In local retail markets, Chicago spot prices fell off a cliff for both gasoline and diesel. I expect to see retail prices at the pump slowly fall. Someone, whether a supplier or trader, sold off a huge position in Chicago going into year-end. This sometimes happens for tax purposes. For now, retail prices should remain lower going into the Christmas travel season which is always nice and appreciated by consumers. 🙂

Propane prices did not move much this week. Prices are continuing to trade in a narrow band as demand for heating picks up. Currently, the winter of 2024 is 10% warmer than 2023. Therefore, I expect to see propane prices rise in the coming month or so to make up for volume loss.

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

Best regards,

Jon Crawford

OPEC+ Produces A “Nothing-Burger”

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Good morning!

Happy Friday! I hope everyone had a great Thanksgiving break! The markets digested a lot of data this week. The big news was the OPEC+ meeting that ended up being delayed and virtual instead of in person. The consensus was that the 1M bpd cut would continue into 2024, and Saudi Arabia would continue their additional 1M bpd cut as well. The markets reacted bearishly to the news, as this was just the status quo of the past year. There was no “true new agreement” met. Most of the consensus was just “word play” and not in writing. The news headlines tried to spin the cuts as “additional to last year”, but the headlines were misleading. Many of the African countries, including Algeria, said they will not adhere to the cuts of last year. And in addition, the 1M bpd cut that all countries agreed to last year was never really fulfilled! Therefore, the news was a giant “nothing-burger”. The news fell after the US national inventories showed builds in crude oil and all refined products on Wednesday. And inflation ended up being adjusted higher for October, along with the housing market continuing to stay inflated. Chinese economic data was lackluster as well. Couple all these news events together, and there was not much to drive crude prices higher. WTI price retreated from near $80/barrel back down to $75/barrel. Although the S&P 500 had the best November on record, JP Morgan is calling for an 8% downturn next year. I am continuing my call that Q1 of 2024 is going to be very messy and crude oil prices could collapse for a brief moment. The collapse will produce heavy buying for long positions in 2024. I just don’t see the FED cutting rates until mid/end-of-year in 2024. If China injects cash into their economy to save their commercial real estate disaster, the event will continue to support the price of the US dollar, which in turn makes crude oil prices cheaper. I believe the US markets are living in hubris going into year-end and better opportunities to lock-in refined fuel prices will come in Q1 of 2024.

The local Chicago spot market sold off a bit this week. I expect to see retail prices of gasoline and diesel remain near the same as last week. Diesel is now being blended for winter. Please make sure if you are purchasing diesel to ask the seller if the product is treated for winter. Diesel should be at least treated with winter additive at this point. We are starting to treat with a bit of #1 diesel because December can be very unpredictable. You do not want to be cut off guard.

Propane prices remained firm and are ending the week higher. As a reminder with the first snowfall of the year, please make sure to keep your driveway clean and have a clear path to your propane tank to ensure a safe and efficient delivery. It’s hard to believe we are approaching the heart of the winter delivery season!

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

Best regards,

Jon Crawford

Happy Thanksgiving and Safe Travels!

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Good afternoon!

I just wanted to take a quick moment and wish everyone safe travels this week and a Happy Thanksgiving! The markets are low in liquidity this week due to many workers taking time off. In addition, the NYMEX is closed on Thursday and only open half the day on Friday. This week the FED reinforced that rate hikes are probably done but will stick around for longer next year. OPEC+ delayed their meeting by four days, so that will happen next week. Also, Israel and Hamas agreed to hostage releases in exchange for a ceasefire.

Gasoline and diesel spot prices fell in Chicago so I expect to see cheaper retail prices this holiday travel season. And propane prices skipped right along with crude oil prices showing no surprises. I will offer more commentary next week once more data is digested into the market after the Thanksgiving break.

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

Best regards,

Jon Crawford

Small Black Swan Event

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Good morning and Happy Friday!

I first would like to wish all the deer hunters safe travels this weekend and a safe hunt next week. 🙂 This week, WTI crude oil experienced a small “Black Swan” event on Thursday and dropped as much as $4/barrel. Large US retailers released lackluster earnings and weak guidance going into the holiday season. The news spoked many traders to clear positions, book some profit, and maybe buy back in before year end at a lower price. The contagion of demand destruction also spread after Biden’s and Xi’s meeting failed to produce meaningful trade agreements with the US’s largest enterprises. However, the news of yesterday also reinforced the idea that the FED might cut rates sooner. If the FED cuts rates to spark consumer demand, crude oil prices could rally. A weaker dollar, coupled with increased demand would make crude oil more expensive. Regardless, Saudi Arabia is keeping a close eye on the market. Although it looks as if WTI crude oil price will post four straight weeks of loses, I do not see Saudi Arabia letting the price collapse. I still believe there will be one or two more mini “Black Swan” events that could pull WTI crude oil price below $70/barrel for a brief time; even as short as one day. There was a lot of buying/selling liquidity in the market yesterday, so clearly any events such as yesterday will spark massive trade volume. I am still long on crude oil prices for next year, but believe there will be one or two more events like yesterday between now and end of January as traders look to book year end profits and buy back in at a lower hold price for next year.

In local news, Chicago diesel spot differentials finally collapsed and are now lower than our neighbors in the Group spot market. I expect to see retail diesel prices drop in the coming weeks. Gasoline came down a bit as well. I do not expect to see a jump in gasoline prices prior to the holidays. Many economic forecasts are sending signals of weaker travel plans this holiday season.

Propane is truly carving out and skipping along the bottom. Propane prices have not dropped at the same percentage rate as crude. As I wrote in the past, propane is trading at the lowest percentage to crude in years, so the markets are just letting the price of propane catch up to normal crude percentage economics. I really don’t think propane producers are going to produce propane much cheaper this season. Especially with calls for the warmest winter on record…again.

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

Best regards,

Jon Crawford

Bears Were Hungry, But The Bulls Formed A Strong Defense

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Good morning!

Happy Friday! Again this week, the news of terrible economic data poured out over the news wires. The stock market ripped as traders looked for places to possibly make more money than long-term treasuries/bonds. China’s exports continued to dwindle. The EIA lowered their demand forecast for 2023. Chairman of the Fed Powell said that they are not done fighting inflation. Overall world economic slowdowns were reported. And Russia announced that they will lift their ban on refined fuel exports. Russia exports the most diesel in the world. The combination of all this data caused WTI crude to fall below $75/barrel for a brief moment. $75/barrel WTI has not been hit since July. As I have been writing, if WTI gets close to $70/barrel, I believe that is a good place to start slowing dipping toes into future crude purchases. This morning, Saudi Arabia announced they believe the economic slowdown is “overhyped”. The news was interpreted as Saudi Arabia will do whatever it takes keep prices higher. As their Sovereign Wealth Fund reported economic gains this past month, their strategy of keeping crude oil prices higher and selling less oil is working. I do not see Saudi Arabia changing their strategy anytime soon. In fact, I believe they will cut more production if necessary. As they also enter the LPG export business for the first time this year, a new revenue stream will flow into their economy. At the end of the day, I believe there could be a “black swan” event once the American consumer’s back is truly broken economically, which in turn will produce a nice futures buying opportunity for crude oil. However, if the event does occur, Saudi Arabia and even other oil companies outside of OPEC, including American companies such as Occidental, will cut production quickly to keep prices from free falling. As I have been writing, I am still bullish on crude oil prices long term, and one should be patient for the short lived opportunities that will most likely present themselves in the coming months and into 2024.

In local news, diesel prices out of the Chicago spot market continue to be inflated compared to our neighbors in the Group spot market. But I believe that once harvest winds down, we will see diesel prices fall back into the normal trading range out of Chicago. Gasoline prices fell this week in tandem with the price of crude. Gasoline is tracking crude oil prices very closely.

Propane continues to trade narrow and is ticking up a little bit in price due to demand increase. As a reminder, please keep your driveway clear and salted in the winter, and a clear path to your tank. We want to ensure safe and efficient deliveries. It’s hard to believe that snow is right around the corner!

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

Best regards,

Jon Crawford