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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

Wars?.. What Wars?..

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Good evening and Happy Friday!

This week, crude oil completely traded on economic data coming out of the US and China. WTI Crude price was on the way to break through $90/barrel in October based on the never ending war in Ukraine and the continued developing war between Israel and Hamas/Hezbollah/Houthis. Instead, the markets turned a blind-eye and focused on company earnings, job reports, and the FED meeting/minutes. In addition, China’s economy is not looking strong and stimulus as well as bailouts for bankrupt commercial building powerhouses will be needed. All the released economic data combined caused WTI crude price to close at $80/barrel for the week! The FED decided to keep rates the same as expected, but left the door open for one more raise. New jobs added to the American economy were less than expected. Company earnings were not as stellar as most were expecting this week. And inventories of refined products in the US were interpreted as “bearish”. In addition to the never ending credit card debt piling up in America, cars are being repossessed at the greatest clip since “The Great Recession” and high mortgage rates are holding causing the housing market to cool. Overall, the fear of an economic slowdown caused crude prices to drop. Therefore, crude oil prices dropped as treasuries continued to remain strong and the strength of the dollar held. I am still bullish on crude oil prices but if WTI crude price falls much below $80/barrel, I see some future buying opportunities. And if WTI crude price was to really fall and hit below $70/barrel, I would take long positions on futures. I believe there will be world crude oil distribution issues that develop from the instability in the Middle East. We have plenty of spare crude oil production capacity across the globe, but I see the potential for destruction in world crude oil distribution channels. I guess we will see what November brings!

In local news, after our neighbors to the west (Minnesota, Iowa, etc) experienced tight diesel supplies that ended up raising the cost of diesel over $1.25/gallon compared to our market, now our market is paying more for diesel than our neighbors! Chicago spot prices on diesel closed 20 cents/gallon higher than the Group to end the week. Within four weeks, we’ve experienced over a $1.50/gal swing in diesel cost across the two spot markets. Gasoline prices continue to fluctuate, but are now balanced with the Group. However, the balancing caused differentials on gasoline in Chicago to rise, so consumers will possibly see a slight increase in gasoline price at the pump. I expect diesel prices to trade in the current range out of the Chicago spot market until harvest in the Midwest region is almost completed.

Propane prices traded in a very narrow range as an early cold snap in the Midwest and corn drying demand kicked in at the same time. The combo caused national supplies to draw more than expected keeping prices fairly firm. We still have the most propane in national inventory that we have experienced in years. I am not worried at all about propane supplies this winter. I do expect the occasional logistical issues with pipelines and delayed train car deliveries, but nothing out of the norm for propane in a winter season. We are well positioned for a successful winter propane delivery season.

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

Best regards,

Jon Crawford

Crude Oil Tug of War

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Good morning!

Happy Friday! Well, again the tug of war on crude oil prices continued this week. WTI prices dropped from $90/barrel back down below $85/barrel and looking to move closer to $80/barrel. As I have been writing, I believe that WTI crude oil prices will trade in the $80-90/barrel range. The war between Israel and Hamas doesn’t seem to be throwing as much fear into the markets this week compared to last week. In addition, the US launched air strikes into Syria last night putting the US officially in the middle of the conflict. Even the strikes from last night did not cause crude oil prices to climb much higher. The big news of the week was that the US reported the highest GDP growth at 4.9% in the third quarter. Most would think that the report is great news of a healthy growing economy, but the devil is in the details. As the consumer looks to run out of cash going into the high spending time of the holidays, most large banks are now convinced the GDP bubble will burst. If the economy moves into recession, crude demand could drop. In addition, a recession in the US could cause contagion to other parts of the world. Therefore, the futures bears won this week on the crude oil trade. Throughout all the chaos, there was some positive news between China and the US. Xi Jinping met with a couple of US Senators and US Secretary of State Blinken expressing that there are thousands of reasons for the US to come together rather than grow apart. The willingness from Xi Jinping to push for reconciliation is a dramatic shift in China policy. Many believe that a summit between Biden and Xi will occur sooner than later. If the US and China are able to strike some trade deals that are transparent and manageable, then I believe China will inject cash bailouts into their failing real estate market. If everything falls into place between China and the US, the cooling tensions could spark a boost to both economies. A boost to both economies would cause an increased appetite for crude oil. Time will tell and we will see what happens next week. As of now, we are truly living on a week-by-week basis with the crude oil trade. There is so much volatility all over the world, and I don’t see situations calming anytime soon.

In local news, diesel cost has come down from their highs following lower crude oil prices. The spread in diesel cost between the Group and Chicago spot markets has settled down. Diesel supplies are starting to loosen up as harvest moves over the hump to the west. Gasoline prices have dropped as well following lower crude oil prices.

Propane price has remained fairly flat and moving a bit higher as winter economics continue to drive the vehicle. With an early cold snap on the horizon, I expect propane prices to remain firm independent from crude oil prices. You can still lock in your propane price for winter if you have not done so already.

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

Best regards,

Jon Crawford

Risk Premium With Crude Oil Prices Continuing To Increase

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Happy Friday!

I hope this email finds everyone well. Unfortunately, the Israel/Palestine conflict is looking to turn into a war as Hezbollah and the Houthis both entered the fight this week. Saudi Arabia and the UAE are meeting for the first time in years to discuss how to make sure the war does not escalate across the entire Middle East. The King of Jordan cancelled his meeting with President Biden while Biden was in mid-flight to Israel. Jordan is looking to other countries for a security strategy. The UK Prime Minister also visited the region this week. Iran continues to fund Hamas according to almost all accounts across the globe. And now that Hezbollah and the Houthis made their voices heard, the Gaza Strip is a powder keg waiting to fully explode and possibly spread across the Middle East. Although economic data in China and the US was very weak, the dollar continued to climb as Fed Chairman Powell said that a rate pause is on the table, but another raise is possible if inflation continues. Treasury yields broke through 5% this week. Americans surveyed this week are saying they are now cutting back on discretionary spending. This coming Christmas season will be very telling for economic predictions in 2024. Home mortgage averages hit 8% for the first time in decades. Oh, and Russia moved nuclear weapons into Belarus this week. We can’t forget that Russia and Ukraine are still at war. China’s power of influence over their Belt and Road initiative hit a setback this week as most of Europe and other countries sat out of the Summit. Overall, China and the US are losing major influence as super-powers across the globe. There are trust issues and economic issues that are scaring many of their friends to distance themselves from both countries. All-in-all, the data from the week sent WTI to $90/barrel. If we close above $90/barrel, I believe that $100/barrel WTI crude oil is on the table by year end. Especially if the conflict in the Middle East continues to escalate.

In local news, the cost of diesel for our neighbors to the east (Minnesota, Iowa, etc) on Group spot pricing rose to $1.25/gal HIGHER than the Chicago spot market! Diesel supplies are extremely tight in the Group, and I believe eventually the shortage will spill over into the Chicago market as harvest picks up steam all over the Midwest. Right now, diesel prices are like the Wild West. So much volatility and no predictability. We are living in a day-to-day environment. Gasoline prices rose with the price of crude oil this week, but supplies seem to be in ok shape heading into end of year.

Propane cost rose a bit this week along with crude oil price increases. I could see retail propane prices potentially increasing in November if crude oil moves higher in price and cold weather demand starts to kick in. Supplies of propane are in very good shape compared to years past. Therefore, any fears of a shortage are low risk this winter.

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

Best regards,

Jon Crawford

Risk Back On And The Bulls Are Running

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Good morning,

Happy Friday! This week was completely focused on the largett attack from Hamas on Israel in 50 years. The response from Israel is sending shockwaves through the markets as the world braces for a potential full invasion of the Gaza Strip by Israel. A full invasion would be a humanitarian crisis. In addition, Iran has offered support to Hamas and Saudi Arabia is panicking. Not too long ago, Saudi Arabia was looking to be a possible peace broker along with China, between Israel and Palestine. Now Saudi Arabia is stuck in the middle. The US responded this week by freezing nearly $6B in oil payments to Iran from UAE. In addition, the US placed further sanctions on Russia for violating the terms of the oil price cap with the G7. China is also opening up sovereign wealth fund to buoy the commercial real estate disaster in the country. Also, the FED minutes from last month’s meeting seem to say that rates will hold higher for longer. Many believed this would would lower crude prices. However, producers are being very vigilant in keeping production quotas tight around the world to support higher oil prices. But the biggest driver of the bulls this week is the conflict in the Gaza Strip. Many are now worried that the conflict will spill over to many other countries, including those in the Middle East that would affect oil production. The US moved an aircraft carrier into the region and Saudi Arabia announced that they would increase production if needed to keep oil prices under control. As of today, WTI oil price has it’s eyes on $90/barrel when just last week the price was about to fall through the floor of $80/barrel. If traders start to take some risk with long positions leading into the end of the year, I believe that $100/barrel WTI crude oil could be possible. For now, we are hoping for a miracle that could de-escalate the potential for a disastrous humanitarian crises in Israel and Palestine.

In local markets, gasoline prices continue to trade in a narrow range but have slowly started to climb higher again. After diesel prices collapsed last week, diesel prices are recovering this week and seem to have carved out a bottom for the time being. As harvest goes into full speed ahead along with the conflict in the Middle East, I believe that prices in our market will be be supported and start to move higher.

Propane prices have not moved around too much the past week. As I’ve stated before, propane producers are drawing a line in the sand going into the winter months that they will just not produce propane for much cheaper than the price of today. As interest rates stay higher for longer and the prediction of a warmer winter, propane producers are hesitant to move the floor price. However, if crude prices start to rocket higher, propane price will follow.

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

Best regards,

Jon Crawford