Tag Archives: lodi

Remembering Those Who Gave the Ultimate Sacrifice

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Good morning,

I woke up this morning and felt it best to take a moment and honor all service persons who gave the ultimate sacrifice of their lives defending our incredibly awesome country. Even though our country can go through hard times at home, we are extremely fortunate and blessed to live in America. I wish everyone safe travels and enjoy remembering that our long weekend came at a significant cost.

Crude oil prices rose to start the week based on Saudi Arabia saying “look out” to short sellers of crude. The next OPEC+ meeting is during the first couple days in June. But then yesterday, Russia said that they are not planning on any more cuts and don’t see a scenario where OPEC+ would approve additional cuts. The announcement caused crude oil prices to collapse. OPEC allowed Russia to play a part in meetings back in 2008, so the difference in opinion could be causing some friction and fissures in OPEC. We will see what happens at the meeting. And then of course there is the US Debt Ceiling talks which is putting all traders on their heels. So for now, we are in a “wait and see” moment. I would not be placing any long-term hedging bets on crude oil at this time.

Gasoline and diesel prices in the Chicago market dropped a bit towards the end of the week. We might see a little relief on retail prices at the pump, but not too much. Although some refineries that were down for over a year have restarted, a very high volume refinery has struggled to get gasoline back online. However, I expect supplies to be healthy and ready to go for the summer season. But retail prices on gasoline will continue to be higher because of the crude oil crack spread incentives to produce diesel.

Propane is bouncing back and forth in a very narrow range. Summer fills are starting to pick up and next season’s heating contracts have been released. So look in the mail for contract information coming your way, or feel free to call our office and get yourself locked in for next year. The great news is that the coming season’s contract pricing is 30 cents/gallon cheaper than last year! 🙂

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

Best regards,

Jon Crawford

The Debt Ceiling Final Countdown

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Good afternoon,

Happy Friday! Not much happened this week in the world of crude oil trading. Most traders are either keeping their bets in place or not placing any bets. The price of WTI traded in a very narrow range of only a few dollars this week, but still holding above my predicted floor price of $70/barrel. Every time a piece of positive economic news was released, a negative counter was released, and vice a versa. I believe everyone is sitting on the sidelines waiting for Biden and McCarthy to strike a deal on the debt ceiling and digest the deal before there is movement in the marketplace. In all honesty, the crude oil trade was fairly quiet this week.

In local news, diesel prices continued their recent slide, but flattened out by the end of the week. Gasoline prices continued their upward movement, even as demand stays flat. Refiners are just not making a lot of gasoline. The arbitrage for diesel on the world market is too great and if economic downturn occurs this summer, no refiner wants to be stuck with a bunch of gasoline. So I expect gasoline retail prices to climb a bit or flatten out. And I think diesel retail will drop a touch and hold.

Propane prices, along with crude were fairly flat this week. I think the bottoming of prices for the summer is very soon or happening now. Next season’s heating contracts will be released on the coming Monday. We also suggest that everyone take advantage of our lower summer fill price. You can work with our staff on liberal gallonage requirements to receive some propane at these lower prices.

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

Best regards,

Jon Crawford

Late sell-off, but still holding on!

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Good afternoon!

I hope this message finds you all well. I am writing my weekly update a bit early. WTI crude prices were on a ride higher for four straight days based on the strong dollar and talks of no recession, as well as American oil companies announcing they plan to be disciplined just like OPEC to try keep WTI price above $70/barrel. Oil companies across the globe have made it pretty clear that $70/barrel WTI is the price floor. Although there was a slight sell-off and profit taking today, WTI will still not close below $70/barrel today. Inflation data was “devil in details” like usual, China’s economy slowed less than anticipated, the EIA reported large draws in gasoline and distillates, and the UK is confident they will avoid recession. But, the big news supporting crude oil prices is once again Pres Biden saying he is going to start purchasing crude oil to refill the Strategic Petroleum Reserve. The SPR is currently at the lowest level since 1983. Since making the statement public, support for crude oil prices will remain strong. The sell-off today was a bit of profit taking on the latest run higher and Jamie Dimon from Chase bank saying that the mid-bank failures might not be over yet. So you combine a bit of higher prices with some fear thrown in there and traders with try and bet on the arbitrage. I think we will experience WTI prices climbing back higher tomorrow into the weekend.

In local news, gasoline and diesel cost rose over 30 cents in the past four trading sessions before giving back a bit today. In our local market, we are now into farm season coupled with refinery maintenance. I think we have some supply issues working their way out between the Group and Chicago spot markets. For now, I expect to see diesel prices and gasoline prices remain higher than the low last Monday. Even if crude prices fall, we could experience higher prices in finished product due to refiners running into issues with their maintenance and looking to export barrels instead of keeping wet barrels in local markets. Only time will tell.

Propane has been looking very steady and making small prices moves with the WTI crude oil trade. The good news is that summer fill prices continue to drop. Now is a great time to fill your tank, and I think next week heating contracts for 2023-2024 season will be available! The contract price for next heating season will be much lower than the previous winter season. During a time of inflation, propane is experiencing deflationary pressure due to an abundance of inventory, even though exports are at record levels. In addition, we don’t see production slowing anytime soon. Keep your eyes peeled for the contract mailing or feel free to call us next week. Remember, filling your tank in the summer benefits the supplier by giving the supplier allocation access for the coming winter to guarantee that propane will be efficiently available in the marketplace. We are a bit more flexible with our summer fill volumes to try and help everyone take advantage of cheaper prices.

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

Best regards,

Jon Crawford

And the fear returns… But is it real?

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Good morning!

Well, the fear of recession, midsize bank failure contagion, and the FED raising interest rates a quarter point hammered crude prices this week.  Even though WTI crude price is finding support on Friday, WTI could report three straight weeks of loses.  I figured that traders would take profits on Friday and buy back in since WTI fell below $70/barrel which is the current “magic price floor”.  Midsize banks are continuing to lose deposits.  The interesting fact this week was that most of the midsize banks losing deposits have a great balance sheet and are not in any sort of financial trouble!  The main issue is that the news is constantly hammering midsize bank failure so their customers are pulling their money out and moving to the big banks, like Chase, Bank of America, Wells Fargo, etc.  Unlike 2008 when the big banks were in trouble for making risky bets, the midsize banks are the vulnerable banks without making many risky bets!  Yes, some midsize banks have bad balance sheets, but this week, healthy midsize banks got hammered due to customer fear and lose of deposits.  In addition, when the FED raised the interest rate another quarter point, the fear of recession only made the problem for midsize banks worse.  The news is constantly reporting that customers need to be in safer larger banks.  Unfortunately, the banking crisis unfolding before us is not as bad as the situation being sold.  The ECB (European Central Bank) also raised interest rates this weeks adding to the fear of global recession.  However, India and China reported healthy economic growth as well as a nice forecast for the year.  The war in Ukraine continues, England is a mess, and the US seems to be dead set on waiting for the FDIC to raise deposit protection to calm the midsize banking failure contagion.  Although recession fears won this week in the marketplace, traders of oil forget that OPEC+, as well as American producers, are being very disciplined with their production.  I would not be surprised if we start to see more significant draws of crude oil inventory in the US, as well as OPEC+ announcing even further cuts at their next meeting in the first part of June.  In fact, if WTI starts to fall towards $65/barrel sooner than later, I could see OPEC+ having and emergency meeting and cutting production before their.  An emergency meeting has been used in the past to stop the falling knife.  For now, I think we are in a falling knife scenario based mostly on fear.  Remember, markets are not the economy. Markets behave irrationally.  Once again, let’s see what next week brings!

In local news, gasoline continues to trade sideways as builds in inventory continue acorss the US, even with decreased production.  Diesel prices have collapsed well below my predicted floor.  I am shocked at how low diesel prices continue to move.  Although there is much profit taking in the market today, I believe we will see cheaper diesel prices until demand for farming and the calming of the almost “meme” banking crisis ends.

Propane prices coninue to fall and I believe we will see the lowest prices towards the end of May.  Production is strong and inventories will start to build quite dramatically over the coming months.  Next season’s heating contracts will be cheaper than this year.  And remember, if you can, please order a summer fill.  Not only will the price be lower than the nest season’s contract, but summer fills help propane companies build allocation rights for the coming winter which ensues reliable supply for the state of Wisconsin.

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

Just Like My Favorite Song… “No One Knows”

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Happy Friday!

I hope this email finds everyone well.  The news headlines of the week really tell the story of the WTI crude trade.  And just like my favorite song from Queens of the Stone Age… “No One Knows”.   Monday:  “Oil rises, but set for weekly loss as economic uncertainty weighs.”  Tuesday:  “Oil prices settle higher on optimism about fuel demand in China.”  Wednesday:  “Oil dips 2% on economic woes and strong dollar”.  Thursday:  “Oil drops 4% as recession fears outweigh US crude oil inventory draw.”  Friday:  “Oil steadies after Russia says global oil markets in balance.”   So… no one knows.  🙂   Is a recession going to hit hard as the FED continues to signal more rate hikes because inflation data continues to be messy: home prices falling, cost of some goods falling, slowing economy and record credit card debt, but consumer spending is staying high as well as high wages coupled with unemployment staying low.  In addition, we are trusting information from Russia and OPEC as the driver for prices higher.  Although WTI crude oil looks to close lower this week, unlike last week, refined products moved lower.  The amount of refining capacity worldwide continues to grow and traders are starting to get a little spooked that oil markets will be tight but an abundance of refined products will develop due to global recession.  The fears remain even as China continues to report growth.  However, you must take the info from China with a grain of salt.  No one is ever allowed to confirm nor deny the economic info coming from China.  So in conclusion, just like I started this paragraph with my synopsis of the WTI crude oil trade this week… no one knows.  🙂

Gasoline prices in the Chicago market continue to hold steady as refiners continue to produce more diesel than gasoline based on the anticipation of weak demand this summer.  But fears of global recession have pushed diesel prices below the cost floor that I thought was firmly set in place.  Diesel prices fell to a price lower at $75/barrel WTI than when WTI price touched $67/barrel during the “Black Swan” potential banking crisis!  I have never seen such bizarre trading activity since 2008.  Nothing seems to make sense in both the crude oil trade as well as the Chicago spot market trade.  What I can say, is that our neighbors in the Group are experiencing some of the most volatile trading in many years.  I believe Chicago might see some spot market price blowout higher on diesel because farmers are going to hit the fields hard for planting due to very sporadic weather.  And I also believe that Chicago could be in for a run higher on diesel prices this fall with harvest, especially if global prices for diesel are higher than spot prices in America.  For now, retail prices at the pump for gasoline should stay fairly steady, but retail diesel prices might ease a bit.

Propane prices dropped a little bit with the drop in crude price, but not nearly as much as usual.  I believe that we will see lower prices in May as we transition out of winter economics and supplier/retailers push to build allocations for next winter.  The United States is going to finish this winter with 50% more propane in inventory compared to last year!  I believe this might be a record.  The reason is due to a very mild winter as well as strong production.  I am very confident that 2023-2024 winter heating contracts will be lower than this past year.  But I am fairly bullish on 2024-2025 winter and beyond.  The reason is that I believe American producers of crude oil and OPEC will continue to try and keep prices high through lower production, especially if recession hits.  In addition, American propane suppliers will export at record rates with the current glut of propane, as well as not ordering as much rail propane from Canada moving forward.  For now, the consumer should be able to enjoy lower propane prices throughout the summer and lower heating costs for the next winter compared to last.  As I’ve been writing, not many commodities are cheaper for next year compared to last year!  Therefore, next winter propane customers should be very happy compared to those with electric or natural gas heat.  🙂

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

WTI Crude Oil Closes Back Below $80/Barrell

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Good afternoon!

I am writing my update a bit earlier due to conflicts tomorrow.  This week was very interesting.  “Risk off” took over the news wires as recessionary signs flashed all over the markets.  More attrition at large tech firms were announced.  The dollar gained back strength.  Bitcoin fell back below the $30k level.  Credit card debt continued to sky rocket to another record level.  The “repo man” took the most cars back last month since 2008.  Housing market purchasing slowed.  Fears of summer demand for gasoline are starting to take hold.  And most market makers are now pricing in a FED interest rate hike in May.  Now, that’s just American economic data!  On the world stage, refiners are expanding at incredible rates causing crack spreads to crumble in America and across the globe.  China and India continue to purchase Russian crude above the “cap” set by many countries.  So oil is flowing across the globe and refiners are moving forward at a quick clip, even though world recession could be on the horizon.  Even OPEC+’s large surprise cut is not really affecting the pricing that much because refiners around the world continuing to expand and run at high rates.  It’s amazing how much can change in one week.  Last week was “no recession in sight, and WTI oil is going to blow out towards $90/barrel.”  Now this week is “recession signals are everywhere and the FED is going to raise rates again.  Run for the hills!”  Even though I believe WTI crude oil will close below $80/barrel this week, I do not believe OPEC+ will let WTI crude oil price fall back below $70/barrel.  We would need another “black swan” event like the banking crises to experience WTI prices collapse that hard.  But for now, I would say the “risk off” is winning and cheaper prices are coming down the pipeline….for now. 🙂

In local markets, Chicago spot market never blew out in price to match The Group in spot diesel pricing.  In fact, as fast as The Group spot price rallied, the price collapsed this week.  Overall, cost of gasoline and diesel are going to end the week lower and I expect to see some falling retail prices next week at the pump.  However, with this high volatility, the drops can take some time as blended inventories work there way into the market.

Propane is sending a message loud and clear.  A price floor seems to be forming.  In other words, with how much WTI crude oil price fell this week, propane prices did not fall according to historicals.  I’m starting to see a floor for possibly summer and next year take shape.  Basically what the situation means is that propane producers have a certain price they need to make in order to keep operations running.  The cost of labor, materials, etc. continue to rise and I believe with the arbitrage to export, producers/suppliers are kind of saying “we wont make/sell for less than this certain price because it doesn’t make economic sense.”  Now, the good news is that I do believe that spot price in the summer will drop a little bit more, and I do believe that next heating season’s contracts will be lower than last year.  More to come as the volatility in the WTI crude trade continues.

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

Best regards,

Jon Crawford – Pres.

Not Too Much To Report

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Good morning!

Happy Friday!  I hope this message finds you all well.  Unfortunately, there is not much to report this week with crude prices.  The WTI trade moved between $80-82/barrel this entire week.  There was not enough news to really move the needle.  OPEC released their March data showing that production only dropped a small amount compared to quotas and the drop was from Iraq who had export issues in March.  Even though the cuts in production from OPEC seem to be in place and holding, oil markets are not quite letting the bulls into the arena.  Even though OPEC also reported record imports from China, the forecast for summer demand was very bleak at almost a 3% drop in world demand compared to last year.  Therefore the proposed cuts last month would be more in line with the marketplace if the demand erosion does occur.  So for now, traders are in a “wait and see” mode.  Placing a bet is VERY difficult right now.  In addition, there were no surprises on the EIA inventory report.  Gasoline prices continue to rise as refiners are producing more diesel to export.  Basically gasoline is in an old fashioned supply/demand economic scenario.  If demand picks up, supply will be tight, so refiners are keeping margins higher right now to be safe.  Inflation data cooled to 5% year-over-year, so the stock market took off higher, but crude oil prices held.  Most traders are split on whether the move down on inflation is still enough to stop the FED from raising rates at the next meeting.  Many banks are starting to call for recession in the second half of the year.  Even in recession, the strength of the dollar has dropped almost 10% from it’s peak six months ago, which is now supporting higher oil prices.  So if recession and a stronger dollar returns, we might experience an inverse relationship in the US.  Crude oil prices could fall, but gasoline and diesel prices will remain higher based on local production vs export production.  We have seen the Group spot price on diesel jump dramatically this week as farmers hit the fields.  In our market, based on the Chicago Mercantile Exchange, we are watching to see if there will be a familiar move in spot pricing jumping higher when planting starts in the Eastern Midwest.  Only time will tell.

In local news, I do not expect to see much change in gasoline prices.  Gasoline spot prices are more in a holding pattern.  So I would predict by the end of the weekend most retail markets will be at a stable market price.  Diesel prices have continued to climb all week, so I expect to see retail prices at the pump continue to rise into next week.  I am predicting a short-term blow out in diesel prices at some point in end of April or May as farmers start to plant for the season.  The level of increase will depend on how fast the harvest goes.  If almost all farmers start planting at the same time, prices will jump much higher compared to a steady spread of planting.  The weather will affect the speed of the planting. Again, only time will tell.

Propane prices continue to trend higher, however lower in price compared to last year.  I truly believe that refiners have carved out a floor for propane prices on next season’s contracts.  There is just a price that producers can’t sell below and make the necessary capital investments needed for production and exportation.  I do think we will see some better summer fill pricing, but like I have been saying, this is a year where there could be a larger spread between summer fill spot pricing and next season’s heating contract.  The good news, is that the market is showing that next season’s contracts will probably be lower in price compared to last year.  Imagine that!  Customers might have a lower cost of heating with propane compared to the cost of everything else going up.   🙂

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

Best regards.

Jon Crawford – Pres.

What A Difference A Couple of Weeks Make!

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Good morning!

Happy Friday!  There was no update last week as I was on vacation.  As I left for vacation, the US was facing a possible banking liquidity crisis.  Medium sized banks were failing, the world was panicking, depositors were moving funds to the major four banks or monetary safety investments, and the FED was not being clear on how they were going to stop the bleeding.  WTI crude prices fell to the lowest price in a over two years to $65/barrel.  Many investors believed the “black swan” event was happening.  Crude prices and the markets were going to collapse.  Not only did the market and crude prices not collapse, but the market ripped back to higher than it was before the banking crisis!  The FED offered a backstop to all depositors.  A relief rally took momentum and did not stop.  WTI crude prices went up in two weeks from $65/barrel to now $75/barrel in less than two weeks.  The stock market rallied higher as well.  The FED met this week and raised rates 25 basis points, and even the raise did not budge the market rally.  Although many bearish signs are in the works, including liquidity issues in the banking system, a commercial real estate bubble that’s about to burst, student loan debt payments resuming, and high inflation, the markets have all shrugged and moved on ahead.

In world news, the escalation between Ukraine and Russia continues.  Russia is claiming to move tactical nuclear warheads into Belarus and is pulling out of the New START nuclear treaty with the US.  The treaty is an agreement that US and Russia will announce nuclear testing to ensure that either country views a test as a true nuclear attack.  The US condemned the action by Russia which adds further tension that Russia could use a tactical nuclear weapon in Ukraine.  China brokered a deal between Saudi Arabia and Syria and is looking to broker a peace deal between Russia and Ukraine.  Zelensky said that he is also willing to meet with Xi Jinping.  China has been on a role as a “peace maker” which has historically been the role of the United States.  Overall, the actions from China in the past two weeks are displaying signs of a super power that can offer peace treaty guidance to complex foreign relations.  The work of China is weakening the influence of the US around the globe.  The US also sold nuclear submarines to Australia further escalating tensions with China, convinced Japan to limit chip exports to China, and welcomed the President of Taiwan to the US for a visit.  Also, in response to China brokering a peace deal between Saudi Arabia and Syria, Saudi Arabia is funding the construction of a large refinery in China to guarantee an energy relationship for the future.  The US is losing clout in the world quickly.  Therefore, the global tensions in the world are adding a “risk-on” premium to the price of crude oil.  And the cherry on top, Finland looks to be approved for NATO membership next week.  The escalations in world tensions connected to the US continue to grow.  And instead, tensions with China and other countries continue to move towards peace and trade relations.  From a 20,000 foot view, the US has a lot of work to do.  In addition, OPEC is holding firm to keeping production cuts in place.  Iraq lost 450k barrels per day of exports this week, but should be back online within a month.  The support level of WTI at $65/barrel seems to be very strong.  The US is working globally now as a major exporter and I believe that the market has set a floor that WTI prices under $65/barrel is not sustainable.  Although we could see another pull back in prices, I just don’t see WTI crude prices falling below $65/barrel anytime this year.

In local news, crack spreads for refiners got hammered this week as refiners continue to push diesel production over gasoline.  But with a potential recession looming in the US, there is only so much diesel that can be exported.  Therefore, diesel prices have relaxed a bit due to the crack spread collapse.  However, gasoline prices have continued to trend higher due to lowering production of gasoline.  Refiners have decided that the world market appetite for diesel is much stronger than gasoline.  And the potential for lower gasoline demand is on the table for the summer.  Therefore, refiners would rather make money on gasoline locally and use the world price export arbitrage on diesel to their advantage.  I do not expect to see gasoline prices be low this summer, even with potential weaker demand.  Diesel prices could hold a bit lower if we ride into recession.

Propane prices have found support as WTI crude price increased.  When WTI crude prices dropped to $65/barrel for a brief moment, propane prices did not drop that much.  Propane has been trading on a historically low percentage value to crude prices.  Therefore, crude prices really need to drop below $65/barrel to cause a major drop in propane prices.  In addition, due to the mild winter, propane inventories are very high across.  But refiners are sending the message loud and clear that a floor for production is in place for next winter.  I believe we will see cheaper prices in the summer, but a fairly decent premium between summer fill and next season’s heating contract price.  Although I firmly believe next heating season’s contract price will be lower than next year, I would not be surprised to see a 15-20 cent premium between summer fill price and next season’s contract price.  I will be urging everyone to top off their tanks this summer and contract for next season, even at a premium.  The reason is the value percentage of propane price compared to crude oil price.  Crude oil prices have a long way to drop before propane price will truly affected.  And I just don’t see refiners giving up margin as the world continues to push the alternative energy transformation agenda and world economics continue to be volatile.

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

Best regards,

Jon Crawford

The Markets Have Spoken

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Happy Friday!

Well, I don’t think I need to talk too much about the bank failures and bank runs that have occurred across the US and Europe.  I think the main media did enough non-stop coverage on those topics!  🙂  The contagion fears and misinformation being discussed by major news sources did not help this week.  There were no risky bets by Venture Capital that caused these banks to fail.  The banks made poor decisions such as investing in crypto, long term bonds, and mortgage backed securities.  The FED raising rates at an incredible pace caused these banks to be pinched, along with rates increasing in Europe.  The money pouring in from major banks as well as a FED backstop will not affect the American taxpayer.  These are not bailouts.  I believe we are doing the right action and letting the bank executives, board members, and shareholder lose their money.  Not the depositors.  The FDIC insurance of $250k is absurdly low.  I previously stated that most of this fear would blow over in a week or two, and that has already happened.  The plan in place should stop any major collapse and the big banks came to the rescue.  The fear of economic collapse caused WTI crude prices to collapse.  I have called a bottom at $65/barrel on WTI and then a catastrophic bottom at $59/barrel.  Well, even with the massive selloff, WTI could not break through the $65/barrel price.  The crude oil market is sending a message.  Energy companies must continue to make money and $65/barrel seems to be the minimum price to continue profitability in operations, investment in alternative energies, and stock buybacks.  Major oil companies need to continue to be profitable as they are investing heavily in the alternative energy space.  The majority of all major alternative energy investments are coming from oil companies around the globe.  Now, let’s take a quick step back.  Will Exxon/Mobil be held accountable like the cigarette companies for covering up their knowledge of global warming that they knew about through research 20 years ago and covered up?… Yes.  Will bank executives and shareholders who sold positions two days prior to the current collapse be forced to return money that will go to back to teh FED?… Yes.  The US government and all agencies have made it very clear that these companies will still be held liable.  The lawsuits and claw-backs will take time.  Unfortunately, just like the the Big Banks that are “too big to fail”, the major oil companies are still the fastest vehicle to implement alternative energy projects such as windmills, solar, and hydrogen across the United States and the rest of the globe.  If oil prices fall too low, American citizens and other customers around the world lose interest in alternative energy because the cost to fill up their cars and heat their homes puts more cash flow into their pockets.  The incentives must remain in order to invest in alternative energy sources, and I believe WTI crude oil must stay at or above $65/barrel to achieve our alternative energy goals.  In addition, if WTI crude prices fell below $65/barrel, I believe that American oil companies as well as OPEC would announce production cuts immediately in order to prop up price.  For the first time ever, American oil companies and OPEC are in sync with incentives.  Market share is no longer the main incentive and driver of profitability.  Pivoting into new business ventures outside of oil is driving the economic engine of all oil producing companies and nations.  Although I believe solar will be the major alternative energy producer for electricity, I am very long on liquid hydrogen in the auto and heavy duty trucking industry.  I believe liquid hydrogen will be much easier to scale and maintain than electric vehicles due to the reliability/availability of rare earth metals and a supply chain that is so difficult to manage worldwide.  Liquid hydrogen can be produced locally in each country and the retooling of factories to pivot towards liquid hydrogen is much easier than electric vehicles.  Lastly, I do believe we are skipping along the bottom of crude oil prices and there are some value hedging opportunities.

In local news, Chicago spot prices were all over the map.  After seeing some market price erosion, gasoline prices firmed up due to the continuing change to summer RVP spec.  Diesel prices fell but ended the week firming up as crack-spreads shook off the price collapse in crude oil prices and traded higher.  I don’t expect to see too many changes on retail prices due to the whipsaw market moves.

Propane spot prices continue their steady trend, and future prices did not fall as much as expected due to the current massive value of propane price compared to crude price.  We are well below the historical average.  Therefore, I believe that future prices of propane will not move much, even if WTI crude oil price stays around $60-65/barrel.  However, because of large levels of propane inventory in our national storage due to a dud of a winter, I believe suppliers will be aggressive on getting rid of propane this summer to make room for the winter storage based on future allocations.  Therefore, I could see the scenario where summer fills are 10-15 cents, maybe even 20 cents/gal, cheaper than the contract price for propane heating season in 2023-2024.  However, next year’s heating contracts will be cheaper than this year which is incredible in a time of high inflation.

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

Best regards,

Jon Crawford

The Power of the FED

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Good afternoon!

I’m writing my update a day early, but once again, I don’t see much changing going into Friday.  As I wrote last week, the market and crude oil prices were grasping at straws to keep a nice rally going.  But I pointed out the true economic cracks in the market reasoning.  Remember, markets are not the economy, nor are they rationale.  Well, this week, the power of the FED was on full display.  Powell testified before Congress and did not mix words.  Even when Senators drilled him and threw anger his way, Powell stood his ground and now said that a half-point is on the table and he will not stop until inflation breaks.  Powell does not see the economy cooling as others are describing.  In addition, China has lowered their GDP forecast and the EU seems to be living in the alternate universe that America was living in the past couple of months.  The EU believes a “soft landing” is possible, but the cracks are showing there as well, just as they did in the US.  In addition, Russia has found plenty of buyers for crude.  Although Russian exports are down, America and Venezuela are filling the gaps.  And we must always remember there is a ton of spare capacity in OPEC.  Natural gas exports continue to run hard from America to Germany and America looks to be able to fulfill most of the gap from the loss of the Nord Stream.  Crude oil production is continuing to try and grow, and refineries are coming back online this year that were closed last year due to either accident or major upgrades.  President Biden has made it clear that the US must continue to invest in crude oil and finished products to bridge America and the world to cleaner fuels.  Crude prices sold off almost 10% on the news this week.  Every week is a push and pull.  WTI crude prices are now moving closer to $70/barrel after testing $80/barrel last week.  I expect crude will continue to trade in the $70-80/barrel range until summer.  If summer demand turns out to be a dud, and Europe slows down, crude oil prices could really nose dive.  But if a nose dive starts to happen, OPEC will cut production to keep the bottom from falling out.  So for now, we wait and see.

In local news, gasoline retail prices rose as the market converts to summer gasoline vapor pressure.  And with summer demand projecting to be lower than last year, refineries are making more diesel than gasoline.  Diesel is in much greater demand around the world.  Therefore refiners can make less gasoline and keep the prices of gasoline higher, all while making better profits on diesel abroad.  I think gasoline will hold around the $3/gallon area in Wisconsin and diesel prices could start to hit the $3.49/gallon on retail if the selloff continues and the Midwest refineries scheduled to open come back online.

Propane continues to build in national inventory and when the winter contract season has completed, I expect to see retail prices drop.  As of now, America has almost 40% more propane in inventory than last year!  I do think summer fill prices will be attractive.  However, I do see a potential for a slight premium on winter contracts over summer fill pricing due to suppliers trying to move as much gas out of the caverns so the country does not run out of storage.  For now, I think the worst of winter is behind us and now we wait and see what summer brings!

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

Best regards,

Jon Crawford