Crude Prices Retreat From Highs

Good morning,

Crude oil prices are retreating from recent highs earlier this week.  WTI surpassed and held above $40/barrel coming out of strong gasoline demand over the 4th of July weekend.  However, sentiments are getting a little negative due to the growing community spread of the coronavirus.  Some States are clamping back down and many are worried that another economic slowdown is in the future.  Crude prices have relaxed back to last week’s levels below $40/barrel.  As I have been writing for some time, I do not see any long-term scenario for WTI crude prices to hold above $40/barrel until better treatments or vaccines are available.  Also, there are grumblings that Saudi Arabia might not extend production cuts due to lack of compliance on quotas from other OPEC nations.  The crude oil market looks like it got just a little ahead of itself.  However, unless we truly start shutting down the economy again, I don’t think we will see crude prices fall too much.

Gasoline and diesel retail prices have varied throughout the area.  The average retail price for both gasoline and diesel is above $2/gallon.  I’ve seen some markets falling back below $2/gallon on gasoline.  Gasoline and diesel costs, when including all taxes, have remained relatively the same.

Propane prices have continued to stay steady.  Not much movement up or down in price.  Contract pricing for next winter has been released.  Please contact the office for more info.  We are highly recommending that everyone contract for the coming heating season and orders a summer fill.  We have no idea what to expect with the coronavirus over the fall and winter.  So far the propane supply issue seems to be of not much concern anymore.  In addition, the corn crop is growing quickly and ahead of schedule.  We are not anticipating a large corn drying season.  Also, many around Wisconsin say, “for every day above 90 degrees in the summer, it’s a day below zero in the coming winter.”  If that’s the case, bundle up because 2020-2021 winter will be cold!  🙂

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

Best regards,

Jon Crawford

Happy 4th of July

Good morning!

Instead of my usual update, I just want to take a moment and wish everyone a safe and enjoyable 4th of July weekend.  I know the last three months have been difficult for many people.  I hope we can all take a break for a couple days and enjoy the beautiful weather.  I know that our country will survive through all of the current turmoil and I hope we all come out stronger in the end.  Our nation has a history of resilience and determination.  We can all come together and be better in the end.

I will just say quick, that next season’s propane heating contracts are released and will be hitting mailboxes next week.  If you would like more information, please call our office and we will be happy to assist you with writing a contract.

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

Best regards,

Jon Crawford

 

COVID-19 Surging Takes The Headlines

Good morning,

Although the US economic data looks to be improving a bit and the unemployment rate looks to be bottoming, the surging of COVID-19 in Texas, Arizona, California, and Florida have rocked the markets this week.  WTI Crude has come off of recent highs and is very skittish in trades due to the possibility of economic downturn from the surging coronavirus.  Across the globe, many countries are continuing to slowly reopen without the major resurgence as the US is experiencing.  Time will tell if the coronavirus rages back up in Europe as well.  But for now, the US is a cautionary tale to the rest of the world.  Supply and demand for crude oil seem to be somewhat in balance for the time being, but any major cutback in current demand will rapidly build surplus supplies in the US.  In addition, shale producers are saying they will need three years to peak at 16% of top level production levels experienced in February of 2020!  That is a terrible outlook for oil in the US.  We are now officially operating the LOWEST number of oil rigs in the country since the 1980’s.  Also, shale companies are looking at $300 billion in losses this year and that will put pressure on banks that are just now starting to experience some financial stress due to the pandemic.  The next three months will be very crucial in determining how we end 2020 and look to 2021.

In local news, demand for gasoline and diesel continues to remain steady.  Retail prices are dropping back down closer to $2/gallon on both gasoline and diesel.  If there is no peak in COVID-19 cases in the South by the end of next week, we will be looking at the lowest retail prices for gasoline and diesel on the 4th of July in almost 20 years.

Propane prices have stabilized due to high capacity production.  I do not believe that propane will continue at the current production runs.  Exports are starting to slow down as well.  Contracts for this coming heating season will be released very soon and will be cheaper than last season.  Stay tuned for more info.

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

Best regards,

Jon Crawford

WTI Crude North of $40/Barrel?.. Will It Last?..

Good morning!

There is not much news to report this week.  Crude oil prices continue to follow the news cycle.  We started out the week with prices dropping based on fears of a second wave with the coronavirus.  But prices recovered as more news of potential treatments for COVID-19 were released and the EIA reported draws in US refined product inventory.  OPEC+ seem to be holding strong on their production quotas and the US is not ramping up production quickly as crude prices slowly recover.  The combination of everything that happened this week is leaving investors with an appetite for more.  So as we close the week, WTI Crude oil topped $40/barrel for the first time since the beginning of March!  But will this recent rally last?  I’m not so sure.  The economy is still slow with another 1M people filing for unemployment this past week.  I believe we are hanging on by a thread and any resurgence of the coronavirus in previous hot-spots forcing any sort of shutdowns will squash this rally.  For now, all trajectory is on the heels of any coronavirus news.

In local retail news, gasoline and diesel retail prices have climbed above $2/gallon in most areas.  Due to the 10% rise in crude prices, retail prices have followed accordingly.  I expect to see retail prices for both gasoline and diesel to remain above $2/gallon.

Propane prices have held steady and climbed a bit the past week.  I continue to be bullish on propane.  Although inventory levels are OK right now, any hiccups in production could put us into deficit very quickly with all of our export capacity running strong.  In addition, if we have a cold winter, demand could put pressure on our production facilities, which at the moment are making NO contract commitments for retailers this coming winter.  As always, propane will be interesting.  I recommend that everyone fill their tank now and contract for next heating season.  We expect next heating season contracts to be out in July.

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

Best regards,

Jon Crawford

 

Crude Sell-Off After Peak

Good morning,

WTI crude futures started off today sinking nearly 10% after peaking at $40/barrel.  The peak pricing came on the heals of OPEC+ agreeing to keep record production cuts in place through July.  But Wednesday was a battering of bearish news for crude.  EIA Inventory Reported showed a large build in crude inventories which came as a surprise.  With rig counts being down to the lowest level in 20 years last week, many are wondering if production is still outpacing demand.  Then the FED released their statement saying they will keep interest rates near zero through 2022 because the economy is going to take a much longer time to recover.  In addition, new waves of the coronavirus are popping up in the US sparking fears of a major second wave across the country.  And finally this morning, unemployment numbers showed an additional 1.5M people applied for benefits last week.  Although the unemployment number showed a slowing of claims, claims have still not stopped which gives concerns on the long-term sustainability of the economy as it stands.  But the real head scratcher was the FED statement.  If the FED keeps rates near 0%, the action devalues the dollar, which increases the price of crude because it’s traded based on the dollar.  But the FED’s announcement caused crude prices to drop.  I have never seen that before.  But we are living in strange times and the market is behaving likewise.  I believed that the crude market was a bit over-bought so I am not surprised at the recent profit taking.  But I do not believe we will see prices fall down below $30/barrel anytime soon.

In local retail news, gasoline pump prices breached $2/gallon in some areas.  Diesel retail prices have have barely held on below $2/gallon.  I expect to see gasoline and diesel prices hover near the $2/gallon mark for some time as retail businesses continue to deal with decreased summer demand.

Propane prices have continued to remain strong.  I continue to be bullish on propane.  Although supplies are in better shape than they were a month ago, the volatility in crude and the unknown commitments from Canada and local US producers leave many wild cards on the table.  I believe now is the time to fill your propane tank.  I also urge everyone to lock in their next season’s prices.  Our contracts will be available around the 4th of July.  Stay tuned for more info.

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

Best regards,

Jon Crawford

OPEC Meeting and the Global Economy

Good afternoon,

So the crude oil rally has taken a pause.  The OPEC meeting was not moved up a week because not all members are holding up their end of the deal.  The lack of full compliance is putting Russia more on the side of not extending the deep cuts.  The US has cut production, but not as much as other would like to see.  However, the economies around the globe are reopening and an appetite for crude is starting to return.  Gasoline demand in the US is returning as people move around for the summer.  Even with great unrest and instability in the nation surrounding the George Floyd protests and the coronavirus, the crude market and stock market continue to move higher.  I’m not so sure that Russia doesn’t pull out of the deal next week and take at least $5-7/barrel on crude price with them.  I think that Russia believes that the US shale industry got off too easy again.  But maybe now that Russia is dealing with a major coronavirus outbreak in their country, they are not wanting to rock the boat too much.  Next week will be very interesting to say the least.

In local news, gasoline prices continue to rise with the price of crude.  Gasoline retail is inching ever so close to $2/gallon.  Diesel retail prices continue to be lower than gasoline retail for the first time in many years.  We have not seen this type of spread between gasoline and diesel since before 15ppm ULSD entered the market in 2007.

Propane prices continue to slowly inch higher.  Supply is in OK shape but not great.  Compared to years past, access to Canadian propane added an extra buffer.  If crude prices recover and Canada is able to export propane at full capacity, we will not be able to rely on Canada to save the day if we have a colder than normal winter.  I am still bullish on propane and recommend that everyone fill their tanks.  Next season’s heating contracts will be issued towards the end of June, first part of July.

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

Best regards,

Jon Crawford

Demand Uptick and Instability with China

Good morning,

Crude prices gained momentum this week on demand increases and economies across the globe reopening.  WTI clawed back to almost the mid $30’s before cooling off yesterday on increased refinery runs due to refining margins returning.  The big news is the possible change in tone on our trade relationship with China.  Crude markets are worried that increased sanctions and derailment of trade talks in China will slow the recovery from the coronavirus pandemic.  In the US, appetite for gasoline is starting to recover but inventory levels are rising.  The relationship is delicate because if demand slips at all in the next three months, we could be right back where we started with a very oversupplied market.  I still believe we are well over a year away from seeing the crude and refined markets balance out.

In local news, demand has clawed back over 30% what was lost in April.  Summer weather and reopening of the economy are bringing people back to their cars.  Cost of gasoline and diesel have recovered some loses as well, but I expect to see gasoline and diesel retail prices remain below $2/gallon for the next month.

Propane future pricing continues to rise based on lackluster demand, decreased production, and increased exports.  Although the alarm bells are not ringing yet, i don’t expect to see propane prices fall.  Summer fill season is in full swing.  I am recommending that everyone fill their tanks in the next month to be safe.  Next season’s contracts should be released towards the end of June.

As always, if you have any questions, comments, or concerns, please feel free to reach out.

Best regards,

Jon Crawford

Crude Finding Support, Prices Rising

Good morning,

Not too much to report this week.  WTI crude prices have risen this week to nearly $30/barrel.  There is much optimism on the continued cuts from OPEC and the US.  In addition to the cuts, China’s crude demand is ticking back up as the country is reopening.  The traders are also hopeful that US demand will continue to rebound from the lows in March and April as states begin to reopen.  The FED is also calling for more stimulus which always raises commodity prices.  I feel that the current WTI price recovery is too fast.  Although there are some bullish headlines out there, the supply balance in the US is still on the bearish side.  I’m not hopeful that WTI will break out much beyond $30/barrel.  If for some reason WTI does break much above $30/barrel, we will see rig counts increase and another price collapse.  I still think we are six to twelve months away from complete supply re-balance in the marketplace.

In local retail news, prices of gasoline and diesel continue to rise.  I do not expect to see pump prices go down anytime soon.  I would count on gas prices above $1.50/gallon throughout the summer at this point in time.

Propane prices also continue to rise.  The supply economics of propane continue to be bullish.  By no means is the propane supply situation looking like an emergency, but the world of overabundance in supply are behind us.  I highly recommend filling your tank and contracting for next season when the contracts become available.

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

Best regards,

Jon Crawford

Crude Rally – Pump Prices Rise

Good morning,

WTI prices gained more than 40% on hopes of the world economies reopening and demand potentially soaring back with a vengeance.  WTI settled this week near $24/barrel.  In addition, the builds in US inventories were not as large as expected.  Production seems to finally be dropping.  However, in my opinion, the rally back seems to be a bit over-bought.  Inventory levels are still high and the world supply is still robust.  Unless there are more stories of magical cures hitting the market this month, there is a potential for another massive sell-off on the WTI contract this month.  Saudi Arabia did cut a bunch of tanker shipments, but at the same time, there are not many tankers left to fill!  So for now, WTI will probably hang around these levels and move in volatile swings until the end of the month.

In local retail news, gasoline retail prices continue to rise.  The glut of supply in Chicago is gone.  Gasoline and diesel costs have risen over 50 cents/gallon these past weeks.  I expect average retail prices of $1.69/gallon gasoline and $1.79/gallon diesel fuel to continue into next week.

Propane prices continue to rise as I have been writing the past weeks.  Propane seems to have bottomed in mid-March and not looked back.  We are suggesting that everyone fill their tanks now if possible.  Production cuts are adding to the supply worries in propane.  Contracts for next season will be coming out probably in June sometime.  Stay tuned.

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

Best regards,

Jon Crawford

Temporary Floor – Chicago Glut Gone For Now

Good morning,

I hope this message finds everyone safe and well.  Crude oil prices are hopefully carving out some support to keep from falling into single digits or negative territory.  Oil companies are beginning to finally cut production here in the US.  In addition, oil companies are starting to do what I feared: cutting dividends.  Shell announced a slashing of their dividend for the first time since WWII!  The inventory report this week showed that maybe we have peaked in production and finally slowing down on building of inventory.  The FED continues to put out offers for helping the economy which also help support oil prices.  We are also seeing a slight, and I do mean slight demand pick up on gasoline which shows that people are slowly starting to move around.  But I am not confident that oil prices will go much higher.  We are not out of the woods by any means.  So many oil companies burned through cash and restructured debt from 2018 hoping for the payoff in 2020.  Well, that’s not going to happen.  I imagine that bankruptcies and depressed oil stocks will continue through summer.

In our local market, gasoline cost has risen over 45 cents/gallon since the beginning of April.  Do not believe what you read in the papers.  Gasoline prices will not be staying under $1/gallon.  The glut of gasoline supply in Chicago is now gone and market economics have balanced accordingly.  The retail cost of gasoline is well above $1/gallon.  I expect to see gasoline prices rise to almost $1.49/gallon in the coming week.  Diesel cost has also risen by almost 30 cents/gallon.  I expect to see diesel retail prices move up a bit in the coming weeks as well.

Propane continues to be a wild card.  Exports diminished for the first time in weeks which helps building local supply, but as price of crude rises, propane price will also start to rise.  There are a lot of chicken and the egg scenarios in propane.  Right now inventory levels are not great, but they are not terrible.  The main concern is Canadian rail propane.  In years past, the US has been well supplied by Canadian propane.  That does not look to be the case in the coming year.  Therefore, we will be heavily dependent on the ability of the US cavern storage to meet consumer demand in 2020/21.  I believe that the price on propane today has the potential to be the lowest price of the year.  I am recommending that people fill up now if they can.  Contract pricing will be coming out soon.  I know for certain that next season’s price will be lower than this season.

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

Best regards,

Jon Crawford