OPEC+ Agree On Production Cuts

Good afternoon,

Earlier today, OPEC+ agreed to increase daily production cuts to 1.7M barrels of oil.  The increase from 1.2M to 1.7M was a surprise to the markets, but the devil is in the details.  When you look at the past six months and the reported quotas from members of OPEC, the daily average was actually close to 1.7M barrels per day.  Due to Saudi Arabia and others cutting more than promised, the deal, although higher in posted cuts, is actually not much of a change from current market conditions.  In addition, waivers were granted for condensates which lessens the blow on the market.  Saudi Arabia announced they will continue to cut an additional 400k barrels/day off their runs which could make the cut closer to 2.1M barrels/day.  But time will tell.  Saudi Arabia received their evaluation for Aramco and is looking to go public with a 5% stake in their 1.7 trillion dollar evaluated state owned company.  OPEC+ is planning on meeting again on March 5th, 2020 to reevaluate the market conditions.  Crude prices jumped higher on the announcement but not as high as expected.  Then the US Jobs report was released as well as rumors of a China/US trade deal.  All the combined news today pushed WTI crude prices to $59/barrel.  However, WTI is still struggling to regain the highs reached earlier in the year.  Even though the news today was very bullish crude, the continued high prices will allow the US shale producers to hold their record production levels keeping overall crude supplies in balance.  At this time, I don’t see crude prices making any runs higher to end the year unless an epic US/China trade deal is reached.

Retail gasoline and diesel prices relaxed a bit to start the week, but clawed back much of the cost by the week’s end.  I don’t expect to see much price movement at the pump over the coming week.

Propane supply is starting to improve since the CN Railroad ended their strike last week.  Propane prices have held firm even though crude prices have risen.  There is still an abundance of propane available in the country and production is healthy.  Plus, warmer than average weather continues to show up in our area keeping propane prices from rising any further.  Next week we will experience a two-day cold snap, but that looks to be about it for cold weather in the coming weeks.

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

Best regards,

Jon Crawford

PROPANE UPDATE:

Good morning!

I hope everyone has a safe and enjoyable Thanksgiving!  Good news yesterday, as the Teamsters and CN agreed to a tentative deal and workers returned to work last night.  We are not out of the woods yet, but now we have a target and some light at the end of the tunnel.  We expect supply to be tight for the next few weeks as rail shipments get caught up.  But with allocations resetting in December we feel that the potential for a December disaster is starting to subside.

Crude prices rallied this week with hopes of a China/US trade deal.  In addition, OPEC+ is talking it up that supply cuts will continue.  I believe that the rally is a little premature.  I’m not too concerned with crude prices breaking out much higher.

Retail prices of gasoline and diesel will continue to rise as costs increased this week.  We believe that once again this might subside after Thanksgiving.

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

Best regards,

Jon Crawford

PROPANE SUPPLY UPDATE:

Good morning,

Well, the propane distribution logistics were finally starting to see the light at the end of the tunnel, and then the CN Railroad in Canada went on strike Tuesday.  CN ships all the rail propane into Wisconsin.  The strike is not over yet but making progress.  If the strike continues through next week, Wisconsin is going to be in trouble.  Enterprise and Oneok pipelines are finally starting to flow a little better now that corn drying is starting to get over the hump.  We were actually looking at getting back to normal by December until the CN strike was announced.  Seems like as soon as one issue is solved, another pops up.  For now, we are grateful for warmer temps and shorter weeks with holidays coming.  If the strike ends over the weekend, we will be able to breath a bit.

Crude prices jumped higher with some additional unrest in the Middle East and the announcement of a possible China/US trade deal.  However, any further movement higher has been tempered with skepticism on a true deal with China.  I continue to see WTI crude trading in a yo-yo pattern between $55-58/barrel until after the OPEC meeting in the beginning of December.

Retail prices on gasoline and diesel moved slightly higher this week with the upward movement in crude prices.  Inventories are in good shape.  I don’t expect any major blowouts in price before Thanksgiving Day travel.

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

Best regards,

Jon Crawford

Cold, Cold, and More Cold

Greetings!

Well, winter snuck up on us pretty fast to start November!  Single digit temps and lots of snow the past week have made November feel like January!  Corn drying demand and the colder than normal temperatures have put a lot of pressure on propane distribution.  There is not a shortage of propane, but there is only so much propane that can move through distribution at one time.  Hopefully by the end of November harvest will be almost completed and temperatures will be back up to normal.  But for right now, we are calling for colder than normal through the end of November.

Crude prices spiked on the hopes of a China trade deal.  Although crude prices are still very low, we don’t expect to see much more upward movement.  I am not convinced that demand is going to outstrip supply in the coming six months.

Retail prices on gasoline have dipped a bit.  But I would not expect to see prices drop much more.  Diesel prices have risen since winter additive blending and #1 oil have entered the supply picture due to the extreme cold.  Winter additive blending and #1 oil can add up to 20 cents/gallon to the cost of diesel fuel.  I would expect to see diesel prices remain higher now that winter temps are here.

Propane prices have risen due to the massive demand spike in the Midwest.  I do not expect to see prices relax from their current levels anytime soon.  If you are a will-call customer, please make sure to check your tank!  This cold snap has caught many customers off guard.  Also, please make sure to salt or sand your driveway to ensure a safe and efficient delivery, and that there is a clear path to your tank.

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

Best regards,

Jon Crawford

No Propane Emergency

Good afternoon!

I hope everyone had a great Halloween even though it was cold and snowy out.  Sounds like the cold weather is going to stick around for awhile.  If all weather patterns hold, we are in store for a colder winter with a lot of snow.  I will keep you updated based on the prediction services we subscribe to.

Also, I wanted to clarify that there is no propane emergency in Wisconsin.  Gov Evers issued an extension of service hours exemption this week and made reference to a propane emergency.  This is not true.  We are having a high demand cycle with corn drying and the early cold weather, but there is no emergency.  Basically, trucks are waiting extra long hours to load product, so we want to make sure that drivers have enough hours on their books to deliver the product.  Once corn drying is over, distribution will be back to normal.  But there is no emergency, shortage of product for this winter, massive price spikes on the way, or anything to be too concerned about at this time.  I will keep you posted as the month goes along.

Crude prices continue to trade narrow range.  We are still predicting that WTI crude oil will trade around $55/barrel through the end of the year.  Nothing new on this front.

In local retail news, refinery maintenance has been longer than expected and supplies are starting to get a bit tight.  I would expect to see prices at the pump on gasoline and diesel rise next week.

Propane prices are rising due to increased demand, but nothing out of the ordinary.  If you are on a will-call, please remember to check your tank.  The early cold and snow has caught some customers by surprise! 🙂

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

Best regards,

Jon Crawford

Crude Continues Sideways Movement

Good morning!

Crude oil continues to trade sideways on a lack of hedge fund positions in the market place.  Crude markets are very soft on long positions.  Traders are continuing to believe that economic headwinds will deteriorate crude demand next year.  The only possible bullish headlines moving crude right now are coming from OPEC saying they might consider deeper cuts next year.  However, most of the talk from OPEC is just talk, so the news is only keeping a lid on crude prices, not moving them higher.  As the US looks at impeachment and a trade war, England/Europe at Brexit, ceasefire between Turkey and Syria began, and China at a trade war and Hong Kong unrest, I don’t see a lot of potential out there to pop crude prices higher.  For now, I expect crude to remain narrow and calm through the end of year until the OPEC meeting in December.

In local news, harvest demand finally hit the Midwest and the glut of diesel fuel out of the Chicago market started to deplete.  Diesel prices jumped almost 15 cents/gallon in two days.  I expect to see retail prices on diesel increase in the coming week.  Gasoline prices have remained steady with crude as supply has been meeting demand.

Propane prices moved a bit higher but not much.  Corn drying demand is now moving and cold temps are sticking around.  I expect to see propane prices slowly move higher if the end of year stays colder than normal.  However, if crude prices fall off a cliff, with how much propane is still in inventory, propane prices will be hard pressed to not move lower with crude.  Time will tell.

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

Best regards,

Jon Crawford – Pres.

Softness In Chicago Market

Good morning,

Headlines around a softening economy and lower refinery runs continue to weigh on crude prices.  Economic data is starting to spoke investors as they continue to move money out of long positions on crude.  WTI is looking to close below $55/barrel this week.  Many firms are lowering outlook for crude prices into 2020 as well.  History shows that crude prices tend to stay low during election years as well.  As conditions in Syria hold some Middle East tensions, OPEC continues to say they will cut production to keep prices from falling off a cliff.  Considering that the next meeting is not until December, I believe OPEC is scared that crude prices could fall through a trap door and collapse.  For now, I think WTI crude prices will remain under $60/barrel for the remainder of the year and have a long ways to go before stars align to pop the price out of its current trend.

In local news, Chicago refinery markets are out of refinery maintenance mode and flush with product.  Retail prices on gasoline and diesel continue to soften.  I expect to see prices at the pump continue a slow downward trend.

Propane prices have leveled off for now as demand is starting to kick in.  I think you will see propane prices start to move higher next week with continued cold and crop drying demand.

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

Best regards,

Jon Crawford – Pres.

Crude Trying To Find A Floor

Good afternoon,

Crude oil prices dropped dramatically this week as Chinese/US talks looked to stall.  In addition, the impeachment proceedings and the looming talks around a recession continued to put downward pressure on crude prices.  However, by the end of the week there was a missile attack on an Iranian crude ship, OPEC announced that they will probably cut more crude in 2020, and Trump said that China trade talks are moving along just fine.  Crude prices found some great support to end the week and ended up about where we started the week.  WTI crude continues to stay under $55/barrel which is very low.  The EIA revised their forecast for WTI prices next year to remain around the same price as today for another year.  If so, cheap energy can continue to try and keep the economy afloat.

In local retail news, gasoline prices continue to remain under $2.49/gallon and diesel prices are capped under $2.90/gallon.  Harvest is slowly starting and talks of tight diesel supply are starting to bubble up.  If so, I could see a price spike in diesel depending on the demand during harvest. As of now, with how wet everything is, we expect harvest to be long and slow.

Propane prices found support as an early cold and wet October is showing greater heating demand as well as high demand for crop drying.  Board prices have increased and I expect to see maybe another increase next week.  It is still not too late to lock in your heating price for this season!

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

Best regards,

Jon Crawford

Crude In Bear Territory

Good morning,

Crude oil prices continue to inch back into bear market territory.  At the current rate, WTI crude is poised to fall through $50/barrel.  This is only three weeks after an attack on the world’s largest oil refinery!  Saudi Arabia claims to be back in full production and the rest of OPEC and Russia are concerned about the possibility of surplus crude entering the market in 2020.  In addition, the issues with the US/China trade war are feeding into concerns on world oil demand.  The rest of the world is taking pause and watching.  Overall, crude demand in the US is very strong, so it’s a bit of a market play than fact.  But time will tell.  If a trade deal is completed, hold on to your seats because crude prices will bounce higher!  For now, crude prices are in check as many money managers have exited long positions on crude going into Q4.

In local retail news, gasoline retail prices continue to remain under $2.49/gallon and diesel prices remain under $2.89/gallon.  I believe gasoline prices will continue to hold, but diesel supply in Central Wisconsin is very tight and I expect to see diesel prices go higher in October.  Once harvest kicks in, we could see a spike on diesel prices at the pump.

Propane prices are holding pattern with crude.  Until propane experiences a demand event, there is just not a lot of movement.  I know some people are concerned that their contract price is higher than the board price today.  Remember that a contract provides you with upside price protection.  We are very early in the season and have a long way to go before a heating cost average will carve out.

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

Best regards,

Jon Crawford

Crude Gains Erased

Good morning!

WTI crude prices are now lower than were before the attacks in Saudi Arabia.  Saudi Arabia is claiming to be back to 75% production and will be at full capacity within a month.  Saudi Arabia struck deals with other countries to cover all their customer contracts during this time.  In addition, with impeachment proceedings looming for Trump, the demands side of crude economics was pulled back to front and center.  Coupled with political news, Chinese trade talks stalled and the market rally took pause along with an easing in crude prices.  This week, the US petroleum inventory report showed a surprise build in inventories with low production runs.  Basically, an attack on the world’s largest oil refinery is still not enough of an event to shake the supply/demand dynamic in the crude market.  Demand is very unstable and production is at record highs.

In local retail news, gasoline prices have calmed down from the jump two weeks prior, but diesel prices will continue to remain high moving forward.  There was a discount on diesel coming out of the Chicago spot market for the past month, placing our cost in Wisconsin about 20-30 cents cheaper than our neighbors to the east.  The glut of diesel has dried up, and prices skyrocketed.  I expect to see diesel retail prices hold where they are at for some time, especially with high harvest demand on the horizon.

Propane prices are slowly inching up.  Although retail spot prices are cheaper than contract, winter fundamentals and potential massive corn drying demand will hit the markets next month.  I am predicting propane prices will jump in October.  How much higher, will depend on crude prices.  For now, you can still contract propane for the heating season.  Feel free to discuss your options with us!

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

Best regards,

Jon Crawford