Happy Thanksgiving!

Good morning!

I hope everyone had an enjoyable Thanksgiving Day!  Since the markets trade on low volume this week due to the holiday, much of the movements will not be realized until the start of next week.  As of now, the profit taking for the year is starting to take shape due to the emergence of a 10x mutated variant of Sars-Cov-2 compared to the Delta variant.  The world is taking notice.  Although the worst case scenario would be a significant step back, we would not be going back to ground zero.  However, the news was enough for traders to lock in the profits for the year that I’ve been talking about.  Even if the news on the variant comes back as positive in the coming weeks, I don’t expect crude prices to take off.  I think the news today was enough to pull a lot of hedge fund firms out of the crude trade, lock in gains, pay taxes at known rates, and move on.  The one event of the week that is affecting crude prices positively is the announcement of the Strategic Petroleum Reserve.  The SPR has only been used three times in our history to deal with global issues:  Persian Gulf War, Hurricane Katrina, and the civil war in Libya.  The previously mentioned events were a huge shock to the global supply chain.  The situation were are currently experiencing is not a supply shortage.  Producers are choosing to withhold product.  The SPR release announcement caused crude prices to trade HIGHER because of the inaccuracy of the need for the deployment.  The amount of SPR coordinated release changes nothing in the grand picture of global supply.  Either the world increases production or not.  There are not enough global reserves to dramatically tip the scales.  Next week is going to be very interesting to watch!

I do expect to see some relief on pump prices in the coming week.  How much is to be determined by how deep and how long the selloff runs.  

Propane price have lost a little strength over the past week.  Our retail price went down for the first time in six months.  I don’t expect to see prices drop too much as we go into the volatile portion of winter.  We escaped supply disaster due to low corn drying demand, but we are not out of the woods.  Periodic price spikes are continuing to lurk in the background.  In other words, I’m taking the recent downward price movement lightly.

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

Best regards,

Jon Crawford

Crude Trade Starting To Collapse?

Happy Friday!

As I have been writing for the past months, the crude oil trade is going to be very choppy until the end of the year.  All components of the trade were in place to keep prices high until the end of the year.  But since there is a massive profit to be gained at these current crude price levels, any strategies to push prices lower could trigger a quick sell to lock in gains for the year.  The foundation of the crude oil trade is based on OPEC+ continuing to withhold crude from the market.  In addition, Saudi Arabia raised their export prices for the end of the year.  I think the act of raising prices further, was a bit too greedy.  This week, Occidental Petroleum, the largest shale oil producer in the US said they would be willing to increase production to help lower prices.  They also said their strategy is to start coming back online fast in 2022.  The actions prompted the International Energy Agency to call a crude surplus in the marketplace starting in Q1 2022.  The announcements set off a selling frenzy as traders tried to lock in record gains in 2021.  OPEC responded by pleading with others that the strategy is working and to hold the course.  But then today, the Biden Administration is looking to work with allies to all release Strategic Petroleum Reserves and flood the market with oil.  The event would cause a crash in price.  And in addition to the US and their allies, China joined the party too, saying that because of rising prices and OPEC’s decision to cease offering discounts on their exports, China would also tap their Strategic Petroleum Reserve.  Crude oil prices are looking to close the week below $80/barrel for the first time in a while.  Could the end of year rally and 2021 crude trade finally be collapsing?  Possibly…. If the US, allies, and China keep their word and flood the market, $70 and below will be the target for WTI moving forward.  The move would be a welcomed inflationary relief going into the holidays.

In local retail news, prices are slowly unwinding from the highs.  However, I do not expect to see diesel prices at the pump drop too much since we are entering into colder weather and the cost of blending diesel with additives and #1 Diesel is entering into the marketplace.

Propane cost is slowly unwinding but with the winter contract cost differentials and lack of demand, I do not see retail prices dropping very quickly.  There will be caution going into the next few months with colder weather on the horizon.  However, the good news is that I do not see propane retail prices going any higher anytime soon.

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

Best regards,

Jon Crawford

Crude Oil Prices: The Wild Ride Continues

Good morning!

Happy Friday!  Colder weather is starting to set in and there was even some snow/mix this morning.  Hard to believe that winter is almost here!  Anyways, crude prices took a wild bumpy ride again this week.  The COP26 concluded this week with not much changed except a wanting to get off of fossil fuels.  However, the conference sparked backlash from Saudi Arabia and others.  The US and other nations have called for the ending of fossil fuel production, yet demanded Saudi Arabia and others in OPEC to pump more oil to bring prices down.  Saudi Arabia responded by saying that since the world wants less fossil fuels, they might pump less fuel and allow the world to experience the pain of high prices.  Saudi Arabia believes the world is not ready for a full transition to alternative energy and they are not going to be bossed around, especially from the US, as we continue to withhold our own oil production from the market.  In addition, Saudi Arabia raised their prices for December and January shipments just to prove a point.  Then, inflationary data for the US came out at the highest in 30 years and the API reported draws in national crude oil inventory.  By Wednesday, crude oil prices were touching on the highest prices for the year.  On Wednesday, the EIA instead showed a build in crude oil inventory and the Biden administration, along with the FED, decided that maybe it’s time to do something about inflation.  The coupled news sent the Dollar much higher and crude prices tanking.  In addition to the bearish sentiments, COVID seems to be coming back for one last major stand in the US and Europe, and China started cutting crude imports due to higher prices.  At one point, WTI dipped below $80/barrel again after being at $85/barrel earlier in the week!  As I’ve been writing, the crude trade is going to be wild going into the end of the year and whether or not traders are going to ring the register on a 70% gain for the year.

In local news, gasoline and diesel prices have remained fairly steady as the market continues to go back and forth every day.  There is not really a directional movement carved out.  I’m expected to see prices remain around the same for the coming week.

Propane prices have continued to stay in check.  As winter approaches and winter price indexes hit the market, I don’t expect too much movement on price for the time being.  We have not moved price at retail for almost a month and I welcome the news considering prices went up over 50 cents/gal since July!  So now we just need to wait and see how hard mother nature hits us this winter.  I am cautiously optimistic going into the winter.  If the FED raises rates sooner and we get a leg-down movement in crude prices, propane prices could stay in check.

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

Best regards,

Jon Crawford

Don’t Get Sick On The Roller Coaster Ride

Happy Friday!  Wow! Crude oil prices took a wild roller coaster ride this week.  Prices started the week out soaring back near highs of $85/barrel on WTI.  Then the US announced increases in national inventory coupled with the news that the FED will begin tapering and possibly raise interest rates in early summer of 2022.  The news sent crude oil on a nose dive over two days of trading, closing at $79/barrel on Thursday!  The closing price was the lowest in weeks.  In the middle of all the news, OPEC+ had another meeting and decided to keep oil production steady, regardless of calls from the US to increase production.  I figured the news would have shot prices higher, but it fell on deaf ears…until this morning.  The October jobs report was knocked out of the park based on expectations, so the news coupled with OPEC’s announcement from yesterday shot WTI right back above $80/barrel.  Looks like WTI is still going to close down for the week, but not nearly as much as anticipated.  As I have been writing, we are in uncharted volatile territory with many players holding the crude oil trade.  The next four to six months are going to be very choppy.  Try not to get sick on this roller coaster ride!

In local news, the cost of diesel has finally eased a bit with harvest on the backend.  Gasoline cost has eased a bit but not as much as diesel.  I expect to see retail prices basically unchanged as the markets are still balancing into the supplies being sold at retail.

Propane price has continued to hold steady through this choppy trade, but that is ok.  The wild ride higher seems to be kept in check at these numbers.  As I have been writing, we are not out of the woods, but more on a pause.  I still could see propane having some break out higher sessions depending on the amount of cold weather this winter.

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

Best regards,

Jon Crawford

WTI Price Showing Signs of Weakness

Good morning!

Although Goldman Sachs continues to pound the drums of $100 WTI crude oil, a lot of bearish overtones finally poked their way through the loud chatter from the bullish news cycle.  Down in the Permian Basin, the largest shale oil play in the US, private companies have increased production past pre-pandemic levels.  Although public companies are holding firm withholding supply, many believe they can’t hold out forever. If prices start to fall, I would expect to see market share become the name of the game.  Crude oil inventories started to build in the US again which is a sign of decreased local demand as well as export demand.  Although the Delta variant is calming down in America, covid cases had their highest level increase around the globe the past two months.  The fears of economic slowdowns across the globe are gaining attention again.  The US Q3 economic data was terrible along with many other countries.  China is looking to resolve their coal shortage issues which would decrease their demand for oil.  And Iran is working to maybe come back to the negotiating table with the US which would bring more transparently traded oil into the market.  And the addition of more Iranian crude into the market could completely wipe out the OPEC+ agreement.  As I have been writing the past two months, the oil market has been running on headlines and getting very heavy in my opinion.  There are many reasons to be patient and sit back until year end while all these scenarios play out.  I am still seeing more downside risk than upside risk in the long term for 2022.

Chicago spot diesel prices have dropped this past week so I expect to possibly see retail prices on diesel ease a little.  Although crude prices have eased a bit, there is a slight supply disruption on gasoline coming out of Chicago, so I do not expect to see much movement on gasoline retail prices just yet.

Propane price is continuing to level off and stop the trend of flying higher.  We are in the heart of contract season and demand has been very light.  Corn drying has been minimal and supplies are very healthy.  The US has built a little additional inventory but not a safety net.  The latest forecast is calling for colder than normal temps this winter.  I would take this pause in price movement lightly.  Propane prices still have plenty of variables on the horizon.  If we have a colder than average winter, propane could break out even higher in price.  However, if crude prices collapse during the winter, propane prices could at least be held in check.  I do not expect to see propane prices back in the $1/gallon range in the coming six months.

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

Best regards,

Jon Crawford

Crude Taking A Breather… For Now

Good morning!

Happy Friday!  Crude prices have finally taken a pause to catch their breath.  China is making announcements that they are trying to solve their coal shortage issues by potentially negotiating with Australia.  The US production seems to be soaring in the private sector versus publicly traded companies.  And OPEC+ has hinted that they are watching supplies very closely to try and make sure a major price spike doesn’t derail demand.  I am starting to see the scenario for an unwinding in crude prices starting maybe in Q1 of 2022.  I could see traders ring the register on record returns for crude positions in Q4 of 2021 and take the profit knowing that short-term cap gains taxes could increase in 2022.  I can also see publicly traded companies and OPEC+ start to put more oil on the market in Q1 of 2022 to go after market share if COVID-19 hopefully becomes less of an economic impact on demand.  For now, I will take the pause on the upmarket movement, but I’m not confident we have peaked.  However, the scenarios for lower crude prices next year are starting to take shape.

Local retail prices of gasoline and diesel have stayed very stable this week.  Gasoline retail price should remain above $3.00 on average and diesel near $3.49/gal.  Not much news to report.

Propane prices have also leveled off for the time being due to a scorching September and October so far and a complete lack of corn drying demand.  In addition, exports are finally showing signs of weakness as cost is deterring petro-chem purchasing.  If these scenarios play out, propane prices could at least stabilize at current levels.  Supplies are still tight, but looking to be more manageable due to the previously discusses items.  The question remains on retail heating demand for this winter.  If we have major cold snaps this winter, I do believe that we could see some major price spikes higher.

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

Best regards,

Jon Crawford

Crude Prices Running With Momentum

Good morning,

Happy Friday.  Crude prices took a slight break mid-week due to a massive increase in crude oil inventory in the US.  But by end of the week, crude prices found much support from the continued global energy crunch.  Natural gas and coal prices continue to scream higher from lack of supply and fears of a cold winter.  The main driver comes from green energy projects in Europe and the UK not producing the anticipated outputs calculated going into winter.  The world crude producers are continuing to withhold lots of crude oil from the market in order to also keep prices high.  Many oil producers have a lot of revenue to make up from the losses in 2020.  The FED announced a possible tapering of bond buying in November.  However, even a stronger dollar is not weighing on energy prices.  I truly believe that energy commodities are in a momentum trade and will hold strong and even go higher until end of the year.  But it’s not all doom and gloom.  There is a strong scenario on the table predicting that crude prices will start to unwind fairly quickly in Q1-Q2 of next year and fall steady from that point.  For now, I believe there will be short-term inflationary pain on crude prices trickling down through natural gas, propane, gasoline, and diesel.

Retail prices for both gasoline and diesel continue to slowly creep higher.  Gasoline retail prices are averaging over $3/gallon and diesel retail is nearing $3.49/gallon.  As I have been writing for sometime, I believe your pocketbook is going to get a lot lighter fueling up for the next 3-5 months.

Propane prices finally took a breather at current rates.  Retail prices are holding over $2/gallon but seem to be in a slight holding pattern now that petro-chem companies are cancelling shipments of propane due to cost.  In addition, the lack-luster corn drying season and hot weather is helping to keep propane prices from really taking off.  I see that colder weather is in the forecast so demand will start to pick up going into November.  The Midwest is in decent shape for propane inventories.  Overall supplies are short, but the Midwest seems to be in better shape than some areas.  I expect a continued bumpy ride and higher prices on propane for the remainder of the 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

Energy Prices Holding Firm

Good morning,

Energy prices are holding firm to end the week.  The FED announced this week that regardless of tapering or raising rates, inflation is going to persist into 2022 because of supply bottlenecks.  The domino effects of these supply constraints are supporting energy prices.  In addition, there is a huge supply crunch on fossil fuel energy due to Europe’s and UK’s miscalculations of green energy production.  They have fallen short on their green production and are in need of more fossil fuels.  And the purchases just can’t be fulfilled quick enough.  Although China is shutting down parts of their economy due to record high coal prices, some supply might be able to shift.  But these types of moves take months to sort themselves out.  Also, equities are starting to spook some investors and there is a lot of chatter saying to throw your money into energy for a quick return on your money in Q4 and possibly Q1 of 2022.  Therefore we have speculation money supporting crude prices as well.  Unfortunately, I am bullish on crude prices until the end of the year.  I just don’t see a situation where enough cards can can fall fast enough to drag down crude prices.  I do believe that there is downside risk in 2022.   I do not see these high prices persisting all the way through 2022.

Local retail prices on gasoline hold near $3/gallon and diesel retail has well surpassed $3/gallon.  Unfortunately with well supported crude prices as previously discussed, I believe these prices over $3/gallon are here to stay for some time.

Propane prices continued to gain momentum based on record low inventories going into the heating season coupled with a major fire in Canada.  Propane prices in September are at an all-time record high.  One can only hope that crude prices stabilize and the damage of index price spikes are mitigated to pockets here and there throughout winter.  Unfortunately, propane prices are going to be high this year.  Like crude oil, I am hopeful that supply and demand economics going into spring of 2022 will balance out bring some price relief for next heating season.  In the meantime, it’s not too late to lock in your heating cost for the upcoming season.

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

Best regards,

Jon Crawford

WTI Holding Above $70/Barrel

Good morning,

WTI Crude prices rocketed above $70/barrel this week on news of better than expected retail sales, decreasing jobless claims, and huge draws in crude oil supplies.  The US continues to rebound from the hurricanes down south, but production is looking to return to normal capacity very soon.  Depending on how Covid continues into the winter, crude oil prices are primed to be supported.  Until the US gets into full crude oil production and harvest is completed, prices are probably going to hold higher.  We will wait and see how the Delta variant moves throughout the world this fall and whether the Fed starts to slow down on their bond repurchases.

In local retail news, the cost of gasoline and diesel has gone up.  We expect to see prices at the pump remain near current levels.

Propane prices continue to go higher.  Contract and delivery prices continue to go up as we enter the heating season with record low inventories.  I can only believe at this point that prices will hold and maybe even go higher.  Europe is in terrible shape for propane supplies as well, and China bought extra propane exports fearing a price shock.  So right now we are seeing low propane supplies in Europe and the US going into peak demand season, even though we have record production.  The only way supplies will increase is if the price gets so high at the US export hubs, that Europe and others will be forced to purchase from others.  I would also like to piggy-back and let everyone know that natural gas supplies are in terrible shape as well in both the US and Europe.  Natural gas prices have doubled and they are primed to double again.  The scenario reminds me of 2007 and 2008 when natural gas heating bill could be well over $300/month on an average home.  I believe all heating commodities are going to be extremely high priced until increased supplies or warm weather curb the fears that are real.  It is not too late to lock in your propane price for the season.

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

Best regards,

Jon Crawford

Wait And See

Good morning!

I hope this message finds you well.  Crude prices held just under $70/barrel this week as the world waits to see how Covid-19 and the variants play out going into the fall.  Saudi Arabia announced deep discounts for October signaling weak demand, but then Europe and the US released info showing signs of stabilization in the Delta surge.  In addition, the Fed is signaling a slowing of bond repurchases and many other world banks are slowing bond repurchases.  South Korea even raised interest rates.  In America, 80% of Gulf oil production is still shuddered from Hurricane Ida but slowly coming back online.  But the weekly inventory report still showed strong exports.  And although the job market is looking primed to finally improve, consumer index pricing increased the largest ever at 8.5%!  Basically, a lot of bullish and bearish news for crude price direction.  I think with summer demand winding down but possible economic conditions improving in the US, many traders are going to wait and see.  Also, harvest is starting to kick in so many eyes will be watching crops in the coming weeks.

In local retail news, prices for gasoline and diesel have eased a little bit post Labor Day weekend as expected.  I believe most retail prices will be holding for a bit as well.

Propane prices continue to go up as national inventories are just not building.  The country is going to be short on propane and prices are going to remain high.  If corn drying demand is weak and temperatures stay warm, we could maybe see some price relief.  However, if we have any sort of cold snaps and demand bumps, propane prices could really blow out higher this season, well above $2/gallon.  If you have not done so, you can still contract and lock-in your heating price for the season.

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

Best regards,

Jon Crawford