Tug of War

Good morning,

Crude prices this week are stuck in a game of “Tug of War” right now between geopolitical issues and true fundamentals.  Global recession fears are weighing on traders’ minds as we end the year which is keeping “Big Money” from going long on crude.  The fears are weighed by China/US trade war, disappointing economic data, and BREXIT drama.  Not to mention that Saudi Arabia and Russia continue to make headlines which have potential for supply issues.  But in true fundamentals, the US exported more crude than consumed last month.  So there are buyers out there.  It’s a head scratcher.  Big Money is stuck on short positions right now which I think will hold until the end of the year.  I feel that money managers are going to look at January as a potential entry point on crude.  So for now, enjoy the Christmas gift that the traders have given us!  But when Big Money enters the market, be prepared for a quick increase in crude prices.  And I do believe it’s not a matter of “if”, but “when”.

Retail prices on gasoline and diesel have stabilized for the moment.  We are looking at around $2.15/gallon on gasoline and $3.00/gallon on diesel.  I think that these prices will hold potentially for the end of the month.

Propane prices have also stabilized but are starting to carve out the potential for an uptick.  Demand is rip-roaring right now.  The current warm spell is looking to end by Christmas, with the potential for colder than normal coming back, including a possible Polar Vortex in early January.  As always, please make sure your driveway is clear and there is a path to your tank this winter.

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

Best regards,

Jon Crawford – Pres.

Bottom Taking Shape

Good morning,

As you have noticed based on the price of gas at the pump, prices are continuing to drop.  WTI crude traded below $50/barrel for the first time in over a year this week, but jumped back up over $50/barrel right away.  I feel that the market is carving out a current bottom at about $50/barrel until OPEC+ meets on Dec 6th.  There is so much chatter going on right now that everyone seems to be on the sidelines just waiting for the meeting.  In addition, the FED stated that they might hold off on continuing to raise rates.  This helped support crude prices on a fundamental level.  But the geopolitical issues are outweighing supply and demand fundamentals right now.  When these situations occur, if we feel crude is undervalued, an opportunity is available.  And right now, I believe an opportunity is available.  I see no reason that OPEC+ will come out of the meeting without planned production cuts based on the price of  BRENT crude needed to balance national budgets.  They understand that cuts will lead to loss of market share to the U.S.  The U.S. just surpassed Russia to become the number one producer of crude at 11.7 million barrels/day.  And speculation is saying that the U.S. could grow by another 2 million barrels/day!  The cartel tried in 2016 to “punish” the U.S. with low prices, but the U.S. persevered and excelled.  So I don’t see OPEC+ going through that experiment again.  In addition, Russia is playing around with flexing it’s military muscle in the Ukraine again.  The U.S. Senate just voted to stop funding support for Saudi Arabia in the war in Yemen.  The Saudi Prince MBS is in hot water for his possible ordered killing of a journalist.  Some feel that Trump’s support of MBS is to try and convince him to not cut production.  However, Trump pulled out of a full enforcement of sanctions on Iran which threw egg in the face of Saudi Arabia and caused much of the current price drop and billions in revenue for Saudi Arabia.  MBS is already in trouble for the killing, so I don’t see him allowing his economy to tank as well.  That all said, there is an opportunity to purchase cheap refined product and lock in prices for next year.  I expect things to change in December.  But only time will tell if geopolitical factors continue to outweigh supply and demand fundamentals.  I believe we are about $5-10/barrel undervalued on crude prices right now.

In local news, gasoline retail prices continue to dip below $2.29/gallon.  Diesel retail prices are also heading towards $3.00/gallon depending on the winter treatments being used.  I expect to see these prices hold over the coming week leading up to the OPEC+ meeting.

Propane prices have remained steady with high demand.  I don’t expect to see propane prices drop any lower this winter.  As a reminder, please make sure there is a clear path to your tank and that the driveway is plowed.  If you are on a will-call for delivery service, please call at 30% and above to insure efficient and timely delivery.

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

Best regards,

Jon Crawford

Happy Thanksgiving!

Happy Thanksgiving!!!

We hope everyone enjoyed a safe and relaxing Thanksgiving! We are so grateful for all of our customers each and every day. We hope the coming holidays bring much happiness, love, and laughter.

From everyone at Crawford Oil and Propane!

 

P.S. Prices are continuing to drop.  Markets are closed on Thursday and Friday this week, so I will update everyone next week.  But for now, prices are continuing to slide.

Small Floor in the Making

Good morning,

Wow, myself and every hedge fund never saw this week coming.  I am still perplexed by the last week in crude oil trading.  Traders are now negative for the year on long crude oil trades.  This week hedge fund managers removed all money from forward crude positions and dumped them into natural gas.  Natural gas is seeing record price increases due to low inventory levels, high exports, and low production.  Natural gas is shaping up to be nasty in price and supply this winter, much like propane in 2014.  WTI Crude prices found a bit of support at $56/barrel after falling through the $57/barrel support price.  OPEC, mainly Saudi Arabia is trying as hard as they can to convince traders that they are going to cut production.  This week they announced cutting shipments but not production, but yesterday they finally announced that they are looking to cut 1.4M barrels/day in 2019.  They are looking to drum up support for the upcoming December OPEC meeting.  The IEA is also being very bizarre in their predictions as well.  They continue to say that 2019 shows a slowing economy and world demand, but then turns around and says the world needs another 10M, yes 10M, barrel/day production in the next five years?!  Basically, you can take it or leave it with the IEA announcements at this point.  There is not much predictability in their news.  For now, we can enjoy low gas and diesel prices going into Thanksgiving and wait and see what OPEC does in December.  At the end of the day, I still can’t believe crude prices fell this far so fast.  I expect the pendulum to swing back up closer to WTI $60/barrel in December.  But for now, sit back and relax.

Local retail prices on gasoline have finally broke through $2.49/gallon.  I expect the price at the pump to continue on the downward trend.  Diesel retail prices are even getting close to $2.99/gallon.  We might see $2.99/gallon diesel in the next week, especially with some farm demand starting to dry up in the Midwest.

Propane prices are slowly breaking away from the crude trade and starting to rise.  We are experiencing colder than normal temps and expecting the cold to continue into December.  Regardless of what NOAA is saying, the weather prediction services that I subscribe to are calling for a potential Polar Vortex showing in December.  I should know more next week.  For now, if you are a will-call customer, please keep a close eye on your tank as most users are going through more than normal this month.  Heating demand is already up over 20% 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 – Pres.

Catch A Falling Knife?

Good morning,

President Trump’s plan to keep crude prices low for midterm elections worked perfectly.  He convinced Saudi Arabia and Russia to pump more oil to make up for the sanctions being put on Iran which started on November 1st.  Leading up to November 1st, crude prices started to relax as world demand and possible surplus crude supplies from the US were in question.  Then to put the icing on the cake to insure that prices stayed low, President Trump on November 1st granted eight waivers to countries allowing them to buy Iranian crude.  This action sent prices falling even further.  Now Saudi Arabia, Russia, and the rest of OPEC are very upset.  OPEC countries are mad at Saudi Arabia and Russia for trying to help the U.S. with the Iran sanctions which put prices at risk.  And Saudi Arabi is furious at the U.S. for granting the waivers putting crude supplies into possible greater surplus.  Regardless, lower prices will be here for a little while until the OPEC meeting during the first part of December.  I  expect OPEC to announce supply cuts.  The U.S. made too many moves to help the elections and I fear retaliation.  So for now, enjoy the cheaper prices.  But I wouldn’t hold out that these current prices stay through Christmas.

Local retail prices on gasoline continue to inch down closer to $2.49/gallon.  With the latest price drops, I wouldn’t be surprised if we see $2.49/gallon on gasoline this weekend or early next week.  Diesel prices continue to remain higher now that winter additives are in the price as well increased demand for harvest.  I don’t expect to see too much movement on diesel prices.

Propane prices continue to remain calm.  As I have been saying for months, once we have a demand event or crude turns around, hold on.  Propane is still setup for a nice price jump at some point this season.  If you are a will-call customer, I highly recommend that you fill your tank now.  In addition, if you monitor your own tank levels, please make sure to call us when you are around 30% to give us sufficient time to complete your delivery during the winter months.

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

Best regards,

Jon Crawford

 

Crude Oil: How Low Will We Go?

Good afternoon,

After heavy selling last week, crude oil prices continue to slide this week.  WTI crude prices are set to close below $65/barrel.  On technical charts this puts us into correction and possibly a bear market.  However, I try not to just watch the charts but also the hard data.  The global market is very tight on supply.  Any disruption puts the world supply back into deficit.  The Iran sanctions have just begun.  And right now traders are banking on Saudi Arabia playing nice due to the political fallout from killing a journalist.  I am skeptical at seeing these prices hold much longer.  I am still anticipating a return in WTI prices closer to $70/barrel.  I expect that China and the US will continue to make progress on trade and that the global slowdown being discussed will not come into fruition.

In local retail news, retail prices of gasoline continue to drop closer to the $2.49/gallon threshold.  The economics are not quite there, but they will be soon if the sell off continues.  Diesel prices have continued to remain more stable due to the increased demand for harvest during this time.  In addition, winter blends are starting to be implemented adding anywhere from 3-15 cents/gallon to the cost depending on the additive treatment and blend ratio with #1 ULSD.

Propane prices are remaining stable as we go into winter.  I am still surprised by the inventory numbers released on a weekly basis.  I believe that with a large demand event, propane prices will spike quickly.  All eyes are on the weather forecast which continues to turn more towards a colder winter now than a month ago.  Stay tuned.

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

Best regards,

Jon Crawford – Pres.

Crude Prices Continues to Slide

Good morning,

Crude oil prices continue to slide this week.  WTI crude touched $66/barrel on Tuesday, closing over 11% down in the past two weeks.  Traders have all rung the register and jumped on board believing that Saudi Arabia will make sure that all Iranian crude lost from sanctions will be replaced.  Many feel that Saudi Arabia will deliver on the promise to help diminish consequences over the killing of a journalist.  In addition to the geopolitical climate changes, the world stock markets have been in correction giving strength to a potential slowdown in the economy which is bearish for crude.  I do not feel that crude prices will go much lower.  I feel that at this point the hedge fund money is out of the price.  When you look at the amount of contract positions sold in the past two weeks, the amount purchased in return is minimal.  Therefore, traders are not selling their long positions and shorting crude.  So basically, from a technical standpoint, crude prices are in a “wait and see” pattern until the hedge fund managers enter the market again.

Local prices of gasoline are inching closer to $2.49/gallon.  I expect to see prices continue to fall throughout the weekend.  Diesel prices have not fallen as much due to increased demand for harvest.  Although harvest is going to be very prolonged this year due to the flooding and temperatures, I don’t expect to experience any diesel supply disruptions over the coming weeks.

Propane prices are slowly rising as we get into winter.  The colder than normal October has increased demand.  The major sell off in crude affected propane slightly, but overall, prices are continuing to trend higher.

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

Best regards,

Jon Crawford – Pres.

WTI Crude Falls Below $70/Barrel

Good morning,

For the first time in weeks, WTI crude price dropped below $70/barrel.  As I have been discussing, there are reasons to believe crude prices could go higher, and also reasons for prices to drop.  Over the past weeks, the reasons for crude to climb (healthy demand, supply tightness, Iran sanctions, political instability in the Middle East) were winning the discussion and the bull market took off.  Once hedge fund positions took a record long position on crude, I took pause.  I was in agreement on the runup in price because emotions had clearly taken over the market.  And then, just like that, profit taking took over.  Announcements came out that Saudi Arabia and Russia were looking at secret production increases to offset Iran sanctions, the FED announced that it’s ready to keep going on rate increases, China’s economy showed headwinds, hurricanes eroded demand and supply surplus came back in the US, refinery maintenance moved closer to completion, and the hedge funds started to ring the register.  Within a week, $7/barrel came off of WTI and refined products started to relax in price.  I am cautious about any further downward movement considering the political instability in Saudi Arabia.  All eyes are on deck surrounding the international situation with the disappearance of Jamal Khashoggi.

In local news, gasoline retail prices started to relax a bit.  We are moving back down closer to $2.50/gallon.  Time will tell, but for now, the big upswing in price is on hold.  Diesel prices might come down a touch, but diesel cost has not dropped as much as gasoline.

Propane prices are holding a bit of a flat pattern after running up last week.  The supply situation seems to be a little bit stronger, but the weather forecast is looking like a potential for a 10% colder winter compared to last year.  This would be a dramatic increase in demand.  So for now, it’s wait and see.  I still am calling for propane prices to rise in the coming months, and it’s not too late to lock in your prices for this winter.

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

Best regards,

Jon Crawford – Pres.

Correction Hits the Crude Market

Good morning,

The crude markets went into correction last week and gave back almost $6/barrel.  In addition, refinery maintenance in Chicago started to finish up causing winter RVP to flow into the cash price point in Chicago on gasoline.  Saudi Arabia and Russia keep hinting at a private side deal to secretly raise output starting in November.  The IEA also lowered their demand forecast for 2019.  And hurricane Michael destroyed demand down south, including most of the infrastructure along the panhandle in Florida.  Also, in a surprise, President Trump is discussing variances for purchases of Iranian crude for countries that tried to curb purchases in the past months.  And last but not least, economic downturn in China and the U.S. due to trade wars overtook the airwaves for a few days as well.  All of these events caused a major downturn in crude prices.  The main event going into this week is the political tension between Saudi Arabia and the rest of the world surrounding the disappearing journalist.  Any major announcement of sanctions could cause a spark for retaliation which in turn could make crude prices soar.  All eyes are on deck.

In local news, retail prices for gasoline and diesel are starting to slowly come down.  I would expect prices to slowly ease depending on what happens this week.

Propane prices climbed in the past week due to an increase in demand and potential supply tightness going into winter.  In addition, corn drying is in full swing.  We expect propane prices to continue to climb going into winter unless crude prices collapse.

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

Best regards,

Jon Crawford – Pres.

Crude Prices Have A Fever of $100/Barrel

Good morning,

As you may have noticed, the price of fuel has been rising at the pump.  As the sanctions against Iran are getting closer to kicking in, traders have caught a nasty fever.  The fever of the magical $100/barrel crude price is on and traders are putting their money where their mouth is.  Right now, the net long positions on crude oil futures hit historic levels again.  This week OPEC and Russia reminded the world that the Iran sanctions were put in place by the U.S., not them.  Therefore, they are a bit reluctant to come out and rescue the world from higher prices.  However, many believe that Russia and Saudi Arabia are secretly putting more oil into the market leading up to the Iran sanctions in November.  Under the current market conditions with the Iran sanctions coming, I do believe that Brent prices could touch $100/barrel in the coming months.  But I’m also a huge fan of history.  Every time we see this amount of hedge fund money pour into crude at a frantic pace, a correction is around the corner.  And in recent years, the correction comes sooner than later.  I believe that by the end of November, there is a potential for prices to unwind, especially by year end as traders take profits on the tax breaks based for this year.  Unfortunately, this means that high prices at the pump are probably here for at least two more months.

Retail prices on gasoline and diesel are climbing not only due to the rise in crude prices, but also because of refinery maintenance at facilities in the Midwest causing supply constraints.  I believe that gas prices will stay under $3/gallon and diesel prices under $3.49/gallon for a bit here.  But if the $100/barrel fever doesn’t break in the coming weeks, at the end of the month we could see gas prices breaking $3/gallon and diesel climbing over $3.49/gallon.

Propane prices continue to baffle me.  Inventories across the country are at the same level as last year.  But the cost ratio of propane to crude oil is low.  Corn drying demand is low and much of the tobacco crop was destroyed out east.  So for now, propane prices will remain stable, but any demand event could cause a large spike in price.

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

Best regards,

Jon Crawford – Pres.