Conway Propane Price Blowout

Good morning,

I hope this message finds you well.  President Trump was impeached a second time this week and the markets didn’t seem to flinch.  WTI crude prices continue to hold on to gains with renewed hopes that demand will continue to improve going through the year.  IEA kept their forecast for daily crude consumption unchanged which was actually support to current prices.  Now that WTI is holding above the psychological $50/barrel, I believe that more headwinds will need to appear in order to push prices back below $50/barrel.  One of the main supports to higher prices is the potential for another $1.9 trillion dollar coronavirus relief bill proposed by President Elect Joe Biden.  The continued devaluation of the dollar will support crude price futures that are held against the US Dollar.  The US will be in a tricky situation as the economy tries to fully reopen with increased energy costs.  If the new $1.9 trillion dollar package passes we will be in a very tight balancing act.

In local news, gasoline and diesel prices continue to hold.  Retail gasoline prices are above $2/gallon and retail diesel prices are hovering near $2.50/gallon.  I do not expect to see any relief on pump prices in the coming weeks.

Propane is the story of the week.  Due to continued increased demand from China who is having a record cold winter, the US continues to produce record amounts of propane and export at record rates.  Months ago, we were looking at the largest glut of propane supply in history.  Now, inventories have fallen below the five year average and we are still in January.  Speculation and unregulated runs on Conway/Belvieu are somewhat to blame as base prices and indexes have increased over 50 cents/gal since the beginning of September.  This is over a 70% increase in cost of propane in six weeks!  To put this in perspective, that would be retail gasoline going from $2/gallon to $2.85/gallon in six weeks!  If that happened, the news would be talking.  But propane trading and exports continue to go unnoticed and unregulated.  We are allowing suppliers to export our national supply to China and the US consumer is footing the bill.  Suppliers are winning on both fronts.  I have been saying for years, propane is a need based commodity during six months of the year.  The propane export business is new within the last ten years.  Nothing has been done to protect our national supply from being fully exported and leaving the US with supply shortages and record price increases.  I am hoping that we see a price decline to start the first week in February.  If not, propane prices could get ugly.

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

Best regards,

Jon Crawford

Curve Ball From Saudi Arabia And Surging Propane Exports

Good morning,

I hope this message finds you well.  I think it is safe to say that we are starting off 2021 picking up right where we left off in 2020:  lots of uncertainty, stress, and chaos.  WTI crude prices look to finish the week at an 11 month high due to many factors.  The week started off with OPEC+ meeting and surprisingly a curve ball was thrown by Saudi Arabia to end the meeting.  Everyone except Russia wanted to keep production levels at current levels until March.  Russia wanted to be able to increase production by 500k barrels/day, even though the action might cause a dip in price on the market.  Russia is still upset at the sanctions being placed on them from the US, lead by Sen. Ted Cruz.  Where is Cruz from?  Texas.  What’s in Texas?  Largest shale oil play in America: The Permian Basin.  Russia is willing to run at depressed prices if it keeps the American oil industry from ramping back up.  Saudi Arabia on the other hand has been willing to give up market share in return for higher crude prices, gambling on demand increases coming later in the year.  So on Monday, when the meeting ended with a standstill, many of us thought that Russia might go rogue and prices could fall.  Instead, on Tuesday Saudi Arabia agreed to let Russia increase production, but offered an additional 1M barrel/day cut in production from their own supply!  The move was a total surprise.  Saudi Arabia basically gave the go-ahead to Russia to take their customers.  The move caused WTI prices to surge over 8% and continued to climb throughout the week.  When you couple this move with the issues in America and the continued devaluation of the US Dollar, I’m not seeing a lot of downward pressure on crude prices.  The only wild card hanging is the new COVID variant spreading around.  If the lockdowns across the globe make it to America, we could see a temporary demand shock.  However, President elect Biden has promised 100M vaccinations in the first 100 days and Dr. Fauci seemed to approve the process this week saying it’s very possible based on the plans he has read.  So although there is a chance for some depressed prices in Feb and March, the long term trend on crude prices seem to be higher prices.  In fact, Goldman Sachs revised their guidance to $65/barrel WTI by end of year 2021!  That would be exactly where crude prices were holding before the pandemic started.  The majority are all calling for $55-65/barrel WTI crude throughout the year which is a minimum $5/barrel higher than we are now.  Regardless, it seems that the days of cheaper gasoline and diesel could be short lived in 2021.

Local retail prices have risen due to the increase in cost.  I believe that gasoline prices will continue to hold over $2/gallon and diesel prices could breach $2.50/gallon in the coming weeks without some price relief.

Propane prices have been on an absolute run!  Propane prices have gone up 30 cents/gal in the last 45 days!  Even though we started the year at record level inventories, experienced a lack-luster corn drying season, and we are in a warmer winter than last year, inventories have dropped to lower levels than last year!  The culprit is record exports.  Production is at an all-time high and producers can’t fill ships fast enough to export to the rest of the world.  With WTI prices above $50/barrel, we are thinking that propane exports might start to slow down.  In fact, propane prices might DROP in February and March, in the middle of winter.  But stranger things have happened.  If exports continue at this rate, propane will be a very interesting commodity to watch.  Storage hubs usually trade between 40-55% crude prices.  We have seen 65-85% crude prices these days!  The spread is absolutely bonkers!  We will be watching the markets closely the first three months of the year as the situation continues to play out.

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

Best regards,

Jon Crawford

Happy New Year!

Enough said! We could talk for hours looking into the rearview mirror on 2020.  And we will probably look into that rearview mirror from time-to-time for the rest of our lives.  But today, I am excited and optimistic for 2021!  Thank you again to everyone for all your patience, support, and understanding as we navigated the most difficult year in our lifetime.  Here’s to a better year in 2021 for the entire world!

Best regards,

Jon Crawford

Merry Christmas and Happy Holidays

Good morning,

I hope this message finds everyone safe and well heading into the holiday week.  I wanted to take this moment and thank everyone for all their support this past year.  We have navigated many crisis situations over the years, but none quite like a global pandemic.  Your kind messages, gifts to our employees, and nice words on the phone have gone a long way to keep our company motivated and focused throughout these trying times.  I hope you all are able to spend some safe time with family celebrating Christmas, reflecting back on this year, and also looking forward to better times in 2021.

From everyone at Crawford Oil and Propane, Merry Christmas and Happy Holidays!

Best regards,

Jon Crawford

Stimulus and Vaccines

Good afternoon,

The hopes of passing a new Covid stimulus bill and the roll out of vaccines boosted oil prices this week.  Even though demand in America seems to leveling off as unemployment remains high and consumer spending is dropping, the possibility of more stimulus is dragging down the dollar which causes crude prices to increase.  The addition of Moderna’s vaccine and the rolling out of the vaccine from Pfizer is giving further future support for future oil prices.  WTI crude prices are hovering near $50/barrel and I expect the market to stay inflated until at least year end.  We will wait for January and see if there is any price relief from profit taking on the market.

In local markets, gasoline prices retail climbed above $2/gallon and diesel retail prices are inching closer to $2.50/gallon.  I do not expect to see these prices come down before the end of the year.  There are too many speculative issues holding prices firm.

Propane cost has risen almost 13 cents per gallon in December.  Even though we are experiencing warm temperatures and low corn drying demand, our national inventory levels fell below last year’s levels this week due to record exportation that shows no signs of slowing.  There could be a relief in prices come January if crude prices stay high and temperatures remain warm.  This would cause exportation demand to halt and inventory levels to build quickly.  But for those who contracted this winter, so far you are in good shape.

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

Best regards,

Jon Crawford

Bitter-Sweet December

Good morning,

I hope everyone had a safe and happy Thanksgiving weekend.  Markets continue to pick up steam as we look to close out this terribly tough and exhausting year in 2020.  The Biden transition is moving along and so far none of the moves are causing too many alarms.  In addition, vaccines and more vaccines are coming out as distribution chains assemble.  Most experts are moving predictions from June to April as the month we will really start to breath relief.  OPEC+ has decided to increase production a bit starting in January, but the move seems somewhat acceptable as the world anticipates reopening.  All of the positive market and COVID news is placing a visible finish line out there for everyone to see.  And the anticipation is leading to excitement.  However, all the news is coming at a cost.  More than 100k Americans are hospitalized across the country for COVID.  That is the most hospitalizations for any disease since the the Spanish Flu.  And many more Americans are going to die.  So as we see the end to the pandemic coming closer and closer, please remember that there is a major human cost still on the horizon and most of that cost will land during the holidays.  I believe the next two months will be extremely difficult and bitter-sweet as we start to plan our lives post COVID while watching thousands of more Americans die.

Please be safe and smart out there.  We have already suffered through almost an entire year of this pandemic and thousands of American families are forever changed.  The finish line is on the horizon and I hope we can come together and finish as safe and strong as possible ready to move forward in 2021.

As always, if you have any questions, please feel free to reach out to us.

Best regards,

Jon Crawford

 

Post Election and COVID Surge Into Winter

Good morning,

I hope this message finds you well.  As our country and the world is coming to terms with Biden as President-Elect, the markets have been behaving very bullish.  On Monday of this week, Pfizer announced that their vaccine is 90% in efficacy and will be distributed to 50M  Americans by the end of the year.  Dr. Fauci is also confident that the worst of the pandemic will be over by Q2 of next year following his belief that all Americans will have access to vaccines by the end of April 2021.  The news sent all markets on a rocket ship higher.  As the Republicans continue to hold control in the Senate, many believe that President-Elect Biden will not be able to achieve much success in very progressive agendas.  Therefore, many feel that the next four years will be steady with more balance back to the middle instead of a push to far left agendas.  But the vaccine party fizzled as the realty of over 120k+ cases of COVID/day plague our nation.  Markets took a breather to end the week and are starting to accept that although the vaccine news is some welcomed positive news, the next two months are going to be a lot of sickness and a lot of death.  The upcoming holiday season will probably be one of the most painful in our lifetimes.  But for the first time since the pandemic started, we are starting to see light at the end of the tunnel.

In local news, Chicago differentials finally released their grip on cash spot pricing as harvest is coming to an end.  I don’t expect to see much price movement lower at the retail level, but at least the moves higher will likely stop.  I expect to see current retail prices hold through Thanksgiving unless something drastic happens.

Propane prices continue to hold strong even though inventories are robust.  If Wisconsin does not experience cold winter conditions by Christmas, I could see propane prices dropping in January of 2021 just like they did in 2020.  But a lot can happen between now and then.  Regardless, when looking at historical pricing, propane prices are still very low and competitive when comparing to natural gas or oil heat.  So the good news is that no matter what, whether you contracted or are riding the cash market, the heating costs for propane this coming season are a good value.

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

Best regards,

Jon Crawford

COVID Surge in Europe and the US

Good afternoon,

The surge in coronavirus cases across the US and Europe has triggered quite the selloff in some equities and commodities.  Crude oil prices have tumbled all week and look to finish at the lowest levels since the Q1.  I believe that most hedge funds are looking at the lockdowns in Europe and are worried about demand erosion coupled with increased supplies.  Libya continues to pour out more crude and OPEC does not meet again until January.  At least in January we will hopefully know who the new President is and OPEC will act accordingly.  I believe that prices could be temporarily deflated until after the election.  I do believe that a Biden victory will give a $10/barrel bump on crude prices.  So for now, everyone is on pins and needles waiting for the election and watching the surge of COVID take over Europe and the US.

In local news, we are seeing demand starting to slow up in Wisconsin as COVID-19 rages through the state.  I don’t expect to see any ramp up in gasoline usage going into Thanksgiving weekend unless the recent surge shows a peak very soon.  Gasoline prices will remain under $2/gal for some time and diesel prices are continuing to hold great value.  Any diesel pump prices below $2/gallon at the pump are great value buys.

Propane prices continue to cause head scratching.  National inventories showed a build this past week when demand would be at a high level.  Futures did not react.  In fact, the disconnect between supply/demand economics in propane are leaving many to wonder if algorithm trading has entered the propane futures market?  Maybe a platform like a Robinhood has allowed access into the market, or an ETF is out there trading with propane futures.  Who really knows!  But we do know that the price of propane is very heavy based on supply and demand.  I expect to see a “bust” in prices if temps warm up at all going into the holiday season.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.  Please stay safe and remember to vote.

Best regards,

Jon Crawford

Same Old, Same Old

Good morning!

Happy Friday!  Unfortunately, I don’t have much new news to report.  WTI prices, as predicted, are holding at the $40/barrel level.  I believe this in part to the upcoming election.  When looking at the supply and demand fundamentals, the appetite for refined products in the US is starting to drop, but demand is increasing in other parts of the world where the coronavirus is not as front and center.  So there seems to be a balancing act in the current state of economics.  I believe that we will trade in a very narrow range through the rest of the year until the big OPEC+ meeting in January.  The results of the election and the state of the coronavirus in America will all weigh on the OPEC+ decision.  We will see if the election results give any bump in oil prices, especially if it’s a contested election.  Other than the upcoming election, I still believe we are in a holding pattern.

In local news, gasoline retail prices are starting to drop now that gasoline supplies have returned to normal in the Chicago spot market due to the completion of some refinery turnarounds.  Diesel cost remain higher as we move through harvest and the end of year construction push.  However, diesel retail pump prices are extremely low right now in comparison to cost.  There is great value for diesel customers in our local market at the pump right now based on historical data.  I think that if the market continues to hold, diesel retail pump prices will have to jump back up above $2/gallon.  There is now a disconnect again between the cost of gasoline and the cost of diesel coming out of Chicago.

Propane prices are the continued head scratcher.  Propane prices are higher than anticipated even though inventories are robust and corn drying demand is low.  I believe most supply hubs are keeping prices higher with the unknown winter ahead, but I still feel that propane prices are 5-10 cents heavy.  We feel like if inventories are tight and corn drying demand is high, prices go up.  And if inventories are ample and corn drying demand is low, prices still go up.  Seems like no matter what, suppliers win in times of harvest.  🙂  If crude oil prices hold at the current level, I do think that there is a potential like last year for propane prices to drop in January and February of 2021.

As always, if you have any question, comments, or concerns, please feel free to give us a call.  Thanks and have a great weekend!

Best regards,

Jon Crawford

Oil Prices Steady

Good morning,

Oil prices sold off earlier this week on surging coronavirus infections across the globe, lack of a US stimulus deal, and fears of demand erosion with an abundance of supply.  The sell off was halted on Thursday when the US reported massive draws in crude oil and refined product inventories.  The market really seems to want WTI to stay above $40/barrel.  Even though fundamentals are quite bearish for crude, there are many qualitative factors affecting crude prices.  We have the Presidential election coming up, rising coronavirus infections, world wide reports of vaccines from multiple countries, and overall anxiety about what the future holds.  The anxiety of the unknown drives volatility in unexplained ways.  I would say that right now emotions are driving much of the markets and until the Presidential election is behind us, it’s going to be a bumpy ride.  Markets will still be volatile after the election, but we we will have at least one of the “unknowns” checked off the list.

In local news, retail gasoline prices are holding near $2/gallon and diesel prices on average are above $2/gallon.  I do not see much relief in diesel prices until after the fall harvest.  So far, the harvest is going smoothly and quickly.  I expect harvest to be mostly completed by early to mid-November.

Propane is the biggest headscratcher of all commodities I follow.  Prices have climbed dramatically and quickly going into winter index economics.  Although propane inventories are at record levels and corn drying demand is the lowest in many years, prices are holding steady.  Propane prices feel very, very heavy and unless the cold snap holds for the next month or so, I don’t see propane prices holding at these current levels.

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

Best regards,

Jon Crawford