Problems in Chicago

Good afternoon,

I hope everyone had a chance to enjoy some beautiful weather the past week.  In crude oil news, WTI crude oil has officially closed above $66/barrel and now surpassed a technical resistance price point.  The push over the edge came on the heels of Trump’s announcement that oil waivers would no longer be issued to countries purchasing crude oil from Iran.  Traders viewed the announcement as bullish support for supply tightness coupled with the instability in Libya.  However, Saudi Arabia and UAE said that would be able to easily put another 1M barrels/day into the market.  That announcement capped any significant gains in crude prices.  Since the announcements on Iran, economic data from South Korea was terrible; the worst posting since the great recession.  US Jobless claims rose, and the Fed is starting to think about staying firm on rate increases.  Oil is struggling to hold these current price levels, but the bulls have a pretty strong platform built around $60/barrel WTI.  As I have been saying, I expect prices to stay high for a while longer.  But I think June is going to be very interesting.  Russia is not happy with the deal that the US cut with Saudi Arabia and UAE.  I think Russia might pull out of the OPEC deal in June and start pumping more crude.  In addition, the US continues to keep crude production levels high.  And the last piece of caution news to look at is a rumor floating that Trump is considering giving China a waiver for Iranian crude as part of a trade deal.  He really wants to ink a trade deal quickly to cool the heat that has been burning in DC.  I guess we’ll see if anything comes out in the next few days.

In local retail news, gasoline prices East of Rockies started to sell off except for Chicago.  Chicago is having continued supply problems at refineries and is about 10 cents/gallon inflated compared to neighboring markets.  So unfortunately our current retail price will hold for some time yet.  Diesel retail prices are holding steady and I expect the current prices to remain, especially going into the start of planting season for the farmers.

Propane prices are continuing their trend of detaching from crude prices.  Retail prices are slowly dropping into summer.  I expect to see next season’s heating retail prices be at about the same price as last year, even though crude prices are 20% higher!  That’s some good value!  For now, make sure you consider getting a summer fill and watch out for contract info that should be mailed out around the 4th of July.

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

Best regards,

Jon Crawford

Happy Easter Weekend!!!

Good morning,

I wanted to wish everyone safe travels this Easter weekend.  We hope everyone enjoys time with family and friends.  The weather is looking excellent which will be a nice reprieve from the past week!

Not much has changed in the market place.  There is a short week of trading this week since the market is closed on Friday.  I am waiting for next week to see how news is truly digested.  Right now Venezuela is avoiding sanctions by selling crude through Russia.  Russia is really getting anxious and wanting to pull out of the OPEC deal.  The US continues to produce at record levels above 12M barrels/day.  The jobs report was good and earnings have been strong.  In regards to technical trading, WTI crude oil has been unable to break through the resistance level of $65/barrel.  So for now, we are taking a breather.

Retail prices on gasoline and diesel are holding steady with the market.  As I have been saying, I’m not seeing much price relief at the pump in the coming weeks.

Propane prices continue to detach from crude oil and are far showing the most bearish fundamentals we have seen in a long time.  I expect prices to stay low throughout the summer.  Keep a lookout for next season heating contracts around July.  I am thinking that prices will be very similar to last year, even though crude prices are 25% higher.

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

Best regards,

Jon Crawford

Mission Impossible

Good afternoon,

As one oil analyst said this week, “It is impossible to predict the price direction of oil.”  WTI crude prices went to $70/barrel in October 2018, down to $46/barrel in January 2019, and back up to $64/barrel in April of 2019.  The massive amount of volatility really puts a lot of pressure on anyone who claims they know the direction of crude prices.  As many oil analysts say, “we are experiencing boom/bust movements in crude prices and we should get used to it.”  I could not agree more.  Almost five years ago, I sat in a seminar from a famous oil analyst in Canada.  When the US shale revolution started to get legs, he warned of these times.  Man, he was spot on.  The lifestyle of these prices swings could last as long as five to ten years depending on who you talk to.  For right now, not much has changed.  It’s all about the economic headlines for the day.  But the fact remains, the US is still strong in crude supplies and production.  The “swing” in production will be watched in Saudi Arabia, Libya, Iran, and Venezuela.

In local retail news, refinery maintenance season is underway in Chicago and prices for gasoline have continued to break out.  Gasoline prices continue to inch ever so closer to the dreaded $3/gallon price.  I’m not so sure that we get there, but I don’t see prices retreating any time soon.  Diesel prices have slowly crept up as well.  I expect us to see closer to $3/gallon diesel in the next month.

Propane prices are starting to reattach with crude price movements.  But propane is very bearish: record production, supported by high crude prices, lower petrochem demand, full strength exports while experiencing inventory gains, over 30% higher inventory of US propane after a higher than normal demand winter.  I’m sitting on the sidelines for a while with propane.  For now, retail prices are getting close to $1/gallon.  I expect to see excellent summer fill prices and contract prices very close to this season.

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

Best regards,

Jon Crawford

Bulls On Parade

Good afternoon!

Nothing seems to stop the bulls from taking crude prices higher.  The US Jobs report was better than expected so the fears around recession melted away.  The FED continues to talk of lower rates and the US oil rig count continues to drop.  In World News, Libya is experiencing turmoil which can affect oil exports, and Saudi Arabia announced that its largest oil field is producing much less than expected.  And the US/China trade deal looks like “all systems go”.  All-in-all, the data is showing high demand with robust economic indicators.  However…. The US continues to produce record levels of crude with less rigs, showing that we are becoming more nimble and efficient.  Russia is wanting out of the OPEC cuts and does not want to see the price of oil get much higher.  And world demand continues to hang on every announcement.  Basically, we are starting to enter price territory where price will affect world demand.  In conclusion, as I have been saying, the ride up is not over yet, but I’m not so sure it will hold on for the rest of the year.

In local retail news, gasoline retail prices continue to hold around $2.69/gallon and diesel under $3.00/gallon.  With the continued rise in crude prices, I don’t expect to see any downward movement in prices at the pump in the foreseeable future.

Propane prices are starting to drop and I expect to see prices continue the downward movement.  We have only seen propane prices detach from crude price movement a few times in the the past, and it is happening now.  Propane supplies are at record levels for this time of year and are only continuing to increase.  In addition, exports are remaining robust and we expect inventory levels to continue to increase.  Therefore, it’s not a question of “if” propane prices will go lower, it’s a question of “how low” propane prices will go.  For now, we sit back and wait for summer fill prices to come out along with next season’s heating contracts.

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

Best regards,

Jon Crawford

Crude Prices Continue To Hold

Good morning,

The market looks like WTI will hold price above $60/barrel this week.  There are so many variables flying around right now.  The bulls are being pushed by FED keeping rates low, Saudi Arabia hammering cuts through 2019, Iran and Venezuela sanctions, positive progress on the US and China trade talks, and feelings of healthy demand appetite for crude oil.  The bears on the sidelines are staying active following weak economic data out of China, a not-so-thrilling housing market in the US, record US production, Russia discussing leaving the OPEC cuts, Trump hammering on OPEC to stop cutting, investors such as Warren Buffet saying our economy is out of steam, and potential extension of supply waivers for countries buying from Iran.  So basically you have a full hand of cards showing bull market strength, and a full hand of cards showing bear market strength.  I don’t like to keep sounding like a skipping record, but crude is probably going to trade back and forth in a $5/barrel range for the next quarter until data starts to truly back one of the hands in play.

In local retail news, I believe gasoline is a bit overbought going into refinery maintenance season.  We could see gasoline prices fall off a little bit in the next couple of months.  But for now, I would get used to paying around $2.69/gallon on gasoline.  Surprisingly, diesel prices are staying fairly consistent around $2.95/gallon. I still think there is a lot of upside risk in diesel prices going into Q3 and Q4 of this year.  More to come on this in the following months.

Propane prices continue to drop as we unwind the winter delivery season.  Propane production is continuing at record levels and inventories remain over 30% higher this year compared to last year, and demand was stronger!  Propane prices have a chance of breaking away from crude and falling.  I am very confident we will see excellent summer fill rates and contract prices for next season at or below this season’s prices.  More to come in the following months.

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

Best regards,

Jon Crawford

WTI Crude Over $60/Barrel

Good afternoon,

WTI Crude price closed this week over $60/barrel for the first time since last fall.  The rise in pricing has been attributed to tightening sanctions on Iran and Venezuela, OPEC and Russia continuing to deliver on production cuts, and strong world demand.  In addition, the EIA’s inventory report showed a massive drop in crude, gasoline, and distillate inventories.  So the bulls have been running with this info.  However, there is caution in air.  This week the FED released their report that they will not increase rates this year.  The news at first caused crude prices to soar.  But then as the information was digested, the price backed off.  The FED also sees the economy slowing down by year end.  Therefore, the combo of healthy demand coupled with a weaker dollar is in jeopardy.  The US continues to produce oil at record numbers.  So the potential for a supply glut to reappear could occur at anytime, especially if the world economy slows.  The economic data from China has not been so hot either.  As I always say, the devil is in the details.  But for now, the bulls maybe have taken a breather, but I don’t think the rally is done just yet.  And just like last fall, this year is looking ripe for another bust on crude prices.  I firmly believe that “boom and bust” economics will be in play for crude prices for at least the next two to three years.

In local news, gasoline retail prices continue to rise as I have been saying.  Most stations are nearing or over the $2.50/gallon retail price on regular gasoline.  The big issue is that consumer behavior changes when gasoline prices go over $2.50.  So we are hoping that the “bust” in price happens before driving season.  Diesel prices have fallen below $3.00/gallon and will probably stay under $3.00/gallon now that winter blending for the year is completed.

Propane prices are ripe for a nice drop this summer.  Our national inventory is 30% higher than last year, and we experienced a colder winter!  Propane production continues to move at record levels.  In comparison to crude prices, propane prices are shaping up for a disconnect from crude and drop this summer.  More to come on this when winter ends.  But don’t relax too much, we still have about three weeks of heating season remaining. 🙂

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

Best regards,

Jon Crawford

On the Up and Up

Good morning,

WTI Crude prices continue to climb towards $60/barrel.  As I have been writing, hedge funds took long positions on crude so bullish sentiment seems to be running the market.  I believe that we will see prices peak somewhere in Q2 of this year.  I think there will be an opportunity for hedge funds to ring the register around that time.  Earlier in the week though, we experienced a one day collapse in the rally due to President Trump tweeting at OPEC that prices are too high.  The market experienced a knee-jerk reaction to the downside.  However, the following day, the EIA reported a massive drop in crude oil inventories giving further support to the strength of US crude oil exports to China.  In addition, OPEC came out with strong messages following Trump’s tweet saying they will not be bossed around and the plan to cut production is well supported and underway.  This week again gives support to my idea that the market is on the bull train and will be for quite sometime until the hedge funds can ring the register.  In Q2, we will start to see how the economy will look going into summer and high demand season.  In addition, the FED will have some more input, and we will see where OPEC ends up.  For now, get your wallet out and expect to keep paying these prices for a few more months.

In local retail news, gasoline retail prices continue to climb towards $2.49/gallon.  I expect that we will experience at least $2.49/gallon at gasoline retail in most of the state sometime in March.  If winter continues to hang around, diesel retail prices will easily continue to hover around $3.00/gallon.

Propane prices are steady and actually dropped a little last week.  Production continues to be very robust and is beating demand at this point, even though winter is colder than last year.  Inventory levels in the country are strong and will end the winter season at high levels.  So depending on the price of crude, we could experience some very low summer fill prices this year.  For now, please make sure that your icy driveways are taken care of and that there is a clear path to your propane tank to ensure a safe and efficient delivery.

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

Best regards,

Jon Crawford – Pres.

Wait and See

Good afternoon,

Crude prices continue climb causing gasoline and diesel prices to rise.  We are seeing WTI crude carve out a recent floor at around $55/barrel.  I’m not expecting that to change much until after the China/US summit in March.  For now, it’s a continuation of “wait and see” what the news throws out each day.  The FED is starting to look dovish again which is putting some downward pressure on crude price, coupled with continued increases in crude production in the US.  But Saudi Arabia cuts and sanctions against Venezuela and Iran are keeping the downward momentum in check.  At the moment, hedge funds have reentered the market with longer positions on crude adding to the temporary floor on WTI.  So far now, I expect WTI to continue its’ narrow trade range.

Local markets are continuing to see rising retail prices on gasoline and diesel, and I expect to see the trend continue.  Gasoline prices are well on their way to over $2.29/gallon and diesel prices at over $3.00/gallon are starting to pop up.  I don’t see these prices going away anytime soon.  For now, it’s wait and see until the end of March.

Propane prices are continuing to hold steady with increases in supplies.  Production is at record levels and currently we are 11M barrels ahead of inventory levels compared to last year.  I expect to see propane trade with crude for the next month or so, but we could start to see propane break away and fall once winter demand starts to diminish.  The only caveat is that is crude goes on a rocket higher, propane will follow.

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

Best regards,

Jon Crawford – Pres.

Prices Continuing to Climb

Good afternoon,

Prices of crude oil continued their path higher this week settling at the highest close in the last three months.  We expect to see crude prices continue to climb as Saudi Arabia is cutting more than expected in volume, supply disruptions continue around the world, and sanctions on oil exports from Venezuela and Iran are hitting the marketplace.  In addition, China and US are entering a trade negotiation deadline that is starting to look hopeful.  Demand around the world appears to be healthy and OPEC seems set on keeping prices higher.  The economy does not seem to be slowing as much as expected in the US and China and overall sentiment seems to be bullish on crude prices.  I am seeing healthy prices through Q2 2019, but am on the fence from there.  Supply is very delicate and could easily slip into surplus at any moment.  But for now, emotions and sentiment are going to push crude along on its current path.

Retail prices for gasoline and diesel continue to be all over the map.  Many areas in the state are selling retail gasoline below cost.  The next couple of weeks will be interesting to watch as the marketplace continues to digest higher gasoline costs and reluctance to increase retail prices on the street.  Diesel cost is continuing to rise as well and $3.00/gallon street price is not far away.

Propane prices are also starting to rise with crude.  Although propane inventories are healthy and production is at record levels, cost continues to follow the crude market.  I just don’t see propane breaking from crude at this point in the year with a couple of winter months remaining.

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

Best regards,

Jon Crawford

Crude Prices Stable – Pump Prices Climbing

Good afternoon,

Finally nice to have more normal winter temperatures again!  I hope everyone is staying safe with the crazy snow and ice storms.

Crude prices continue to trade in a narrow range based on the day’s news.  One day the economy looks great, the next day it looks awful.  In other words, whatever, hits the headlines in the morning drives the price for the day.  Crude production is very stable worldwide.  Even though sanctions on Venezuela are looking to hit the market soon, many countries have already vowed to continue to buy from Iran, so the potential for a drop in world production is limited.  My main concern is diesel production and prices in the US.  With sanctions against Citgo, we are putting a lot of pressure on other countries for importing heavy crude that is best refined for diesel.  The US does not produce any heavy crude.  In addition, our diesel inventory levels are below the 5 year average.  So going into high demand seasons, if we continue to limit diesel production, we are going to see our cost of diesel rise quickly.

In local retail news, the retail price of gasoline has now moved above $2/gallon and climbing.  Diesel retail prices are starting to move closer to the $3/gallon mark.  I expect to see retail prices continue to rise over the coming weeks as costs have increased dramatically over the past three weeks.

Propane prices have remained stable.  Although demand has been very strong, production numbers are robust.  There is just not a lot of fear for inventory loss in propane for the remainder of the year.  Please remember to keep your driveway clean and have a clear path to your propane tank in order to receive your delivery safely and efficiently.

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

Best regards,

Jonathan Crawford – Pres.