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

Roller Coaster Repeat

Good morning!

Crude prices pressed “repeat” again this week with supply and economic news driving the volatility.  We started the week off with Brexit drama, Iraq announcing that they pumped more oil than they should have, and Iran saying they will breach all parts of the nuclear deal.  Prices dropped hard.  Then OPEC comes out after a new Saudi Oil Minister was named saying that they will do whatever is necessary to keep prices high leading into the Aramco IPO.  Iraq followed saying they will behave and do better on cuts moving forward.  Even Russia said they would work with the US on crude prices which is unheard of!  The news cause prices to spike higher.  Then on Wednesday, inventory numbers on crude levels displayed large draws coupled with strong economic data in the US causing prices to spike even higher.  But then in the afternoon, Trump fired John Bolton, the biggest Hawk on Iran, and said he would consider waivers on Iranian crude exports to get them to the table for negotiation.  Crude prices turned and fell off a cliff.  Then on Thursday the IEA announced that world supply would probably go into major surplus in 2020, causing prices to continue the fall.  And finally, today economic data on the US was strong and US/China trade relations showed movement to the positive with each country giving in a bit.  The US will not enforce new trade tariffs, and China will lift the agricultural purchasing tariffs and buy soybeans.  The news gave support to crude prices and stopped the fall.  So WTI crude price ended where it started at about $55/barrel.  What a ride the past weeks have been for crude prices and I don’t see it stopping anytime soon.

Retail prices on gasoline continue to stay very low.  Prices on regular gasoline are ranging between $2.34-2.44/gallon based on major price differentials currently between suppliers.  Diesel prices are also remaining very stable going into harvest season.

Propane prices are slowly starting to creep up, but nothing too scary.  Propane is trading based on crude movement.  We are still at historically low prices of propane with historically high volumes of inventory.  We do not expect to see prices rising until October 1st when winter tariffs kick in and harvest demand starts to take shape.  If you have not contracted your volume for the heating season, you can still do so.  Please call our office to have your tank filled and we can prepare a contract for you.

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

Best regards,

Jon Crawford

Roller Coaster Ride

Good afternoon!

I hope everyone had a wonderful and safe Labor Day weekend.  Crude oil prices went on a roller coaster following the long weekend.  The week started out with tumble as China announced retaliation tariffs along with economic pressures starting to creep into the US markets and Chinese data.  But then a day later, China and the US announced a meeting and everything turned around!  In addition, the Hurricane Dorian managed to miss the Gulf so no oil production will be impacted here in the US.  But then, the big rally was dampened by the release of info that OPEC, particularly Russia, is not holding to compliance cuts.  As prices started to relax, Yemen announced that they killed 30 Saudi’s in retaliation strikes today which caused crude to soar higher, coupled with large announced draws in US inventory.  In addition, the US payroll data was fantastic and China revised their production data showing no contraction.  But by the end of the day, crude oil prices finished flat with world economics and potential over supply still in play.  What a roller coaster and a head scratcher!  Crude has been trading with high volatility in a narrow $5/barrel range.  This tells me that crude is ripe for a break out in one direction.  Which direction is TBD!  And by TBD, that means what news stores are discussed for the day! 🙂

In local retail news, gasoline prices have fallen below $2.49/gallon and were are five year lows for Labor Day.  The lower prices were a nice relief on everyone who was traveling.  Diesel prices continue to fall as Chicago economics continue to favor our market over the neighboring Group.  However, I don’t expect to see diesel prices go any lower as refinery maintenance finishes and harvest season approaches.

Propane prices continue to remain low, low, low.  The national inventory showed another large build and we are well on our way to breaking an inventory supply record this year.  If there is no major corn drying demand event, early cold, or nasty winter, I expect propane prices to remain low all winter.  Now next year will be a different story as additional exporting hubs and pipelines will be in full operation.  So for now, enjoy the lower prices of this season!  If you have not filled your tank to start the season, please do so!

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

Best regards,

Jon Crawford – Pres.

Trade War and Recession Fears Grow

Good afternoon,

WTI Crude prices continue to trade in their narrow range of about $53-57/barrel.  On the supply side, with the current OPEC cuts in place, the Venezuela shut down, and the US slowly shutting down rigs, the market is actually tighter than the price is displaying.  Right now, all eyes and ears are on recession fears due to the trade war with China.  If the world economy slows down, then I don’t expect crude prices to tank much more than below $50/barrel.  So much of the recession fear is baked into the current price.  However, if the trade war starts to wind down and the world economy continues as is, then we could easily experience a $7-10 spike in crude prices.  The FED said that they are willing to act appropriately but not committed to rate cuts and the trade with China does not seem to be slowing down anytime soon.  For now, WTI crude will continue to bounce in mid $50’s.

Retail prices on gasoline and diesel have continued to ease.  Gas prices have fallen below $2.49/gallon in some markets, and diesel has dropped below $2.69.  I expect to see these lower prices at the pump through Labor Day.

Propane prices are at historical lows and inventories remain at historical highs.  We expect propane inventories to hit the largest volume ever recorded.  We encourage everyone to enjoy these low prices with a summer fill and contract for the next heating season.  Please call our office or go online to place an order!

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

Best regards,

Jon Crawford – Pres.

Recession Fears Drag Down Crude Prices

Greetings!

Another wild ride for crude prices this week.  The week started off with crude prices skyrocketing higher on the announcement that Trump would delay additional Chinese tariffs.  The news coincided with Saudi Arabia announcing another run at taking Aramco public and saying they will do whatever it takes to keep prices from going lower.  But oh, what a difference a day makes.  China responded by continuing to devalue their currency and markets got a little shaky.  Then, the US reported large builds in crude and refined product inventories.  As crude prices started to fall, the bond market displayed indications of a looming recession and the stock market along with crude prices cratered.  We are now back to almost the low price of the year again in three days!  I would expect Saudi Arabia to start hitting the airwaves again soon if this continues.  I just don’t see them allowing WTI to fall below $50/barrel.

In local retail news, prices for gasoline and diesel are all over the map due to high fluctuations in cost and price spreads between terminals marketing either Chicago Spot or Group 3 Spot.  I expect wild discrepancies on street prices of gasoline and diesel over the next month or two.

Propane prices continue to stay very low based on high volume of national inventory.  Please take advantage of summer fill prices.  With the potential for high corn drying demand and an additional export terminal coming on board in Q4, propane prices could start to swing up quickly by the end of the year.  Please call our office or go online to place an order.  If you have not contracted propane for the next heating season, I also suggest talking with our staff about options that might work for you.

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

Best regards,

Jon Crawford – Pres.

Lots of Noise, No Movement

Good morning,

Crude oil ended the week with little change in price even though the headlines were packed full of influential data.  On the geopolitical front, Iran captured a ship from the UK, claimed to have caught US spies in Iran, and threatened the rest of the world’s Navies to stay out of the Persian Gulf.  In the past, these types of incidents would have triggered a 10-15% premium increase on crude prices.  But this week, the news did nothing to move the thermometer on risk premium in crude prices.  I believe this is because the risk of supply surplus is winning in the minds of traders.  Demand erosion is continuing.  This week, even after the largest reported for the year draw-down in US Crude Inventory, prices barely moved.  The lack of movement is because crude is being exported but not necessarily delivered.  Ships of crude oil are starting to appear without a home.  The scenario starting to form has caused much pain on prices in the past.  In addition, China’s economy seems to be cooling and the US is not far behind.  I don’t think recession fears are on, but maybe a pullback.  But any pullback in demand when production is at an all-time high, even with cuts in place from OPEC+, any movement to surplus will form a global glut in crude oil inventories and cause prices to crash.  I actually believe that if OPEC compliance does not continue through the end of the year, we have a risk of WTI crude prices plummeting below $50/barrel to start 2020.  And I don’t think that low of price would slow down the US production.  I really think we need to experience WTI prices closer to $45/barrel before we see US production dramatically slow up.  For now, it’s possibly sideways movement on crude prices until end of summer.

In local retail news, as I was writing last week, retail prices peaked and have come down like expected.  I don’t expect prices to drop much more at the pump though.  However, it’s better than an increase during summer travel!

Propane prices continue to stay very low with high volumes of national inventory.  Please take advantage of these prices and fill your tank.  We will deliver below the minimum requirement during this time to try and help everyone save some money!  We also suggest that you contract your propane for this coming winter.  The contract prices are lower than last year and are a good value.

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

Best regards,

Jon Crawford

Demand Erosion In The Lead

Good morning,

Despite continued tensions with Iran, demand erosion is winning on directing prices of crude oil.  WTI crude fell from over $60/barrel posting last week to now just over $55/barrel.  China has posted terrible economic data.  But we always need to remember that those numbers are not always trustworthy.  In addition, oil tankers from West Africa have been found in the ocean without a home.  In other words, buying is starting to slow down, even though OPEC+ has taken 1.2M barrels/day off the table.  If world demand truly slows down, then we might see crude prices drop another $5/barrel!  I am absolutely stunned at the lack of interest in traders biting on geopolitical issues right now.  With all the turmoil surrounding Iran, the data must be very convincing showing as long as the US continues to pump at current levels and world demand continues to decline, the oil market will move into surplus again, even with all the current OPEC+ cuts in place!  The next six months are going to be very interesting to watch.  If WTI crude breaks through $54/barrel, then we have a shot at seeing the floor fall out back down to $49/barrel.

In local retail news, gasoline and diesel prices have peaked following the landfall of hurricane Barry.  All oil fields have restarted and prices relaxed.  For now, I think we have experienced the highs for the month of July.

Propane prices continue to remain very low.  Propane continues to trade with crude oil, so if crude prices stay low and propane production stays strong, we should have robust inventories for the winter.  However, because propane prices have now fallen into competitive spreads against natural gas, petrochemical companies are starting to bite on stored propane in the south.  If crude prices stay low, I could see petrochemical companies taking a huge chunk out of inventories in the coming six months.  In addition, if corn drying demand is strong, we could see a further draw on inventories.  I do not believe that we will see major price spikes by Thanksgiving, but if the winter is very cold, we could start to see prices spike after Christmas into 2020.  If you have not filled your propane tank this summer, please do so!  Contracts for next heating season are also available.

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

Best regards,

Jon Crawford