Risk Back On And The Bulls Are Running

Good morning,

Happy Friday! This week was completely focused on the largett attack from Hamas on Israel in 50 years. The response from Israel is sending shockwaves through the markets as the world braces for a potential full invasion of the Gaza Strip by Israel. A full invasion would be a humanitarian crisis. In addition, Iran has offered support to Hamas and Saudi Arabia is panicking. Not too long ago, Saudi Arabia was looking to be a possible peace broker along with China, between Israel and Palestine. Now Saudi Arabia is stuck in the middle. The US responded this week by freezing nearly $6B in oil payments to Iran from UAE. In addition, the US placed further sanctions on Russia for violating the terms of the oil price cap with the G7. China is also opening up sovereign wealth fund to buoy the commercial real estate disaster in the country. Also, the FED minutes from last month’s meeting seem to say that rates will hold higher for longer. Many believed this would would lower crude prices. However, producers are being very vigilant in keeping production quotas tight around the world to support higher oil prices. But the biggest driver of the bulls this week is the conflict in the Gaza Strip. Many are now worried that the conflict will spill over to many other countries, including those in the Middle East that would affect oil production. The US moved an aircraft carrier into the region and Saudi Arabia announced that they would increase production if needed to keep oil prices under control. As of today, WTI oil price has it’s eyes on $90/barrel when just last week the price was about to fall through the floor of $80/barrel. If traders start to take some risk with long positions leading into the end of the year, I believe that $100/barrel WTI crude oil could be possible. For now, we are hoping for a miracle that could de-escalate the potential for a disastrous humanitarian crises in Israel and Palestine.

In local markets, gasoline prices continue to trade in a narrow range but have slowly started to climb higher again. After diesel prices collapsed last week, diesel prices are recovering this week and seem to have carved out a bottom for the time being. As harvest goes into full speed ahead along with the conflict in the Middle East, I believe that prices in our market will be be supported and start to move higher.

Propane prices have not moved around too much the past week. As I’ve stated before, propane producers are drawing a line in the sand going into the winter months that they will just not produce propane for much cheaper than the price of today. As interest rates stay higher for longer and the prediction of a warmer winter, propane producers are hesitant to move the floor price. However, if crude prices start to rocket higher, propane price will follow.

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

Best regards,

Jon Crawford

The Bears Had Breakfast, Lunch, and Dinner This Week

Good morning!

Happy Friday! Crude Oil prices fell off of a cliff this week. Crude oil prices just got hammered on fears of recession and betting that the jobs report today would be awful. Not only was the jobs report MUCH stronger than predicted, but nothing changed in market fundamentals surrounding crude oil. OPEC decided to keep deep cuts in place until the end of the year. The US crude oil inventory continued to draw down this week. President Biden is probably going to meet with Xi Jinping to try and heal relationships with China. And the US consumer seems to be in better shape that previously reported. Many banks came out this week with bearish sentiment for crude oil out of left field. The majority of the drop in price was due to options being liquidated on the market and then causing contagion. When statements from banks turn bearish and prices fall, usually this means that banks are liquidating their positions and looking to buy back in at lower numbers. Crude oil hitting $100/barrel started to look unattainable by year end, so the banks did their old “switch-a-roo” and traders outside fell for it hook, line, and sinker. Although spot prices collapsed, WTI has yet to fall through $80/barrel. I have been calling a hard floor at $80/barrel. We need to remember there is still a war going on and economic growth continues to accelerate in countries like India and Vietnam. Once again, all economic situations remained neutral this week. The only changes were the statements being made by banks and the news running with the stories all over the airwaves. As a reminder, the market can be very irrational. Volatility is in full-swing right now.

The price of diesel and gasoline collapsed in our spot market as well. However, the differential spread between the Group Spot and Chicago Spot remains at 50+ cents/gallon for diesel! The Group Spot is more in-line with the NYMEX, so I still believe it’s not a matter of “if”, but a matter of “when” Chicago Spot price on diesel jumps dramatically higher.

Propane price continues to slowly follow crude oil prices. Now that we are into winter economics, producers are reluctant to give too much back on dips because demand is fairly weak right now. I believe propane will take back all the pricing it gave away this week if crude prices go back up. Inventories remain healthy but exports could stay at record levels if business deals are cut with China, India, and Vietnam.

If you are a business, I also wanted to mention that there are rebates for installing certain appliances and machinery with propane as the source of fuel. https://focusonenergy.com/business/propane

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

Best regards,

Jon Crawford

The Bears Are Still Trying

Good afternoon!

I hope this message finds you well. The bears in the crude oil trade are trying to move the floor price below $90/barrel. But they failed to accomplish the job, in spite of strong bearish sentiment and news. The dollar continues to gain strength which increases the purchasing power for crude oil. The action usually lowers the price of crude on the market. In addition, the amount of savings in the hands of consumers is dropping fast. Student loan repayments are beginning. And inflation is starting to sting in many areas of the economy. And China is still struggling with their commercial real estate problem. However, Saudi Arabia and Russia remain lock-step in limiting crude oil and refined supplies to the market. And the US reserves of crude oil continue to drop to lowest levels in years. As demand for crude oil in the US ramps up with the harvest, suppliers and refiners are remain disciplined and not oversuppling the market at home. The actions of world oil producers and the US oil industry are winning the battle between the bears and bulls. Therefore, even though the world economic data was awful this week, WTI crude oil still closed above $90/barrel to finish the week.

Diesel prices out of Chicago started to move higher as differentials changed in cycle timing. Although Chicago is still cheap for diesel in comparison to other spot markets, I am still betting that harvest is going to cause diesel inventories to drop and prices to rise. Gasoline continues to be very long in the market and remains trading flat-to-down. I don’t expect to see any major jump in gasoline prices anytime soon. Even though diesel prices rose this week, I remain firm on my recommendation to keep your diesel tanks full.

Propane continues to trade in a narrow range. The heating season is officially underway, although it doesn’t feel like it! I expect propane to move higher as the winter goes along. Producers of propane are sounding alarms loud and clear that they just won’t sell propane for much cheaper than the current trading price. Keep-fills have started and before we know it, the weather will be cold and the holidays will be here! Enjoy the hot weekend while you can!

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

Best regards,

Jon Crawford

Hold Steady

Good morning!

Happy Friday! I wish I had positive news to report, but this week was a “hold steady”. WTI Crude Oil prices maintained a floor of $90/barrel. I do believe that traders are going to try and push crude prices to $100/barrel by the end of the year. With the current capital gains structure, traders can ring the register as close to $100/barrel and pay a “known capital gains tax”. Everything surrounding taxation could change when the “Trump Tax Cuts” run out. There has been support for crude prices around the world to remain strong as well. Japan continues to provide stimulus to their economy. China continues to work hard to push their economy forward. India’s economy is strong. The United States economy also looks like a “soft landing” from FED policy is possible. In addition, Russia announced cuts to exports of gasoline and diesel into the world market to help support the current price of crude oil. In other words, the world economic sentiment has strong support for higher crude prices. But a recession in 2024 is a very real possibility. However, I continue to sound the horn that if recession hits, all major oil producers will cut production to keep prices higher. As I’ve said for the past few months, I believe that WTI Crude will trade in a range of $70-80/barrel for a long time. When crude prices hopefully drop at some point towards the end of the year when traders “ring the register”, the drop in price could be a possible futures buying opportunity depending on how far the price falls.

In local news, gasoline prices continue to trade in a narrow range. Gasoline supply looks to be long in Chicago. But diesel prices are still primed to jump 30-40 cent/gal at any point. If you are a bulk diesel purchaser, I highly recommend keeping your tanks as full as possible. The jump in diesel price is not a matter of “if” but “when” and the jump will happen quickly.

Propane prices continue to trade in narrow range as well. Summer allocation building ends in September. I expect a small bump higher in price starting in October due to the fundamental change to winter spot pricing. Regardless, propane prices continue to be cheaper than last year which is incredible considering the massive inflation inflicted upon our economy. There are small potentials for propane price blow outs this winter depending on weather. But supplies are healthy and logistics will be the only issue to deal with this winter.

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

Best regards,

Jon Crawford

All Sights On $90/Barrel WTI Crude Oil

Good morning and Happy Friday!

I hope this email finds everyone ready for the weekend. This week WTI Crude Oil price pushed through $90/barrel for the first time since November 2022. The US economy possibly experienced increased inflation in August, but the cause was mostly due to increased cost in of gasoline as summer finished. The world economy is looking healthy and the potential for a soft landing continues to win out on the news airwaves. In addition, as I’ve said all along, don’t bet against China. China had some commercial real estate issues and a slower than anticipated reopening GDP which caused a panic sell-off in crude late spring. China instituted a full bailout for the commercial real estate and added further stimulus to the economy. Within one month, China is seeing an increase in GDP and their stock market is roaring higher. World demand for crude continues to be strong and the US crop harvest looks to be a fast harvest which puts supply pressures on markets to stay wet with refined products. The supply pressure in turn supports crude oil prices, pushing them higher. I am still convinced that $80/barrel is the new floor for WTI crude and any dip in price below $80/barrel is a great futures buying opportunity. For now, we just sit back and let the market do it’s thing.

In local news, our neighbors to the west are finally calming down on as harvest is on the down slope. However, Chicago Spot is so heavy with diesel that an increase in cost of 30 cents per gallon could occur at any moment in our market. My advice is to keep all your diesel tanks full. It’s not a matter of IF diesel prices in our market skyrocket higher, it’s a matter of WHEN. And I believe the blowout will happen within two weeks. I think when the futures October contract expires at the end of this month, we better strap on our seatbelts for a roller coaster in volatility in the Chicago Spot Market. Gasoline prices have continued the slow grind higher so I don’t expect to see retail prices of gasoline go down at the pump anytime soon.

Propane prices have climbed higher and retail prices have followed. Our board price is getting closer to our contract price to start the winter, even though we have a record level of inventory of propane in the US. I believe higher crude oil prices will continue to support higher propane prices all winter long, especially if the winter is warmer than average.

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

Best regards,

Jon Crawford

What A Mess…

Good morning!

Happy Friday! WTI Crude prices continue to slowly grind higher. China announced a financial plan to bail out the failing commercial real estate problem. The announcement caused all commercial real estate stocks in China to soar over 75%. In addition, Saudi Arabia announced that they will keep their voluntary additional crude production cuts to 1M barrels/month until the end of the year. Then, in a surprise to everyone, LNG employees in Australia announced a strike which will put pressure on nat gas production globally. Without an increase in crude harvesting, opening up new nat gas production will be difficult. And then fall is here in the US, so harvest is starting. Demand for refined products is skyrocketing across the US which is supporting crude prices as well. And the US economy is trending towards a soft landing rather than a recession. Overall, I do not see any signs pointing to a bearish scenario for crude prices in the months of September or October. I still am holding my call that $80/barrel WTI crude oil is going to be the floor price moving into 2024. In 2024 there are possibilities of some occasional dips in price below $80/barrel presenting some futures buying opportunities. But I don’t see any long-term scenarios holding WTI Crude price below $80/barrel.

In local news, refined products east of the Rockies is an absolute mess. Refineries are down for turnaround and one in particular has been down much longer than anticipated. As harvest begins in the western states, east of Rockies, not enough gasoline was put into inventory and supplies are pinched tight. The price of gasoline in the Spot Group Market shot up over $1/gallon in comparison to the Spot Chicago Market. The blowout caused trucks from Minnesota and Iowa to flood Wisconsin terminals. Therefore, WI terminals have been forced to raise prices to protect product promised for WI contract customers and keep out of state trucks away from WI. In addition, terminals have run out of product and allocations have been put in place all over the state. I expect to see prices for gasoline and diesel increase in WI for the next two months. In addition, finding product will be extremely difficult for distributors as terminals temporarily run out of products. Logistics for supply will be a nightmare. The good news is that we have dealt with this type of scenario many times before and Crawford Oil is positioned very well to survive through the struggle. We will make sure that all our customers receive their deliveries.

Propane prices continue their slow grind higher as crude prices increase. Although our retail price for propane has increased, you can still save some money ordering a fill now and contracting your remainder of gallons for the heating season. Feel free to call our office for more details.

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

Best regards,

Jon Crawford

Happy Labor Day Weekend!

Good morning!

Happy Friday! I just wanted to take a quick moment and wish everyone a safe and fun-filled Labor Day weekend! For those traveling, I hope the traffic is not too bad. 🙂 Not much changed in the marketplace this week so we will get back to regular updates next week.

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

Best regards,

Jon Crawford

WTI Crude Price Still Holding Around $80/Barrel

Good moring!

Happy Friday and cooler weather! Wow, was that a week of heat! As I have been writing, WTI crude oil prices continue to hold around $80/barrel. China reported less than stellar economic data again this week and crude oil prices dropped below $80/barrel for a couple days. But then recession fears in the US hit the news and the next day crude price jumped right back to $80/barrel. This week the top bank CEO’s and the FED are all meeting in Jackson Hole for the annual meeting on the analysis of the US economy. This morning, FED Chairman Powell stated that inflation is still too high and interest rates might go up a little more and hold for a longer period of time. The news sent crude prices higher, which is the opposite under normal economic conditions. Usually as the dollar gains strength, crude oil prices drop because crude oil is traded in dollars and customers can get more bang for their buck when purchasing crude. However, higher interest rates for longer have a greater chance of slowing down the US economy which lowers crude demand. Therefore, producers will cut production to increase the price rather than compete for market share. Crude producers are saying loud and clear they would rather pump less crude and make more money than collapse price and pursue market share competition strategy. I’m not too concerned about the economic issues in China since they have the power to do whatever is necessary to fix their economy. And I am still convinced that $80/barrel is the new norm for WTI Crude price. All oil companies are needing to make investments outside of oil, and $80/barrel works for all crude producers. We might see the occasional dip, but US producers will shut down rigs and Saudi Arabia will cut production to keep prices from collapsing.

In local news, diesel prices calmed down a bit. But the September futures contract expired, and just as I have been writing, the October contract shot up 15 cents per gallon. The reason is that diesel supply will be tight in Chicago during harvest. The Midwest is not going to run out of diesel, but logistics are going to be tough to manage and distributors like myself will have to chase terminals for a month or so. Gasoline prices have calmed down as summer ends. I see gasoline retail prices staying around $3.49/gal. However, diesel retail prices could jump back above $4.00/gallon and hold for the next few months.

Propane prices gained a little bit of ground this week even though the US is at record inventories. I believe exports will continue to skyrocket going into winter and Canada will use as much propane as possible for manufacturing as opposed to shipping to the US. In addition, if we have a warm winter, suppliers will keep prices high to make up for the loss in volume, which in turn will raise retail prices. As a reminder, contracts start in September and you still have time to take advantage of summer fill pricing.

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

Best regards,

Jon Crawford

China Doom and Gloom Affecting Crude Prices?… Not Just Yet.

Good morning!

Happy Friday! WTI crude prices took a little hit this week. China released less than stellar economic data, cut interest rates, and stopped reporting youth unemployment which has been at all time highs. The news caused crude oil prices to tumble and fall below $80/barrel for a brief second. But the strength of the US economy, the decreasing oil rig count in the US, and the cooperative discipline from OPEC+ to keep production cuts steady continue to support the narrative of tightening world crude oil supplies. In fact, regardless of China’s economy, crude producers seem to be in lock-step keeping production low in order to prop up prices and avoid a massive collapse. As I have been writing, I believe $80/barrel WTI to be the “new norm” moving forward for quite some time. Yes, we might have some dips below $80/barrel. But the timing will be brief as traders hedge bets at those prices which in turn prop prices right back up to $80/barrel. I also believe there is potential for upside price in WTI crude to breach $90/barrel. But for now, we should all start accepting the reality that current crude oil prices will probably remain the new norm regardless of what happens in the world economy.

In local news, diesel spot prices have come down from their highs. Diesel supplies in the US are still very tight and any major disruption in refining prior to harvest could cause a massive increase in diesel prices east of the Rockies. Most people in the industry are keeping their fingers crossed that the harvest is mostly completed before any hurricanes potentially affect Gulf Coast production. Gasoline prices have fallen a touch from their peaks as well. But again, as long as crude oil prices remain strong, both gasoline and diesel prices will hold firm.

Propane prices remain steady going into end of the summer. Although supplies are very high in the country, the appetite for exporting and Canada keeping more propane in house for manufacturing, prices will probably start to climb in Q4 of this year. If we have a mild winter, I also believe suppliers will increase their margin index to make up for lost volume. The action from suppliers will in turn raise the retail price of propane. I highly recommend topping off your tank by the end of September. We are being very liberal with our summer fill volumes.

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

Best regards,

Jon Crawford

$80/Barrel WTI the New Price Floor for Crude Oil?

Good morning!

Happy Friday! WTI crude oil prices held above $80/barrel this week. OPEC+ confirmed Saudi Arabia’s announced production cuts of 1M bpd happened in July. In addition, the IEA increased their outlook on crude demand for the end of year and into 2024. The US seems to be experiencing a softer landing around inflation which will continue to fuel demand for more crude oil. Producers seem to be determined to try and keep oil prices as high as possible. I believe that the world economies can survive at $80/barrel WTI. Therefore, I don’t see any incentives for a producer to go after market share by flooding the market with crude oil and collapsing price. Although the war in Ukraine is a wild card, the US Presidential election is coming next year and many voters are starting to rank ending the war in Ukraine as a top priority. So politics at home could play a major role in how the US government continues to send money to Ukraine. I would have to write for now that crude oil prices are nicely supported and I don’t see too many headwinds besides a complete collapse in the Chinese or American economies. But both countries have tools in the toolbox to heed any major recession.

In local news, diesel spot prices continue to be volatile as harvest approaches and two major refiners are going into maintenance mode. I could see diesel prices at the pump blowing out higher this fall for a brief period of time. Gasoline spot prices continue their slow burn higher. I expect to see gasoline prices peak towards end of summer. However, prices of gasoline could remain higher if refiners choose to produce more diesel due to the potential tight diesel market in the fall. The next few months will be very interesting in our local spot market.

Propane prices have followed crude oil prices higher. Spot prices have moved almost 20 cents/gal higher from the bottom. I recommend everyone to top off their propane tanks now and contract for the upcoming heating season. It’s hard to believe that colder temperatures are right around the corner!

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

Best regards,

Jon Crawford