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

Politics Like a Hurricane… Plus a Real Hurricane

Good morning,

I hope that this message finds everyone well.  Crude oil markets went on a wild ride this week.  After a steep sell off from Trump announcing his positive COVID-19 test and hospitalization, markets rebounded when Trump returned home.  In addition, politics started to play out where stimulus packages would get passed in Congress.  And then hurricane Delta poked its nose into the mix shutting down oil production and exports in the Gulf.  To top off the rally back, US inventories experienced a draw due to production cuts.  By Wednesday, crude prices were back to the highs of last week.  And now with the hurricane hitting land soon, traders took WTI over the $40/barrel mark and will probably hold until next week sometime.  Crude prices are very volatile.  I was expecting crude prices to drop today based on increased numbers of jobless claims and 23.5M people out of work with unemployment benefits running out.  Something needs to happen to support the economy.  Our entire airlines industry is going to collapse and 23.5M people out of work going into winter and holiday season is not particularity great for oil demand.  If Congress gets a deal done I believe that crude prices can hold.  If there is no deal on stimulus, then I could see crude prices tanking into the end of year.

In local news, retail prices have finally started to catch up to the increased cost on gas and diesel out of the Chicago spot market.  Although spot prices have eased a bit, I expect to see gasoline and diesel prices over $2/gallon for the coming week.

Propane production and supplies are ample, but prices continue to climb.  The situation is much of a head scratcher.  We are already at contract prices for our spot market pricing.  I think propane prices are setup to ease if the winter is mild.  You can still lock in your prices for winter though.  If you are unsure if your account is keep-fill or will-call, please call the office to clarify.  Hard to believe that winter is already sneaking up!

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

Best regards,

Jon Crawford

WTI Falls Below $40/Barrel

Good afternoon!

Happy Friday! I hope this message finds everyone safe and well.  I know that Wisconsin is now one of America’s hotspots for coronavirus spread.  The next four to eight weeks are not going to be fun.  I wish everyone good health and safety as we battle the current wave of virus in Wisconsin.

The prices for WTI Crude Oil closed below $40/barrel to end the week.  The week started out with a rally in prices looking at shorter supplies from lackluster demand and refining.  However, on Thursday, the combination of the economic data released and the “no deal” on coronavirus federal aid pushed crude prices below $40 barrel.  Many believed the sell off was a breather from recent runs higher.  But then at 2am this morning, President Trump announced that he and the FLOTUS have tested positive for COVID-19.  The news sent markets into a tailspin, along with crude oil prices.  In addition, the economy data released shows continued weakness and gaps in a chance for a faster than expected economic recovery.  I am still bearish crude oi.

In local news, gasoline retail prices jumped about $2/gallon.  I expect prices to hold for sometime. Diesel cost jumped as well, but retail prices have not quite moved yet.  Diesel retail prices have potential to climb higher in the short term.

Propane prices have actually gone up this week.  The move higher is a head scratcher to everyone.  We experienced low demand, increased production, increased inventory levels, and increased exports.  We now have over 102M barrels of propane in inventory.  However, with a colder than normal start to winter, prices might find support. However, it’s not a bad idea to lock in propane prices for the year.  The spot post delivery price on propane is the same as contract.  Looking ahead, since spot price and off the truck price are near identical, it might bot be a good time to lock in your price for the year.

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

Best regards,

Jon Crawford

 

Warmer Than Normal Winter?..

Good morning,

I hope this message finds you all well.  I do not have much to report this week on crude oil.  The news has been fairly quiet.  The only news was that refined product inventories experienced a major draw this week.  If the US crude production starts to return sooner than expected, Saudi Arabia is being very serious about punishing the markets.  Also, the economy seems to be running out of steam based on durable good purchases and unemployment filings.  WTI is holding around $40/barrel, but I am still bearish on crude oil going into the fall.  I just don’t see demand picking up coming out of summer as more people go indoors.  For now, it’s the same-old-same-old.  We will be watching the election and anything coming out of OPEC to see if pricing will be pushed out of its current trading range.

In local news, differentials on Chicago spot pricing continue to be very volatile.  Gas and diesel prices have been very jumpy as cash markets look to cover refiners that are short going into maintenance season.  I expect to see gas and diesel prices remain near or above $2/gallon for the foreseeable future.

Propane looks to be in good supply going into the winter.  The 2021 weather forecast from a group that I enjoy following was released today.  Every single model is calling for a warmer than normal winter.  However, looking at historical winters, when every model predicts the same weather event, the opposite usual occurs.  In recent memory, the coldest winter in 10 years was actually predicted by every model to be above average, and the exact opposite happened!  The models are showing a risk of Polar Vortex movement into Wisconsin.  We are also looking at frost next week which is the earliest frost in over 10 years.  Basically, it’s too early to call, but if a few things move around I think we will have a jumpy winter with some periods of deep cold.  If it stays as predicted, our coldest month looks to be December with tons of moisture in February and March.  I will continue to keep you updated as we go into winter.  If you you have not contracted your propane or filled your tank at lower prices, it’s still not to late! 

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

Best regards,

Jon Crawford

OPEC+, FED, and Hurricanes

Good morning!

Surprisingly, crude oil prices increased 9% this week on the backs of circumstantial bullish news.  Multiple hurricanes and tropical storms are continuing to punish the Gulf of Mexico shuttering oil production temporarily.  Considering the weak demand across the globe, the supply disruptions are minimal and no damages have been reported to rigs or export facilities.  The FED announced this week that they will keep rates at zero for years and are willing to let inflation run higher.  The news is very bullish for crude prices because the announcement looks to keep the dollar weak.  Then the icing on the cake for the week was strong words from the Saudi Arabian Energy Minister saying they will do whatever it takes to keep oil prices above $40/barrel and punish anyone who tries to gamble on the market.  I have never read such strong words from Saudi Arabia in response to OPEC and other oil producers.  Libya is bringing another 1M bpd back online and other countries were discovered to have cheated on their quotas.  Basically, the run up in prices this week are reactions to circumstantial and temporary news events.  I am still seeing very weak demand on the horizon and do not believe that any there are any tailwinds to the rally this week.

In local news, surprisingly the Chicago cash market jumped dramatically on gasoline prices.  The spot cash market blew out almost 12 cents per gallon this week.  I’m guessing that with refinery maintenance season starting, a supplier is short on gasoline going into the turnaround.  Once again, temporary situation.  We might see retail prices on gasoline break above $2/gallon, but that will not last in my opinion.  Diesel prices have remained steady compared to gasoline.  Supplies of diesel are in great shape heading into the harvest.

Propane prices actually rose with crude prices this week despite healthy inventories.  Summer spot differentials are starting to wind down.  If you have not ordered your first fill for the winter, we highly recommend that you do so now.  Contract prices are very attractive and with all the uncertainty on the horizon, we recommend that you lock in your pricing for the winter.  Also, as a reminder, we are already starting the 2020-2021 heating season!  If you are a will-call customer, please make sure to start checking your tank to ensure a hassle-free delivery.

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

Best regards,

Jon Crawford

Hurricanes and the FED

Good morning!

Well, another wild ride for crude prices this week.  At first to start the week we were expecting to see some bumps higher in prices as a potential for double hurricanes in the Gulf were brewing and the US and China renewed Phase 1 trade talks.  As prices rose on Monday, many expected to see crude prices rally through the week.  On Wednesday, draw downs in inventory and continued coronavirus fears supported the pricing complex.  However, our local Chicago spot market also changed their cycle timing to October which caused a large drop in basis.  So as crude prices were holding steady, our local market was experiencing some cash price erosion off of the highs on Monday.  And then the FED topped the week off with their aggressive change in tone on rates and perception of the economy.  The FED is now going to work a policy that spurs inflation, job growth, and keeping rates lower for longer.  The announcement caused a shift of selling in crude and a buying into equities.  Although at the end of the week, crude prices have remained somewhat supportive, the local cash markets have broken away from the trend due to an abundance of supply in the Midwest.

In local news, I expect to see gasoline retail prices continue to hover just under $2/gallon.  Diesel retail prices are still very attractive if your market is under $2/gallon.  The diesel retail margins are very tight.  However, diesel products are very plentiful in the Midwest and depending how harvest goes in the coming months, a potential for some nice drops in diesel retail pricing is possible.

Propane prices are stable but are transitioning to winter economics soon.  I expect to see propane retail prices rise a bit in September.  If you have not ordered a summer fill yet, please do so before prices start to change.  I also recommend locking in your price for the upcoming heating season.  The price is lower than last year and with COVID-19, world trade relations, a presidential election, and a crazy summer of weather, I have no idea what to expect this coming winter.

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

Best regards,

Jon Crawford

Volatile Times Coming For Crude

Good afternoon,

The crude markets have been behaving very strangely this week.  I am starting to believe that maybe traders are putting the cart before the horse with the global recovery from the pandemic.  Crude prices continue to be buoyed by a weaker dollar.  However, if the global recovery slows down at all, lack of demand will overtake a weaker dollar on crude price prediction.  There was a draw in US inventories this week and reports of crude shipments from the US going to China.  But sources are saying that Chinese demand for crude is not what is being displayed.  Overall, I feel that going into the election with the continued massive amounts of unemployment is going to catch up after summer and show that our economic recovery is far from over.  Although the stock markets have recovered in many ways, the economy is not tracking the same.  I do feel that crude is over bought and lower prices will come going into the fall.  Historically, prices always collapse around the time of presidential election.

In local news, margins are very slim at retail in many markets.  I expect that eventually gasoline and diesel retail prices will be easily over $2/gallon if they are not already in your market.  I am floored at the street value for gasoline and diesel currently.  If gasoline or diesel is under $2/gallon in your market, I recommend filling up!

Propane prices are continuing to stay stable and I expect prices to remain fairly stable through the fall into the end of the year.  Production surprisingly remained strong through summer and corn drying demand is looking to be much weaker.  I am not worried about supplies going into this winter.  However, summer economics will start to change in September regardless of supplies, so if you have not filled your tank yet, please make arrangements to do so!  The current prices are good value right now!  And don’t forget to lock in your heating price for the upcoming winter!

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

Best regards,

Jon Crawford

Covid Relief Package And Trade Issues With China

Good morning,

Crude prices started the week out strong with Trump announcing continued pressure on China trying to force the sale of the app TikTok.  The action is renewing skepticism that the US and China will not be able to reconcile their trade differences in the near term.  In addition, as COVID-19 continues to spread, Congress and Trump have still not passed a relief package as the previous relief package expired.  Many Americans are finally starting to get back to work, but with the majority of schools going virtual in the fall, without some sort of financial package to help families with the cost of keeping kids home, many are worried our economy will start to decline again.  Although the oil industry is starting to recover and the strength of the dollar is weaker, the continued China trade and COVID issues are putting downward pressure on crude.  I still expect WTI prices to hold near $40/barrel until a COVID relief package is passed.

In local news, retail prices on gasoline and diesel continue to climb.  I expect to see gasoline retail prices at or above $2/gallon and diesel retail prices will be over $2/gallon.  As the futures trading months are moving more into harvest months, diesel prices are gaining some momentum with increased demand forecast.

Propane prices continue to follow crude.  If you have not filled your tank this summer, please do so.  The retail value of summer fill pricing has very high value for the consumer.  I expect our retail prices to climb 10+ cents/gallon going into September.  I also recommend contracting your propane usage for the upcoming heating season.  I am reading reports of a colder winter this year and with all the instability in the marketplace, I think that the safety of locking in your pricing is very attractive.

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

Best regards,

Jon Crawford

Slight Pullback On Price

Good morning,

Crude prices have retreated from the highs of last week.  Economic data in the US was not very strong this week.  Unemployment remains high with additional jobless claims filed.  The FED is looking at holding rates very low.  The earnings from most companies, other than Big Tech, were awful in Q2.  The coronavirus is spreading to more states as it weakens in others.  Most states are going to stricter mandates and fears of economic slowdown are back on the table.  In addition, the ability for schools to safely open in person across the country is looking like it will be very limited.  The US inventories of crude oil experienced quite a draw this week, but many believe it was a correction from last weeks report.  Around the world, Europe is possibly looking at a second wave of the coronavirus.  But the continued hopes of treatments and the race for vaccines are keeping markets steady.  So for now, $40/barrel on WTI seems to be the floor.  Next week will be a possible directional test and prediction for crude prices in August.  More info to come.

In local news, Chicago pricing differentials fell on the August contract expiration.  Gasoline retail prices have fallen back below $2/gallon and diesel retail are near $2/gallon.  Given the fundamentals in Chicago and crude bouncing along at $40/barrel, I don’t expect to see much movement on retail prices in the coming week.

Propane prices are still at very good value and we highly recommend that everyone fill their propane tanks now.  We also recommend writing a contract for the 2020-2021 heating season.  Contract prices are lower than last year and summer fill pricing is very attractive.  Please call our office today for more info.

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

Best regards,

Jon Crawford