Spaghetti At The Wall

Good afternoon!

Happy Friday! Well, the crude oil markets traded in a very range this week. WTI crude oil price fluctuated between $77/barrel and $79/barrel. WTI was looking to push through the $80/barrel support level, but just didn’t quite get the momentum….until today! On day close today, WTI price closed above $80/barrel for the first time in a month. Right now the majority of traders are still shorting WTI at $80/barrel. But if traders switch positions and go long at $80/barrel, WTI price will push through $80/barrel and probably move closer to $85/barrel. Seems like the traders are digesting a ton of spaghetti being thrown at the wall of the crude trade. There is plenty of news supporting higher prices, as well as some reports supporting lower prices. The support for higher prices includes Israel continuing their move on Rafah, along with the US sending another $1B in weaponry. Ukraine is receiving more weaponry for defense against RUssia. Russian petroleum exports have tightened due to Ukrainian attacks on refineries. China and Russia held a summit to solidify an alliance promising to resist all Western interference with trade as well occupation of territories close to both China and Russia. OPEC+ and others continue to call for increasing demand this summer that will slide crude oil inventories into deficit by year end. In bearish news, other agencies are calling for an economic slowdown in the US, China, and Europe. Any slowdown could put downward pressure on crude oil prices. However, FED cuts could provide support for higher prices due to the devaluation of the dollar. I am also convinced that no oil producer is going to let WTI price fall below $75/barrel. In addition, I believe Saudi Arabia and others will continue to implement supply cuts to prop up prices for the remainder of the year. Also, hurricane season and a presidential election are on the way! Get your popcorn and enjoy studying the spaghetti on the wall!

In local news, the Chicago spot market gave back a lot of spot basis this week. I expect to see retail prices on gasoline and diesel at the pump go up next week. I would suggest purchasing gasoline or diesel sooner than later. The Chicago spot basis is still 15 cents below our neighbors in the Group spot. Therefore, our Chicago market is still providing good value for gasoline and diesel prices.

Although crude prices traded narrowly, propane spot prices dropped a bit more but firmed up on the out months. Many suppliers are looking at a floor for futures saying they are unable to profit if the price gets much cheaper. What’s scary, is if that happens, producers will cut back on production. Right now inventories are healthy and we are experiencing a great balance between supply, demand, and exports. Spot price is holding great value and I recommend everyone filling their propane tank. Also, next season’s heating contract pricing will be available on Monday! Please call to setup your contract for the coming winter!

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

Best regards,

Jon Crawford

Slow Creeper

Good morning!

Happy Friday! The past week did not have as much news as the week prior. The big news of the week was Israel rejecting a ceasefire deal from the negotiating group in Qatar. Israel is adamant that the remaining members of Hamas must be eliminated from Rafah. Estimates believe that there are three battalions of Hamas left hiding in Rafah. Each battalion is around 1,000 members. Pres Biden responded to Israel’s rejection of a ceasefire by withholding further weapons to Israel until Israel can release a battle plan that limits civilian casualties. Israel cut off the main supply route to Rafah. However, the humanitarian bridge that was built in the Mediterranean Sea is now functional. Therefore, aid should start to flow into Rafah to help the 1M residents sheltering in place. The accord that Pres Biden pitched to Saudi Arabia is DOA if Israel invades Rafah. Israel resounded to the United States weapon withholding by saying they will “go it alone” into Rafah. Since Israel’s announcement, Israel started targeted bombings in Rafah and asked all southern residents to evacuate. The conflict in Ukraine/Russia escalated a bit as Ukraine started to receive more weaponry support. Russia is reporting oil production issues, but is having no problem finding customers. China and India continue to buy all of Russia’s exports. In economic news, world crude oil production continues to barely meet demand. OPEC+ and United States producers are being very disciplined with their production. They do not want the world supply of oil to go into surplus. In addition, EIA reported a draw in crude oil inventories on Wednesday. The FED also signaled that maybe rate cuts could come sooner than end of the year. Crude oil prices did not pop as expected with all the action in Israel/Gaza. Instead, crude oil prices slowly crept higher from their lowest price in almost a year. WTI Crude Oil price is BARELY holding below $80/barrel. I expect any escalation in the Middle East region or Ukraine/Russia will push WTI price back above $80/barrel.

In local news, the Chicago Spot market continues to be tight on gasoline supplies. Gasoline prices have dropped a little bit, but not as much as diesel prices. Diesel production remains high and surplus-supply is starting to develop. However, demand for diesel is picking up as farmers hit the fields and construction projects fire up around the Midwest. I expect to see little movement in spot prices of gasoline and diesel. The spot market will probably start to move in tandem with the price of crude oil. Diesel spot prices are holding incredible value. I highly recommend purchasing spot diesel at these current prices.

Propane spot prices dropped to their lowest price in over six months this week. But a floor of support seems to be developing. Just like spot price diesel, spot propane price is holding incredible value right now. I suggest considering purchasing spot propane at these current rates. Next season’s heating contracts should be out next week or the following. Stay tuned 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

Is The Repositioning For Real?

Good morning!

Happy Friday! There was a lot of data to unpack this week. Crude oil prices continued their slide. WTI crude price looks to close below $80/barrel for the first time in almost a year. The drop in price below $80/barrel forced a futures options trading repositioning of nearly 85% in the market. Almost every trader sold off their long positions and bought shorts. Although the data this week was interpreted as bearish, I continue to say that the drop in crude oil price is an incredible buying opportunity for the spot market. Starting the week, there was an announcement that Israel was going to negotiate with Hamas on a peace deal. The news caused commodities to drop in price. Many believe the deal will get done. A ceasefire would pull more geopolitical risk out of crude oil prices. However, when you dig into the details of the peace deal, I don’t see how the deal will get done. The details of the deal are as follows. Hamas is willing to release hostages in exchange for hundreds of Hamas POW’s being held by Israel. In addition, Israel would allow Hamas to exist with a recognized two-state solution. The framework seems DOA, but the markets love volatility. In addition to the potential ceasefire, the US announced a potentially very risky accord with Saudi Arabia. The US would provide Saudi Arabia with weapons and military support, and cut back on military support for Israel. And in return, Saudi Arabia would recognize Israel as an independent state in the Middle East and cut back on doing business with China. Also included is a clause that the US and Saudi Arabia will work together to keep Iran in check. I believe the accord has the risk of upsetting Israel, Iran, and China. Israel does not like the US getting cozy with too many Middle Eastern countries due to lack of trust. The accord could also pressure Iran to continue attacks in the region in response to the US meddling further in Middle Eastern affairs. And I’m sure China would not take too kindly to the accord as well. Therefore, the accord runs the risk of causing geopolitical tension. There has also been a lack of enforcement on Iranian crude exports. Iran’s 1.5M barrels/day exports are all being sold to China and India with no issue. The world has been calling on the US to enforce sanctions on Iranian oil exports, but Biden knows that the sanctions would raise crude oil prices. And because we are in an election year, Biden will do everything in his power to keep crude prices low. At home, there was a lot of data released. The FED decided to keep rates unchanged as inflation data continues to be holding stubbornly high. However, today’s jobs report showed a large decline in new job openings and the unemployment rate went up. The news is being digested and interpreted that the FED could move up rate cuts. If so, the price of crude oil would increase due to a weakening dollar. The EIA also reported a large increase in crude oil inventories. However, the EIA is known to be very manipulative with their data. Once again, this is an election year. The EIA will continue to try and keep a lid on oil prices. Biden is definitely the president of choice for the EPA and their policies. In summary, the drop in WTI crude oil price below $80/barrel is an incredible opportunity to put on long trades for crude oil. I do not see OPEC+ increasing production this summer. Saudi Arabia and UAE need the price of oil to move higher. Summer demand will be kicking in soon, as well as hurricanes. In other words, the drop in price is hanging on by a thread. We will see what next week brings!

The Chicago spot market prices dropped in tandem with crude oil prices. Although gasoline prices remained very firm going into the summer demand season. Diesel prices are at their lowest price in about a year. I expect refiners to look at exporting more refined products as opposed to selling spot. Focusing on exports has a better potential of pushing prices compared to selling locally. There are many incentives to pinch refined supplies at home and make prices go up. Refiners can easily export and maintain good margins. So refiners will be running at full steam, but pushing products overseas as opposed to going long in the spot market. Again, we are in an election year, and the oil companies are in opposition to Biden. I believe the oil companies will do whatever is necessary to try and inflate prices going into the fall of this year.

Propane spot prices also dropped in tandem with crude oil prices. However, futures pricing are remaining fairly firm. Propane national inventories are not building at a rapid clip. We will be keeping an eye on national inventories. With exports running at record highs, the current drop in propane prices could be a headfake and a great buying opportunity. For now, we are sitting back and waiting. Next season’s heating contracts should be released in mid-May. I also recommend filling up your tank this summer. Retail price on propane currently has great value.

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

Best regards,

Jon Crawford

Irritated Scalp From All The Scratching

Good morning!

Happy Friday! Well, again, the week is ending on a complete head-scratcher. WTI crude oil price continues to remain under $85/barrel! The US and Chinese economy continue to stay strong, even with US inflation and CPI remaining hot. The EIA reported a massive draw-down in national crude oil inventories. The US passed a resolution sending more weapons to Ukraine and Israel. The US is sending long range ballistic missiles to Ukraine for the first time ever in the war. The missiles have the capability of striking all of Russia’s ports and oil infrastructure. Israel is providing over 40,000 tents to the Palestinians in Rafah to prepare for the Israeli invasion. Biden and others are discussing tighter sanctions on Iran and Venezuela after each country reported large crude oil sales to China. Blinken and others are discussing raising tariffs on Chinese exports to thwart off China flooding the market with their continued inventory growth of exportable goods. Although Iran has said they will not retaliate towards Israel anymore, Iran did say they will consider attacking ships in the Straight of Hormuz and the Red Sea. Honestly, all of the news this week was very bullish for crude oil prices. However, crude oil prices dropped throughout the week! The prices for crude oil are looking to close around the same price as last week’s close. Therefore, since crude oil price continue to stay soft during a period of high bullish activity, many traders liquidated their short positions and bought long crude oil prices. The largest number of options trading on the market in over a year occured all within this week! Again, everything happening from supply/demand, market reports, to geopolitical issues are all pointing to higher crude oil prices. I continue to remain long crude oil prices.

In local news, Chicago Spot Market remains well supplied with gasoline and diesel. Prices have eased a bit with the drop in crude prices. Therefore, I do expect to see lower retail prices at the pump. We are looking at two weeks of softening gasoline and diesel prices in our market. Therefore, I believe there is a lot of value at today’s retail price for gasoline and diesel. I am definitely a buyer at these prices.

Propane prices continue to trade in a narrow range. The EIA report on propane inventories was a bit bullish this week. Unless crude oil price falls off a cliff, I don’t expect propane prices to drop much more. Next season’s heating contracts should come out next month. I highly recommend everything buying propane in the summer. As I stated earlier, I am still long crude oil price and believe prices will rise this summer and continue until the end of the year.

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

Best regards,

Jon Crawford

Never Before In My Life

Good morning!

Happy Friday! Never before in my life have I seen so many bullish situations for crude oil prices. But this week, oil prices DROPPED! Iran attacked Israel this past week, and Israel struck Iran last night. The retaliation from Israel caused prices of crude oil overnight to surge higher. But because the strike was not as large as expected, crude oil prices started out lower this morning! Iran responded by saying that they will now retaliate to Israel’s response. From all angles, sounds to me that Israel and Iran are officially in direct conflict. Biden and other European leaders have been trying to deescalate the the situation to no avail. Iran strongly supports the continued hijacking of oil tankers in the region. The Houthis’ will continue their attacks in the Red Sea. Hezbollah said they will continue their strikes on Israel. Russia said they will not let up on attacking Ukrainian energy infrastructure. Ukraine said they will continue to attack Russian oil infrastructure. I have never seen so much instability in the Middle East in my entire career. And the world’s largest commodity trade rests in the heart of all these conflicts: oil. With the presidential campaign on the way, oil price is a top issue. Biden must keep oil prices low in order to help his chances of reelection. Somehow, traders are shrugging off the most intense threats to oil supply. I believe that eventually the Middle East situation along with Russia/Ukraine is going to end up affecting oil supplies causing a major spike in oil price. For now, we can watch how the most irrational market behaves in the coming weeks.

In local news, gasoline and diesel prices dropped in tandem with the price of crude oil. The Chicago Spot market is well supplied. Therefore, I do expect to see prices of gasoline and diesel move lower in the coming week.

Propane prices dipped a bit this week, but not as much compared to the percentage price drop of crude oil. Propane future prices are finding a floor that I believe will be hard to break. I am still bullish on propane prices for the rest of the year and into 2025. Next season’s heating contracts will probably come out next month. So more to come!

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

Best regards,

Jon Crawford

World War III?

Good afternoon!

Well, it has been a week. Crude oil prices relaxed a bit during the week, but clawed back and will be holding around last week’s high. The geopolitical risk for crude oil prices has not been this intense since Russia invaded Ukraine. Israel and Hamas were close to reaching a deal on a ceasefire, but the deal was called off. Intelligence reports from Israel claimed that all remaining hostages that Hamas are holding are dead. Therefore, there is no leverage to negotiate. Israel still plans on invading Rafah. But then in a surprise attack that was not discussed with allies, Israel bombed and destroyed the Iranian embassy in Syria killing at least eight Iranians. The news sent shockwaves across the world. Iran announced full retaliation for the attack. An Iranian response seems to be imminent. Israel told Iran that if any drones or other artillery from within the borders of Iran hit Israel, Israel will interpret the attack as an act of war. Israel said they will then retaliate with strikes into Iran directly. The situation between Israel and Hamas is escalating and spreading quickly into new territories. The world is starting to worry that a much larger conflict could breakout and pull more countries into war. Oh, and I haven’t even touched on Ukraine! This week was brutal between Ukraine and Russia. Ukraine struck another Russian oil refinery. Ukraine has officially damaged 15 of 30 Russian oil refineries. Ukraine has vowed to attack as much oil infrastructure as possible. However, Russia responded by destroying Ukraine’s largest power plant outside Kiev. Therefore, the more Ukraine bombs the Russian oil network, the more Russia will take out power in Ukraine. The war is really dragging and not looking good for either side at the moment. If the attacks of this week continue, both countries’ energy sector will be demolished. The energy losses are bad for the entire world. Also, in a surprise and not well covered interview, Secretary of State Blinken announced that the plan is to officially bring Ukraine into NATO. A timeline was not given, but Blinken reiterated that eventually Ukraine will be a part of NATO. Under Article 5 of the NATO treaty, an attack on any member of NATO is an attack on all members of NATO. Therefore, if Ukraine is a member of NATO and is bombed by Russia, the potential for a large-scale war is on the table. And depending on the conditions in the Middle East with Israel and Iran, as well as Chinese/US tensions, a potential for World War III is on the table. Finally, on the supply/demand projections for crude oil, OPEC+ is still calling for continued supply deficits in the market going into year-end. Many other countries and banks alike are making the same call due to healthy economies and steady demand for oil. Also, if Russia truly continues to lose the ability to export, crude oil deficits in the marketplace become all the more probable. Supplies in the US continue to see-saw back and forth, but the US still has upside capability to harvest more crude oil. Our exports of crude and refined products continue to flow at record levels. Therefore, if a hurricane takes out any of our exporting capabilities, there would be a shock to the world supply causing prices to move higher. And, just this week, Biden cancelled all future federal land leases on the oil reserves in Alaska. Alaska has always been our “ace in the hole” play for oil. Taking the largest deposit of oil off the table only flames support for crude oil deficits in the marketplace over the coming years. In addition, inflation data came in hot showing a strong March and healthy American economy. Although a stronger dollar usually lowers the price of crude oil, the stock market is taking a hit because FED rate cuts will probably be pushed out. Since crude oil world supply is looking to be in deficit this year, traders are pouring money into commodities to try and make up for stock market loses. As I have been writing for a while, I believe crude oil prices are well supported and have plenty of room to run higher.

In local news, Chicago spot markets traded in a very narrow range. Supplies in Chicago and the Group are very healthy. Therefore, large spikes in crude oil prices will probably not adversely affect refined fuel prices in the spot markets. Prices at the pump will probably move higher, but not at the percentage rate compared to crude oil price.

Propane price also continues to trade in a narrow range but is starting to find some support. Inventories last week reported a draw. During this time of year, national inventories should be starting to build. As record production and exportation continue to be strong, propane inventories continue to run lower than the five-year average. If crude prices take off, propane prices might end up following and taking away any advantage of cheaper summer fills. For now, I am still seeing next season’s heating contract pricing to be around the same price as this past heating season. Therefore, propane is continuing to display great value in price when compared to other energy commodities.

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

Best regards,

Jon Crawford

Up, Up, And Away!

Good morning!

Happy Friday! I took last week off due to Spring Break. Unfortunately, the crude oil market is finding lots of support to continue the run higher in price. The war in Gaza escalated this week as Israel not only targeted the Iranian Embassy in Syria, but also mistakenly killed aid workers in Gaza. The geopolitical risks for higher crude prices kicked into full gear as expected. The US economy continues to run hot and calls on the FED cuts are all over the map. There is no consistency on if/when FED cuts will take place. The US crude oil inventories increased this week. However, gasoline and diesel inventories dropped. The report was interpreted as bullish. However, most of the refined products are being exported. The US economy seems to be healthy, but there are headwinds as cash/credit tighten with the consumer. If consumer spending starts to drop going into the summer, we could see a pull-back in crude prices. To add additional fuel to the bull-fire, OPEC+ met online and decided to keep cuts in place. Algeria and Iraq continue to pump over quota, and Venezuelan crude will find a home potentially in China. Russia’s exports have fallen, but the drop is temporary. Saudi Arabia announced this week that they are unable to meet their 2030 vision goals at the current rate of investment and crude oil sales. Although Saudi Arabia wants WTI crude oil to be closer to $100/barrel, the possibility of the Saudi’s increasing production moves onto the table if competition continues to take market share. I continue to sit back and watch everything play out. We are approaching a very intense presidential election in the US. If WTI oil continues to climb and hit $100/barrel, voters will be inclined to take out the “pain at the pump” on a sitting President. In my opinion, Biden will do everything in his power to try and lower oil prices going into November.

In local news, diesel prices have moved much higher with the increase in crude prices. Gasoline prices have remained fairly flat. The Chicago market seems to be sending a message that they are over-supplied with gasoline. We are starting to approach hurricane season and NOAA is calling for an intense and jam-packed storm season. The potential for “mini-blowouts” in basis pricing is on the table this summer and early fall.

Propane prices have moved higher in tandem with crude oil prices. However, propane cost has not moved higher at the same percentage to crude oil price movement. Summer fill season is right around the corner, and as customers finish up their contract pricing from the current season, they are pleased to hear the current retail price of propane is lower. Next year’s contracts will probably be coming out in May sometime, so more to come. Oh, and this current winter is now running at 12% warmer than last year, breaking the record for the warmest winter EVER!

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

Best regards,

Jon Crawford

Taking A Breather?

Good afternoon!

I am writing my update early since tomorrow is Good Friday and most oil traders take the day off. Crude oil prices continued to rise at the beginning of the week. Ukraine continued to bomb Russian oil refineries forcing Russia to cut production. Iraq and UAE had troubles making production quotas in February. The EIA reported another draw in crude oil supplies in America. China’s economic data started to show signs of life. And the CERAWeek conference in Houston discussed how crude oil demand will continue to increase over the coming years. In addition, if AI truly takes off across the globe, our world energy usage could increase anywhere from 25-50% globally! The numbers are absolutely bananas! The harvesting of crude oil and natural gas will have to increase in order to supply enough energy. We just do not have enough alternative energy sources, nor can we build alternatives fast enough. However, after WTI prices hit the highest price again in many months, a short pause landed towards the end of the week. The FED decided to hold rates. The EU is holding rates. The strength of the dollar remains high. The strength of the US Dollar puts strong downward pressure on crude oil prices. In addition, the potential economic collapse in the commercial real estate market is starting to take shape. As previously discussed, the majority of all commercial real estate loans are held by small to midsize banks. Commercial property values have fallen as much as 50%+ over the last year or so. The use of Commercial Mortgage-Backed Securities (CMBS’s) has rocketed over the past years and now loans are coming due. Basically, what happened in the great housing collapse of 2008 is starting to happen in commercial real estate. The potential for a major collapse is producing economic headwinds in America. There is also some light starting to shine through for a possible ceasefire in Gaza. Many groups and representatives are talking. Hopefully there could be a deal in the place over the coming week or so. At the end of the week, the crude rally finally paused and took a breather. WTI Crude price relaxed a bit but is still remaining above $80/barrel. There is a potential for WTI price to fall back below $80/barrel, but I am still bullish on crude oil prices in the near term based on market fundamentals and geopolitical issues. There is still the possibility of a contagion sell-off in Q3 through Q4 of this year. For now, sit back and kick your feet up for a bit. It’s nice to catch your breath every now and then. 🙂

In local news, the Chicago spot market finally started to sell-off basis differentials and move closer inline with Group prices. Therefore, I believe we might have peaked on refined prices in our Chicago spot market. We could start to see retail pump prices come down next week if the crude breather continues.

Propane prices held fairly firm this week. Propane price mostly followed crude. However, we are building national inventories a bit earlier than normal, so the potential for prices to fall later in the year could take shape. Basically, prices could slowly rise all summer and into the fall. Then if there is weak corn drying demand and a warm start to the following winter, prices could sell off. We had this happen the year prior. During the 2022-2023 season, the highest price for propane ended up being in the summer! I believe it’s still to early to hedge your bets with propane. Let’s first try and get through this warmest winter on record, and then see where we sit when the dust settles at the end of April.

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

Best regards,

Jon Crawford

Bulls Continue To Feast

Greetings!

Well, another week went by and the bulls continued to fill their bellies. The war in Ukraine escalated this week. Ukraine bombed three Russian oil refinery/production facilities. The attacks took out possibly 200k bbd of crude oil production. Even though other oil producing countries can quickly make up the difference, the calls went radio silent and the countries decided to the let the bulls continue their run. The war in Gaza seems to have no end in sight. Ceasefire talks failed to materialize again this week. However, the US engaged Iran with talks discussing deescalating the Houthi attacks in the Red Sea. The talks were the first between the US and Iran in over ten years. Iran agreed that deescalating the Houthi attacks are in both parties’ interest. However, many in the world community do not believe that Iran will do anything. In fact, now Iran knows that the US is struggling to contain the Houthi attacks. Some reports now say that attacks might increase due to the talks. China and Japan seem to have found some bottom support in their stock markets. Outside money seemed to slowly trickle back in. Inflation data in the US continued to show a hot economy and supported pushing out rate cuts. And then in a surprise press release, the IEA changed their call to world oil crude supplies falling into deficit this year. Since the beginning of 2023, the IEA called for oil supplies to be in surplus all of 2024. The news this week continued to support higher crude oil prices for the near-term. But the horizon is starting to look a bit hazy. Jamie Dimon from JP Morgan/Chase raised his call of the US falling into recession by mid 2025 to 50%. Many oil traders liquidated long oil positions starting in Q4 of 2024 and beyond. The stronger dollar is probably keeping a lid on WTI price from flying to $90/barrel. But I do think that $80/barrel WTI crude oil will remain for the coming months. The upcoming summer demand and inflationary data through Q3 of 2024 will tell us more. For now, keep your seat belt on and hold tight. Many traders are calling for $100+/barrel oil, but I think that’s a trap based on the very long positions in crude. Patience wins the race and as I have been saying since the end of 2023, 2024 will be a cost-average year with maybe only locking up 25% of one’s petroleum needs.

In local news, the Chicago spot market is not in great shape. The higher spot prices in the Chicago market are looking to hang around for some time. Bp Whiting is still not pumping at full speed. Mobil refinery had a flaring event that shuttered some production. Citgo refinery had an oil leak reported. And then three other refineries announced upcoming maintenance in Q2 of 2024. Therefore, the Chicago refinery market is feeling some short-term pain. I expect Chicago spot economics to run a bit higher compared to our neighbors in the Group for the next few months. Hopefully by summer, Chicago production will be in full-swing and spot prices will drop lower than the Group. In the meantime, I expect to see retail prices of gasoline and diesel to be very choppy. The Chicago spot market trade will be very volatile and the prices at the pump will reflect accordingly.

Propane cost continues to trade at a decent “percentage to crude cost”. However, in my opinion, the devil is in the details. If crude prices stay high, propane cost will trade very flat. And if crude prices drop, the production of propane will also drop. However, the drop in price/production might not cause the price to run much higher because there is so much room for the “percentage to crude cost” to move higher. If crude prices fall and propane prices stay flat, many retailers will pile into future purchases which suppliers want. I think suppliers could use the “percentage to crude cost” to coax retailers to the buyer’s table. Propane inventories also started to build this past week. Usually propane inventories don’t experience an inventory build until April at the earliest. Although national propane inventories are at lower end of the five year average, I could see propane inventories building quickly this summer. In addition, the farm season is not looking good so far which means a potential weak crop drying demand in the fall. I’m still sticking with the possibility for some lower summer-fill prices on propane and next year’s propane heating contract prices to be very similar to this year’s prices.

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

Best regards,

Jon Crawford

A Big Yawn

Good morning!

Happy Friday! The news cycle this week continued with much of the same old same old as last week: Houthis continuing their threats in the Red Sea, the war in Ukraine slowly grinding in the favor of Russia, the FED sending mixed messages on rate cuts, China’s economic data still being poor, the IEA saying oil demand will decrease, OPEC+ saying oil demand will increase, and a “devil in the details” EIA report. The news of the week continued to support WTI crude oil prices, even though in my opinion, the news was bearish. Again, the market continues to act irrationally. The EIA report announced a smaller than expected build in crude oil inventories. However, there was an outage on the Keystone Pipeline that supplies Conway with storage barrels. Therefore, the smaller build in inventory was due to restricted crude oil shipments flowing into storage. And FED Chairman Powell reported on Wednesday that rate cuts are almost ready to go. But today the jobs report was red-hot showing that the economy is still going strong. So within two days, Powell’s speech was basically pointless. The economic data is still showing inflation stronger for longer. All the news this week continued to keep WTI prices in a narrow trade range between $78/barrel and $80/barrel. For now, the bulls seem to be holding on to anything that will keep prices high. I still see rate cuts coming later this year, but maybe only one to three total cuts. I also tend to put my money on history. History shows that crude oil prices usually drop going into a Presidential election. Again, I believe patience will win this year and opportunities for buying crude oil at lower prices will come to fruition at various times throughout the remaining year.

In local news, the supply of gasoline in the Chicago spot market seems to have finally balanced out. The cost of gasoline dropped in our market since last week. Therefore, I do expect to see gasoline retail prices drop. Diesel prices in the Chicago spot market continue to be stubborn and remain higher compared to our neighbors in the Group spot market. Diesel cost on the CME followed NYMEX crude oil prices in tandem. Therefore, since diesel cost increased a bit in our local spot market, I do not expect to see diesel retail prices drop in the first part of next week.

Propane prices traded in a very narrow range again this week. Even though warm weather is demolishing heating demand, exportation of propane remains at record levels. Our national inventories are now officially below the 5-year average, even though we are possibly experiencing the warmest winter on record. But the out months on propane futures are firming up due to the possibility of supplies being short if there is a colder winter in the future. Many companies are starting to place long bets on propane futures over the next two to four years. I still believe we will have some better retail prices on propane for the summer. But I could see next year’s contract pricing being almost the same price as this year.

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

Best regards,

Jon Crawford