Happy Friday!
Markets are always a bit wonky going into a long holiday weekend. I’ll pick back up on market updates next week. I hope everyone has a safe and enjoyable Labor Day weekend!
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford
Good morning!
Happy Friday! This past week was another eventful one in the markets. WTI crude oil experienced a significant sell-off, nearly breaching a critical support level at $70 per barrel. The primary driver continues to be global economic conditions, particularly in China. Recent data points to China’s economy losing momentum, with declines in new home prices, a slowdown in industrial output, and rising unemployment. Additionally, China’s exports of refined products and other commodities have plummeted. Meanwhile, Russia has maintained record levels of crude and refined product output, with India officially becoming Russia’s largest customer. The increased output from Russia and Iraq has added downward pressure on crude prices.
Looking ahead, OPEC+ is expected to begin unwinding its disciplined production cuts next month. If this plan proceeds, the global crude oil market could shift to a surplus, potentially triggering a “flash crash” in prices. Although the U.S. reported unexpected draws in crude oil and refined product inventories this week, the impact was offset by poor economic data and the Federal Reserve’s minutes, which suggest that rate hikes may occur in September. Additionally, the U.S. revised its job creation numbers from March, reducing them by over 800,000—a significant adjustment not seen since 2009. As summer ends and gasoline demand declines, there are concerns that overall demand for refined products may diminish. However, U.S. shale oil producers are continuing to ramp up production, raising fears of an oversupply in the domestic market.
Geopolitical tensions in Israel and Gaza took a backseat this week as discussions of a cease-fire resumed. Iran is withholding any retaliatory actions against Israel pending the outcome of these negotiations. Meanwhile, the conflict between Ukraine and Russia persists, with Ukraine advancing into the Kursk region and Russia reorganizing to target vulnerable areas in Ukraine. Despite these geopolitical risks, economic data was the dominant influence on the crude oil market this week.
We now await the Federal Reserve’s remarks at Jackson Hole regarding potential rate cuts in September, as well as the upcoming OPEC+ meeting, which will address the continuation of production cuts through the end of the year. September will be a crucial month for determining the future trajectory of crude oil prices for the remainder of 2024.
In local markets, weakening gasoline demand and the return of the Joliet refinery to full operations have led to a significant drop in gasoline prices. I expect retail gasoline prices to decrease slightly next week if current trends continue. However, diesel prices seem to have stabilized due to the onset of refinery maintenance and the approaching harvest season. Consequently, I do not anticipate a decline in diesel retail prices next week.
Propane prices did not follow crude oil prices lower. The ratio of propane prices to crude oil prices remains low. With winter pricing dynamics and a potentially high-volume corn drying season approaching, suppliers have little incentive to reduce prices for retailers. If you haven’t yet topped off your propane tank this summer, we strongly recommend doing so before winter pricing takes effect on October 1st. Additionally, consider locking in prices for at least a portion of your upcoming winter propane usage.
As always, if you have any questions, comments, or concerns, please feel free to reach out. Have a great weekend!
Best regards,
Jon Crawford
Good morning!
Happy Friday! Crude oil prices continued to trade in a narrow range. WTI price has been unable to break through the $80/barrel ceiling. The push-and-pull is between supply/demand and geo-political tensions continued to play out this week. Even though Israel is waiting on a military response from Iran and Ukraine invaded Russian territory, the supply/demand fundamentals with crude oil won over the market’s attention this week. The crude oil trade continues to remain volatile.
China reported a lot of bearish data this week. Oil prices dropped by more than 1% when weak economic indicators from China, including poor manufacturing data and low refinery runs, overshadowed geopolitical risks. China’s oil refinery output in July dropped to its lowest level since October 2022, primarily due to thin processing margins and weak fuel demand. This marks the fourth consecutive month of declining refinery output. Brent crude fell below $80 per barrel on the data. However, the U.S. retail sales data provided some economic support, suggesting stronger economic growth in the U.S. and kept a floor on crude oil prices
There were also many data points discussed on the world supply of crude oil. China and Saudi Arabia continued to lead in Russian crude oil imports. In July, China and Saudi Arabia were the largest importers of Russian products. Imports to China and Saudi Arabia increased significantly, with China using the imports for refining and Saudi Arabia for power generation. In addition, Chinese diesel consumption declined this week. Diesel consumption in China fell by 11% in June 2024 compared to the previous year, the largest decline since July 2021. The reduction is attributed to slower economic activity and the substitution of diesel with liquefied natural gas (LNG) in heavy-duty trucks. At home, North Dakota oil production continued to decline. North Dakota’s oil production fell for the second consecutive month in June, marking a decrease of 22,500 barrels per day. The state has struggled to maintain production levels since hitting a peak in September 2023. Also, the EIA reported a surprise build in crude oil inventories. U.S. crude oil stockpiles unexpectedly increased last week after six consecutive weeks of drawdowns. Gasoline and distillate inventories also fell more than expected, reflecting fluctuating supply and demand dynamics. In addition, the International Energy Agency (IEA) continued to pour cold water on crude oil prices. The IEA reduced its forecast for global refining activity growth for this year and next, citing weaker-than-expected performance in the first half of 2024.
In the local Chicago market, gasoline prices plummeted from their highs over the past month. The Joliet refinery is coming back online. Distillate prices continue to remain flat based on a supply tightness. I do expect gasoline prices at the pump to fall next week. Diesel prices will probably remain steady.
Propane prices again remain steady. We are getting closer to winter pricing dynamics and suppliers are allowing percentage to crude ratios to increase rather than cutting prices. There is still room for propane future prices to run higher even with WTI crude oil price holding below $80/barrel. I still suggest that everyone top of their propane tank by end of September and contract some propane 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
Good Morning!
Happy Friday! This week, crude oil prices followed a bell curve, ending where they began after a mid-week spike. Economic news from around the globe overshadowed any geopolitical risk premium. Despite some complexities in the details, crude oil prices are struggling to find support. China reported weak manufacturing data and low imports. The Federal Reserve announced that a rate cut is possible in September. Additionally, the U.S. unemployment rate rose to 4.1%, with only 175,000 jobs added in July, signaling economic weakness and lower demand for crude oil. OPEC+ decided to continue unwinding their supply cuts, contributing to a bearish sentiment.
However, some details suggest a different outlook. This week, Israel assassinated Ismail Haniyeh, the political leader of Hamas, in Iran. This action halted ceasefire negotiations and almost guarantees a military response from Iran, causing crude prices to spike. Traders adjusted their futures positions to long on crude oil. OPEC+ also indicated that cutting production is still an option if crude prices drop in August, and Russia is pumping crude at its lowest level in years. Producers are disciplined in avoiding oversupply, leading to an oversold market with potential buying opportunities. I do not expect crude prices to drop below $70 per barrel.
The Mobil Joliet refinery in Illinois is facing issues restarting after a tornado-induced shutdown a few weeks ago. This delay has caused a spike in regular gasoline prices and a significant increase in reformulated gasoline prices. The shortage prompted the Federal EPA to issue a waiver allowing counties designated for reformulated gasoline to purchase regular gasoline until inventories are replenished. Gasoline and diesel prices are expected to remain higher until the Joliet refinery is fully operational.
Propane spot prices have slightly decreased from their peak but remain strong compared to crude oil prices. Propane futures are robust based on inventory levels and predictions of a polar vortex this winter. Home heating customers are advised to fill their propane tanks this summer and contract for the upcoming heating season.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford
Happy Friday! This week, crude oil prices experienced significant fluctuations, with WTI crude dropping below $80 per barrel for the first time in several weeks. The $80 per barrel mark has been considered a psychological support level. The decline in crude prices was primarily influenced by expectations of the Federal Reserve cutting rates in September, weaker-than-expected economic data from China, and the potential for another ceasefire agreement between Israel and Hamas. Although these factors were interpreted as bearish, there are inconsistencies in the details.
The anticipated Federal Reserve rate cut has already been factored into the market for over a month. Consequently, the recent sell-off based on Federal Reserve data appears to be an overreaction. The economic data from China was indeed weak, prompting China to lower its borrowing rates. However, China has a history of manipulating its currency to remain competitive globally. As the United States approaches a presidential election, China is prepared to engage in trade disputes with a lower yuan valuation. Despite President Biden’s announcement of a potential ceasefire deal between Israel and Hamas, Benjamin Netanyahu, in his speech to the US Congress this week, did not mention any such deal.
A closer examination of these three points suggests that the recent drop in crude prices is a temporary anomaly. Similar patterns were observed last month, with prices quickly rebounding. Once WTI prices fall to around $78 per barrel, traders tend to clear positions and buy back in. Therefore, I believe crude oil is once again oversold. The bullish data for crude oil prices this week was robust. The US economy grew at a 2.8% rate, exceeding expectations. The consumer economy in the US shows no signs of slowing down. The EIA reported another drawdown in crude oil inventories nationwide, and the Federal Reserve’s PCE number aligned with expectations. Without any significant contraction in the US economy, I do not foresee a path to lower oil prices. Oil companies continue to reduce oil rig counts to maintain steady production levels. I firmly believe that $80 per barrel is the floor for WTI crude oil prices, and recent events are likely a temporary anomaly.
In the local Chicago market, Mobil announced plans to restart their Joliet refinery this weekend, with refined products expected to start flowing in early August. This news caused gasoline and diesel spot basis prices to drop. While gasoline spot prices dipped, diesel spot prices did not fall as much as anticipated due to tight diesel inventories going into the turnaround season. Additionally, the Midwest is predicting a large harvest this season, which will increase diesel demand and pressure supplies this fall.
Propane prices remained stable despite the dip in crude oil prices. The EIA reported a small build in inventory this week, which offset the previous week’s large build caused by Hurricane Beryl closing exports rather than increased production. I expect propane prices to continue trading within a narrow range. Propane still offers excellent value compared to crude oil prices. I recommend filling your tank this summer and locking in prices for the upcoming heating season.
As always, if you have any questions, comments, or concerns, please feel free to contact us.
Best regards,
Jon Crawford
Happy Friday!
This week, crude oil prices continued to trade within a narrow range, with WTI holding above $80 per barrel. Geopolitical news was relatively quiet. Ukraine is grappling with a severely damaged electrical grid, potentially increasing diesel consumption for generators. Russia shows no signs of de-escalating, and tensions are rising in Palestine as Israel killed a Hamas commander in Rafah. Additionally, the Philippines constructed an aircraft landing strip near Manila in contested waters with China, potentially escalating tensions regarding Taiwan. The Shanghai Cooperation Organization (SCO), which includes China, Russia, and several other nations, met and pledged mutual military and economic support, posing a potential challenge to NATO. These developments underscore a possible economic conflict and a cold war-like military structure emerging globally.
Crude oil supplies remain tight worldwide as producers exercise disciplined production. The U.S. is recovering from Hurricane Beryl, which temporarily halted exports and refinery operations. Normal operations are expected to resume in a few weeks. The Federal Reserve’s anticipated rate cut in September could weaken the dollar, putting downward pressure on crude oil prices. However, producers have signaled continued production cuts if rates decrease. Former President Trump announced plans to make the U.S. the leading global producer and exporter of crude oil, though U.S. producers remain focused on maintaining higher prices through disciplined production. OPEC agrees that reducing production during a recession is essential to sustaining higher prices. The consensus among global oil companies is “less barrels for more money,” suggesting no imminent price reductions despite a potential landscape for higher U.S. production under a Trump administration.
Severe thunderstorms forced an emergency shutdown of Mobil’s Joliet refinery in Illinois, causing significant price increases for gasoline and diesel. The refinery, producing about 300,000 barrels per day, will be down for at least a few weeks, impacting supply during the refinery maintenance season. Consequently, gasoline prices increased by nearly 30 cents per gallon and diesel by 20 cents per gallon, with prices expected to remain high into August.
Propane prices remained stable, trading in a narrow range alongside crude oil. Propane continues to offer excellent value, and we strongly recommend filling your tanks and locking in prices for the upcoming winter.
As always, please feel free to contact us with any questions, comments, or concerns.
Best regards,
Jon Crawford
Happy Friday!
This week, crude oil prices closely tracked economic data, with WTI trading within a narrow range but maintaining a level above $80 per barrel. The early-week sell-off was driven by weak economic data, including reports of cooling U.S. inflation and Saudi Arabia’s decision to delay future infrastructure investments. Additionally, Federal Reserve data suggested a potential rate cut in the near future. Although these economic indicators slightly depressed crude oil prices, supply concerns prevented prices from falling below $80 per barrel. The EIA reported a significant draw in crude oil inventories, and the U.S. oil rig count continued to decline. This data supports the thesis that American oil producers are exercising discipline by reducing production in response to weak demand to sustain higher prices.
Geopolitical factors also contributed to bullish sentiment. The U.S. announced plans to send larger bombs to Israel as it continues its conflict with Hamas in Rafah. In Ukraine, reports emerged of a children’s hospital bombing, and President Zelensky spoke at the NATO summit, where continued military support for Ukraine was pledged. These geopolitical issues supported oil prices, but economic data was the primary driver this week.
In local news, the Chicago spot market experienced a significant drop in diesel basis, leading to expected lower diesel prices at the pump. The gasoline basis in Chicago continued to lengthen slightly against rising crude prices, keeping gasoline prices stable despite the increase in crude oil prices. Chicago is expected to remain long on basis until the next refinery turnaround, projected for late August or early September. Motorists in Wisconsin should benefit from the competitive pricing of refined products throughout the summer.
Propane prices have continued to rise in line with crude oil prices, with futures prices now exceeding the six-month average. Customers are strongly encouraged to fill their propane tanks and lock in their propane gallons for the upcoming winter. For more information, please contact our office.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford
Good afternoon!
I would like to wish everyone a safe and happy 4th of July! Crude oil prices have risen throughout the week, along with finished products, ahead of the busiest travel weekend of the year. Additionally, the Federal Reserve holding rates steady and the approach of hurricanes in the south have continued to support higher crude prices. Consequently, I expect pump prices to increase. All finished product prices, including propane, ended the week higher. With many traders out of the office, trading volumes are light, which can lead to price volatility. Enjoy the rest of the holiday week!
Best regards,
Jon Crawford
Happy Friday!
I am back from vacation and a lot has happened since I returned! WTI Crude has established a new floor at $80 per barrel, with all attempts to fall below this price failing. This week, the price of WTI is expected to hold and close above $80/barrel. Traders have moved away from short positions and instead are placing longer-term position bets on crude prices. This shift is largely due to a reassessment of the market’s reaction to the OPEC+ meeting, which initially seemed bearish but has now been digested as bullish. Additionally, geopolitical risks have intensified, notably with Russia and North Korea’s recent pact. The pact offers increasing concerns about a nuclear weapon ending up in Iran. Ukraine’s military reported an average soldier age of 43, indicating a shortage of younger troops. France is considering deploying troops to Ukraine escalating tensions even further. In Israel, tensions persist between the government and military regarding ongoing operations. Domestically, the EIA report indicated increasing demand with U.S. families prioritizing travel over other discretionary spending despite higher gas prices. Overall, crude oil prices are aligning with my previous predictions and analysis.
The Chicago spot market is showing signs of tightness, with gasoline and diesel prices surpassing those in neighboring regions. This is surprising given the healthy refinery runs in Chicago and storm damage impacts elsewhere. It appears Chicago oil companies are redirecting barrels east due to rising demand. Barrels from Chicago and the Gulf are finding increased profitability with supplying the New York Harbor market which relies heavily on imports.
Propane prices have risen in tandem with crude oil prices. It is advisable to fill your propane tanks and lock in prices for the upcoming heating season. Prices have bottomed out recently and are now on the rise. Hopefully prices will not rise too much more.
For any questions, comments, or concerns, please feel free to contact us.
Best regards,
Jon Crawford
Good morning!
Happy Friday! The big news this week was the OPEC+ meeting on June 2nd. Traders were looking for guidance on how long production cuts will continue to be implemented. OPEC+ countries reaffirmed their commitment to existing production cuts. These cuts, totaling 2.2 million barrels per day (bpd) for the first half of 2024, are in addition to previous reductions of 3.66 million bpd, bringing the total cuts to 5.86 million bpd. Despite concerns over economic slowdowns in major economies, OPEC+ maintains an optimistic outlook on global oil demand growth. The organization expects demand to rise significantly, which will necessitate continued management of supply to balance the market and support stable prices. The possibility of winding down current production cuts in Q4 of this year is on the table. However, the Joint Ministerial Monitoring Committee (JMMC) will continue to closely review global oil market conditions and production levels every two months. The committee is also empowered to call additional meetings or request an OPEC+ and non-OPEC Ministerial Meeting whenever necessary to address market developments. The meeting highlighted the importance of adhering to the Declaration of Cooperation (DoC) and the Charter of Cooperation. OPEC+ plans to extend the current production levels and assess the situation using data from three independent sources to guide 2026 reference production levels. The markets interpreted the news as “bearish” and crude prices sank to the lowest prices in over a year. However, Saudi Arabia clarified on Thursday that the winding down of production cuts will only take place if the market is showing signs of an oversupplied market. The announcement poured cold water on the sell-off and crude prices rebounded. In addition, WTI price falling below $75/barrel triggered a massive repositioning in the options market. Traders showed signs of an oversold market and repositioned for WTI price to be back above $80/barrel at sometime in Q3.
The geopolitical risk for the commodities market continued to remain high this week as the war between Russia and Ukraine showed no signs of slowing down. Ukrainian forces reported downing 36 Russian missiles and drones targeting Kyiv. Russia launched approximately 20 missile and drone attacks on Kyiv since early May, intensifying their efforts to disrupt Ukraine’s preparations for a major counter-offensive. The international community continued to respond, with NATO emphasizing the need to prevent the conflict from escalating into a broader war between Russia and NATO. Additionally, Turkey donated a drone to Ukraine, funded by a Lithuanian fundraising campaign. The war in Palestine also showed no signs of slowing down. Although Biden announced a ceasefire plan to the UN, China and Russia are not in favor. China and Russia hold veto power. Therefore the chances of the resolution passing is slim. Families of Israeli captives held in Gaza have urged the Israeli government to accept this plan, highlighting the ongoing humanitarian crisis and the need for a peaceful resolution. The Gaza Health Ministry has reported that thousands of wounded Palestinians require urgent medical evacuation from Gaza due to the continued conflict and lack of medical supplies and facilities. Israeli forces conducted heavy artillery and helicopter raids in various areas of Rafah. These raids resulted in the deaths of several people and caused significant destruction to residential areas. This situation underscores the severe humanitarian toll the conflict is taking on the civilian population. And in a surprise announcement this morning, Houthi rebels unveiled a supersonic missile called “The Palestine” that can break through defense systems on the Red Sea. Many see the escalation will cause more attacks on ships on the Red Sea and prolong further supply disruptions. Overall, I still believe the geopolitical risks for crude oil prices outweigh demand erosion. I think Q3 of 2024 is going to be a very interesting quarter.
In local news, the EIA reported a crude oil inventory build of 1.2M barrels, a gasoline inventory build of 2.1M barrels, and a distillate inventory build of 3.2M barrels. The news was interpreted as showing signs of diminishing demand. Chicago spot market continues to hold excellent value compared to our neighbors in the West. Although Chicago spot barrels are cheap, any refinery disruption or hurricane will cause a massive spike in price. For now, everyone should take advance of the cheaper retail prices.
Propane prices continue to skip along the bottom. The EIA reported a propane inventory build of 2.5M barrels which was in line with expectations. Retail pricing of propane has great value. We believe now is a great time to consider filling your tank and contracting your propane needs for next year. Again, contracts for next heating season are cheaper than the previous winter. Almost no commodity futures are showing signs of lower pricing in 2025 compared to 2024. Feel free to call the office for more information.
As always, if you have any questions, comments, or concerns, please feel free to give us a call. I will be leaving on vacation soon and will not be having any updates for the next two Fridays. I should have the next update released on June 28th.
Best regards,
Jon Crawford