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

Crude Ends The Week Lower

Good morning,

I wanted to first wish everyone a safe Labor Day weekend.  I know the weekend is not like usual, but I hope everyone can get outside at some point and enjoy some end of summer.  Crude prices have ended the week lower than where they started.  WTI is flirting with breaking below $40/barrel.  The main driver is lack of demand on the horizon as summer ends.  The US economy continues to drag and until a vaccine is distributed, we just don’t see how the US can fully bounce back.  China’s demand is a bit inflated and lots of worry is hitting the markets going into flu season.  Although the US is looking at inflation which drives crude prices higher, the demand worries are weighing at a greater level.

In local retail news, gasoline and diesel prices will probably start to drop after Labor Day as the drop in cost blends into the market.  I expect to see some lower gasoline prices next week.  Diesel retail prices are still very good in value and don’t expect to see much of a change just yet.

Propane prices have remained somewhat calm, but supply builds continue to put a lot of potential downward pressure on future pricing.  Depending on the level of cold this winter.  Contract and board pricing will probably remain very close.

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

China and the Surge of Coronavirus in the US

Good morning!

I hope everyone had a great week.  This week was another crazy ride on the commodities train.  We started out the week with crude selling off on the continued surge in spread of the coronavirus in the US.  But then announcements of breakthroughs in treatments and vaccine development stopped the selling and moved crude into buying territory on the hopes of recovery.  Crude prices gained further support as President Trump gave his first coronavirus press briefing in months and asked for Americans to wear a mask because the pandemic is going to get worse before it gets better.  Now, we would think that crude prices would drop on such news, but because the President was acknowledging the seriousness of the situation and asking Americans to change behavior to stop the spread, the news actually supported crude prices because hopefully the announcement will help the situation improve.  I know….crazy times….  In addition to the coronavirus, the US and other countries continued to pull out of Hong Kong in retaliation to the new laws put in place by China.  And then, the US announced that we would be closing the Chinese consulate in Houston due to reports of Chinese espionage.  The consulate had until end of day yesterday to evacuate and was seen burning items all day on Wednesday.  China retaliated by kicking the US out of one of our consulates in China.  And just to turn it up one more notch, Taiwan announced that they are afraid of a military strike by China since most of the world and superpowers are distracted with coronavirus.  Wow…that’s a lot to handle right there!  On the supply/demand front, the US inventories experienced a slight build this week showing that the surge in coronavirus is starting to hurt demand a bit.  The week is ending with crude prices near where we started for the week.  If the US/China relations continue to deteriorate, crude prices are in limbo.  Will demand destruction or devaluation of the dollar be the ultimate price driver on top of the pandemic?  Only time will tell….

In local news, Chicago supplies took a differential jump this week and cost for gas and diesel jumped almost 10 cents/gallon.  I believe the price jump is in regards to the futures contract month expiring and looking to fall harvest with high demand.  I expect to see gas and diesel retail prices hold near $2/gallon for the next week.

Propane prices are gaining some support with crude price movement.  However, propane supplies seem to be in much better shape and corn drying demand is looking very weak for the fall.  The increase in supplies will give us a cushion for a cold winter.  I am predicting a colder winter than normal due to the high heat over 90 degrees we have experienced this summer.  A general rule to follow is “a day over 90 degrees in the summer, is a day below 0 in the winter.”  If that holds true, we are looking at a much colder than normal winter.  I strongly suggest filling your tank now while the prices are low and contracting propane for the coming heating season.

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

Best regards,

Jon Crawford

WTI Back Above $40/Barrel

Good morning,

The crude oil market continues to ride a narrow wave between $38-41/barrel.  As I have been discussing, the price movement is completely driven by headlines and not always based on supply/demand economics.  Prices continued their downward trend below $40/barrel until late Tuesday when vaccine announcements were made along with a very bullish prediction on the weekly EIA Inventory report.  Crude prices jumped back up above $40/barrel.  On Wednesday, the EIA Inventory report was confirmed and major banks released their earnings showing strong profits.  However, the rally was quieted as OPEC+ decided to relax production quotas starting in August until the end of the year.  The main economic driver for crude has been gasoline demand in the US.  As the coronavirus cases continue to surge, if economies slow down and more crude enters the market, a balance from surplus crude will be broken quickly causing prices to severely drop.  In addition, China’s economic data was not very strong and American unemployment filings were over 1M again.  I believe we are going to experience a very narrow range on the crude trade for the next few months.

Gasoline and diesel retail prices have not changed from last week.  The average retail price on both gasoline and diesel is around $2.05-2.19/gallon depending the market. I do not expect to see much if any movement on retail prices.

Propane prices have been following the crude market fairly closely.  I continue to write that all customers should fill up now while prices are cheap.  We also released our contract pricing for next heating season and the prices are fantastic.  I also recommend that all customers 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 4th of July

Good morning!

Instead of my usual update, I just want to take a moment and wish everyone a safe and enjoyable 4th of July weekend.  I know the last three months have been difficult for many people.  I hope we can all take a break for a couple days and enjoy the beautiful weather.  I know that our country will survive through all of the current turmoil and I hope we all come out stronger in the end.  Our nation has a history of resilience and determination.  We can all come together and be better in the end.

I will just say quick, that next season’s propane heating contracts are released and will be hitting mailboxes next week.  If you would like more information, please call our office and we will be happy to assist you with writing a contract.

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

Best regards,

Jon Crawford