Don’t Get Sick On The Roller Coaster Ride

Happy Friday!  Wow! Crude oil prices took a wild roller coaster ride this week.  Prices started the week out soaring back near highs of $85/barrel on WTI.  Then the US announced increases in national inventory coupled with the news that the FED will begin tapering and possibly raise interest rates in early summer of 2022.  The news sent crude oil on a nose dive over two days of trading, closing at $79/barrel on Thursday!  The closing price was the lowest in weeks.  In the middle of all the news, OPEC+ had another meeting and decided to keep oil production steady, regardless of calls from the US to increase production.  I figured the news would have shot prices higher, but it fell on deaf ears…until this morning.  The October jobs report was knocked out of the park based on expectations, so the news coupled with OPEC’s announcement from yesterday shot WTI right back above $80/barrel.  Looks like WTI is still going to close down for the week, but not nearly as much as anticipated.  As I have been writing, we are in uncharted volatile territory with many players holding the crude oil trade.  The next four to six months are going to be very choppy.  Try not to get sick on this roller coaster ride!

In local news, the cost of diesel has finally eased a bit with harvest on the backend.  Gasoline cost has eased a bit but not as much as diesel.  I expect to see retail prices basically unchanged as the markets are still balancing into the supplies being sold at retail.

Propane price has continued to hold steady through this choppy trade, but that is ok.  The wild ride higher seems to be kept in check at these numbers.  As I have been writing, we are not out of the woods, but more on a pause.  I still could see propane having some break out higher sessions depending on the amount of cold weather this winter.

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

Best regards,

Jon Crawford

WTI Price Showing Signs of Weakness

Good morning!

Although Goldman Sachs continues to pound the drums of $100 WTI crude oil, a lot of bearish overtones finally poked their way through the loud chatter from the bullish news cycle.  Down in the Permian Basin, the largest shale oil play in the US, private companies have increased production past pre-pandemic levels.  Although public companies are holding firm withholding supply, many believe they can’t hold out forever. If prices start to fall, I would expect to see market share become the name of the game.  Crude oil inventories started to build in the US again which is a sign of decreased local demand as well as export demand.  Although the Delta variant is calming down in America, covid cases had their highest level increase around the globe the past two months.  The fears of economic slowdowns across the globe are gaining attention again.  The US Q3 economic data was terrible along with many other countries.  China is looking to resolve their coal shortage issues which would decrease their demand for oil.  And Iran is working to maybe come back to the negotiating table with the US which would bring more transparently traded oil into the market.  And the addition of more Iranian crude into the market could completely wipe out the OPEC+ agreement.  As I have been writing the past two months, the oil market has been running on headlines and getting very heavy in my opinion.  There are many reasons to be patient and sit back until year end while all these scenarios play out.  I am still seeing more downside risk than upside risk in the long term for 2022.

Chicago spot diesel prices have dropped this past week so I expect to possibly see retail prices on diesel ease a little.  Although crude prices have eased a bit, there is a slight supply disruption on gasoline coming out of Chicago, so I do not expect to see much movement on gasoline retail prices just yet.

Propane price is continuing to level off and stop the trend of flying higher.  We are in the heart of contract season and demand has been very light.  Corn drying has been minimal and supplies are very healthy.  The US has built a little additional inventory but not a safety net.  The latest forecast is calling for colder than normal temps this winter.  I would take this pause in price movement lightly.  Propane prices still have plenty of variables on the horizon.  If we have a colder than average winter, propane could break out even higher in price.  However, if crude prices collapse during the winter, propane prices could at least be held in check.  I do not expect to see propane prices back in the $1/gallon range in the coming six months.

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

Best regards,

Jon Crawford

Crude Taking A Breather… For Now

Good morning!

Happy Friday!  Crude prices have finally taken a pause to catch their breath.  China is making announcements that they are trying to solve their coal shortage issues by potentially negotiating with Australia.  The US production seems to be soaring in the private sector versus publicly traded companies.  And OPEC+ has hinted that they are watching supplies very closely to try and make sure a major price spike doesn’t derail demand.  I am starting to see the scenario for an unwinding in crude prices starting maybe in Q1 of 2022.  I could see traders ring the register on record returns for crude positions in Q4 of 2021 and take the profit knowing that short-term cap gains taxes could increase in 2022.  I can also see publicly traded companies and OPEC+ start to put more oil on the market in Q1 of 2022 to go after market share if COVID-19 hopefully becomes less of an economic impact on demand.  For now, I will take the pause on the upmarket movement, but I’m not confident we have peaked.  However, the scenarios for lower crude prices next year are starting to take shape.

Local retail prices of gasoline and diesel have stayed very stable this week.  Gasoline retail price should remain above $3.00 on average and diesel near $3.49/gal.  Not much news to report.

Propane prices have also leveled off for the time being due to a scorching September and October so far and a complete lack of corn drying demand.  In addition, exports are finally showing signs of weakness as cost is deterring petro-chem purchasing.  If these scenarios play out, propane prices could at least stabilize at current levels.  Supplies are still tight, but looking to be more manageable due to the previously discusses items.  The question remains on retail heating demand for this winter.  If we have major cold snaps this winter, I do believe that we could see some major price spikes higher.

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

Best regards,

Jon Crawford

Crude Prices Running With Momentum

Good morning,

Happy Friday.  Crude prices took a slight break mid-week due to a massive increase in crude oil inventory in the US.  But by end of the week, crude prices found much support from the continued global energy crunch.  Natural gas and coal prices continue to scream higher from lack of supply and fears of a cold winter.  The main driver comes from green energy projects in Europe and the UK not producing the anticipated outputs calculated going into winter.  The world crude producers are continuing to withhold lots of crude oil from the market in order to also keep prices high.  Many oil producers have a lot of revenue to make up from the losses in 2020.  The FED announced a possible tapering of bond buying in November.  However, even a stronger dollar is not weighing on energy prices.  I truly believe that energy commodities are in a momentum trade and will hold strong and even go higher until end of the year.  But it’s not all doom and gloom.  There is a strong scenario on the table predicting that crude prices will start to unwind fairly quickly in Q1-Q2 of next year and fall steady from that point.  For now, I believe there will be short-term inflationary pain on crude prices trickling down through natural gas, propane, gasoline, and diesel.

Retail prices for both gasoline and diesel continue to slowly creep higher.  Gasoline retail prices are averaging over $3/gallon and diesel retail is nearing $3.49/gallon.  As I have been writing for sometime, I believe your pocketbook is going to get a lot lighter fueling up for the next 3-5 months.

Propane prices finally took a breather at current rates.  Retail prices are holding over $2/gallon but seem to be in a slight holding pattern now that petro-chem companies are cancelling shipments of propane due to cost.  In addition, the lack-luster corn drying season and hot weather is helping to keep propane prices from really taking off.  I see that colder weather is in the forecast so demand will start to pick up going into November.  The Midwest is in decent shape for propane inventories.  Overall supplies are short, but the Midwest seems to be in better shape than some areas.  I expect a continued bumpy ride and higher prices on propane for the remainder of the season.

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

Best regards,

Jon Crawford

Energy Prices Holding Firm

Good morning,

Energy prices are holding firm to end the week.  The FED announced this week that regardless of tapering or raising rates, inflation is going to persist into 2022 because of supply bottlenecks.  The domino effects of these supply constraints are supporting energy prices.  In addition, there is a huge supply crunch on fossil fuel energy due to Europe’s and UK’s miscalculations of green energy production.  They have fallen short on their green production and are in need of more fossil fuels.  And the purchases just can’t be fulfilled quick enough.  Although China is shutting down parts of their economy due to record high coal prices, some supply might be able to shift.  But these types of moves take months to sort themselves out.  Also, equities are starting to spook some investors and there is a lot of chatter saying to throw your money into energy for a quick return on your money in Q4 and possibly Q1 of 2022.  Therefore we have speculation money supporting crude prices as well.  Unfortunately, I am bullish on crude prices until the end of the year.  I just don’t see a situation where enough cards can can fall fast enough to drag down crude prices.  I do believe that there is downside risk in 2022.   I do not see these high prices persisting all the way through 2022.

Local retail prices on gasoline hold near $3/gallon and diesel retail has well surpassed $3/gallon.  Unfortunately with well supported crude prices as previously discussed, I believe these prices over $3/gallon are here to stay for some time.

Propane prices continued to gain momentum based on record low inventories going into the heating season coupled with a major fire in Canada.  Propane prices in September are at an all-time record high.  One can only hope that crude prices stabilize and the damage of index price spikes are mitigated to pockets here and there throughout winter.  Unfortunately, propane prices are going to be high this year.  Like crude oil, I am hopeful that supply and demand economics going into spring of 2022 will balance out bring some price relief for next heating season.  In the meantime, it’s not too late to lock in your heating cost for the upcoming season.

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

Best regards,

Jon Crawford

Continuing To Hold Steady

Good afternoon,

This week was another wild ride in the energy markets.  We started the week with a nice selloff due to profit taking and the US Government shutdown looming.  However, prices soared back with a bullish national inventory report.  I really thought the FED announcement yesterday of possible rate increases next year would pop the dollar and cool off WTI crude prices, but it did not.  Instead, oil producers are starting to say that these higher prices are “green premiums” due to possible demand erosion from alternative energy investments.  Lots of posturing, confusion, and caution in the marketplace.  We are definitely starting to see market conditions behave in the opposite historic and sometimes correct action.  When the wobble and opposition to factual supply and demand economics enter a market, look out!  It’s anyone’s guess going into October!

In local retail news, gasoline prices finally saw some summer premium pricing come off as higher RVP winter gasoline is entering the market.  Retail prices on gasoline have been falling and broke away from diesel.  Diesel cost continues to hold steady.  With incredible diesel demand hitting the Midwest with harvest, I do not expect to see much change in diesel prices.

Propane prices continue to hold strong.  We are now officially at the lowest level in national inventory going into winter over the past ten years.  Supplies are extremely tight, production is steady, but exports are very strong.  We can get through winter without too many hiccups as long as corn drying demand is low and the winter is mild.  If either of these two factors throw us a curve ball, hold on to your seatbelts.  Propane could skyrocket higher.  Although prices have gone up and are looking to stay higher, you can still lock in your price for the coming heating season if you have not done so.

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

Best regards,

Jon Crawford

WTI Holding Above $70/Barrel

Good morning,

WTI Crude prices rocketed above $70/barrel this week on news of better than expected retail sales, decreasing jobless claims, and huge draws in crude oil supplies.  The US continues to rebound from the hurricanes down south, but production is looking to return to normal capacity very soon.  Depending on how Covid continues into the winter, crude oil prices are primed to be supported.  Until the US gets into full crude oil production and harvest is completed, prices are probably going to hold higher.  We will wait and see how the Delta variant moves throughout the world this fall and whether the Fed starts to slow down on their bond repurchases.

In local retail news, the cost of gasoline and diesel has gone up.  We expect to see prices at the pump remain near current levels.

Propane prices continue to go higher.  Contract and delivery prices continue to go up as we enter the heating season with record low inventories.  I can only believe at this point that prices will hold and maybe even go higher.  Europe is in terrible shape for propane supplies as well, and China bought extra propane exports fearing a price shock.  So right now we are seeing low propane supplies in Europe and the US going into peak demand season, even though we have record production.  The only way supplies will increase is if the price gets so high at the US export hubs, that Europe and others will be forced to purchase from others.  I would also like to piggy-back and let everyone know that natural gas supplies are in terrible shape as well in both the US and Europe.  Natural gas prices have doubled and they are primed to double again.  The scenario reminds me of 2007 and 2008 when natural gas heating bill could be well over $300/month on an average home.  I believe all heating commodities are going to be extremely high priced until increased supplies or warm weather curb the fears that are real.  It is not too late to lock in your propane price for the season.

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

Best regards,

Jon Crawford

Wait And See

Good morning!

I hope this message finds you well.  Crude prices held just under $70/barrel this week as the world waits to see how Covid-19 and the variants play out going into the fall.  Saudi Arabia announced deep discounts for October signaling weak demand, but then Europe and the US released info showing signs of stabilization in the Delta surge.  In addition, the Fed is signaling a slowing of bond repurchases and many other world banks are slowing bond repurchases.  South Korea even raised interest rates.  In America, 80% of Gulf oil production is still shuddered from Hurricane Ida but slowly coming back online.  But the weekly inventory report still showed strong exports.  And although the job market is looking primed to finally improve, consumer index pricing increased the largest ever at 8.5%!  Basically, a lot of bullish and bearish news for crude price direction.  I think with summer demand winding down but possible economic conditions improving in the US, many traders are going to wait and see.  Also, harvest is starting to kick in so many eyes will be watching crops in the coming weeks.

In local retail news, prices for gasoline and diesel have eased a little bit post Labor Day weekend as expected.  I believe most retail prices will be holding for a bit as well.

Propane prices continue to go up as national inventories are just not building.  The country is going to be short on propane and prices are going to remain high.  If corn drying demand is weak and temperatures stay warm, we could maybe see some price relief.  However, if we have any sort of cold snaps and demand bumps, propane prices could really blow out higher this season, well above $2/gallon.  If you have not done so, you can still contract and lock-in your heating price for the season.

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

Best regards,

Jon Crawford

Happy Labor Day!

Good afternoon!

Instead of a dismal update on prices continuing to go up, let’s just take a break and enjoy the last weekend of summer!  I hope everyone has a safe and fun Labor Day weekend!  We can get back to the world of commodity pricing and the state of affairs next week.  🙂

Thank you again for your business, and if you have any questions, comments, or concerns, please feel free to reach out!

Best regards,

Jon Crawford – Pres

And Just Like That…. WTI Back Near $70

Good morning,

What a difference a week makes.  Crude prices rebounded very strongly this week.  The dollar started losing strength as investors looked to the FED to unwind the easing programs.  Crude inventories showed a larger than anticipated draw on Wednesday.  China announced a reopening of their economy with a call for increased crude imports.  The exit from Afghanistan is causing unrest in the Middle East.  And the delta variant looks to be peaking for the majority of the United States.  All of these issues combined gave an enormous tailwind to the crude trade and pushed prices much higher.  In technical trading, WTI displayed what we call a “Golden Cross”.  A golden cross occurs when an asset’s shorter-term moving average crosses above its longer-term moving average.  A golden cross has only happened twice in the past twenty years, and both times prices rebounded 20-50%.  Therefore, there is a lot of chatter that crude prices could breakout for the end of year.

In local retail news, Chicago refineries are showing problems with upcoming fall maintenance season.  Differentials for gasoline and diesel prices jumped nearly 20 cents per gallon!  Therefore, I do not see much price relief at the retail level through Labor Day weekend.

Propane prices continue to hold firm.  As I have been writing for months, this year is the outlier in the past ten years.  Every ten years, there is always one year where price goes up in the summer.  Unfortunately, the US continues to export record levels of propane to China.  China is expanding their petrochemical businesses as their economy reopens.  Although I believe corn drying will be less than expected, national inventories will be tight going into winter.  I am not concerned about running out of propane, but logistics in moving propane to the correct areas of the county will be choppy.  I expect a bumpy ride with prices this winter if we experience any “polar vortex” or any prolonged colder than average temperatures.  We are still locking in heating contracts for the season and doing summer fills before the cooler temps begin.

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

Best regards,

Jon Crawford