Wishing A Safe And Enjoyable Memorial Day Weekend

Good afternoon,

I would like to take a moment and wish everyone a safe and enjoyable Memorial Day weekend.  I know many of us will be traveling and enjoying activities for the first time in a very long time.  But please take a moment and reflect on all the service men and women who have given the ultimate sacrifice of their very own lives defending our country and our freedoms which allow us the opportunity to enjoy an extended weekend.

I will keep my update short and just say that prices are going up.  From crude oil to propane, prices continue to rise.  All eyes and ears will be on OPEC+’s meeting in June.  Until then, keep your wallet handy while purchasing gasoline, diesel, and propane.

Have a great weekend and I will touch base more next week.

Best regards,

Jon Crawford

The Gasoline Shortage That Wasn’t

Good morning,

The big news this week was the hacking of the Colonial Pipeline in South Eastern USA.  The ransomware attack shut down the largest distribution pipeline causing massive panic buying fueled by constant media reports and disinformation.  I shook my head as gas stations all over the East Coast started to run out of fuel.  In addition, the misinformation caused panic buying in states that are not even supplied by Colonial.  Down in southern Florida, stations started to run out of fuel and even in Wisconsin, lines formed at the pump to panic buy based on fears of price spikes and supply problems.  The truth is that there was never any spike in cash price markets in the Gulf Coast or New York Harbor.  In fact, a gallon of base price gasoline continued to trade at a CHEAPER rate than the Chicago market!  Go figure…  So the media hype of the week made a potential supply problem into a disaster that could have been avoided with accurate reporting.  Colonial has reported that they were operating on “outdated Microsoft Windows” and decided to pay $5M in ransom for their information to be returned.  The information that was stolen contained which companies owned what products and the volumes there of throughout the entire pipeline.  Therefore, the information was very valuable.  Crude oil prices traded up this week on the news of the pipeline hack, along with Israel/Palestine conflict, and potential increased demand outweighing the disaster in India.  This week was a perfect example showing how the media can affect commodity prices and unfortunately business/consumers outside of the Colonial issue paid the price.

In local news, cost of product continues to slowly tick higher.  Retail prices of both gasoline and diesel are holding near $3/gallon and I don’t expect to see much relief until possibly after Memorial Day.

Propane prices also continue to be stubbornly higher than normal.  Although our country experienced a nice rebuilding in national inventory this week, prices continue to hold firm with crude’s movement and high rates of exports.  I’m not quite sure we are going to see much lower prices until possibly later into end of summer or early fall based on inventory levels and potential corn drying demand.

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

Best regards,

Jon Crawford

Crude Trying To Push Through A Psychological Barrier

Good morning,

Despite rising production in the US and OPEC+, a lackluster US jobs report, and an absolute disaster in India, traders continue to try and push WTI prices through the psychological and technical barrier of $65/barrier.  If WTI is able to hold gains above $65/barrel, then traders are going to try and go to $70/barrel.  The issue with the continued push higher is that gasoline and diesel retail prices will hold steady above $3/gallon.  Once retail hits these prices, many organizations, producers, and countries take notice.  I am still under the impression that major investment firms took long positions on crude contracts and need to push prices near $70/barrel before they can sell and regroup.  OPEC+ will be meeting again in June and I can’t imagine there will be any barriers to holding back production.  We are starting to see OPEC+ offer discounts on exports as well.  Another issue floating is the Fed interest rate.  Although Treasury Secretary Yellen is saying rates might need to bounce this year to cool things off, the Fed Chair Powell is saying “steady as she goes”.  At this point Powell has not even mentioned reducing the bond buying program.  So as long as we continue on this track, the strength of the dollar will be held down keeping crude prices higher.  But if India continues on their path and the US holds stagnate, eventually demand for crude will overtake the weaker dollar and cause commodities to fall in price.

In local retail news, I was wrong.  I did not expect to see diesel retail prices break $3/gallon, but they have and will continue to hold at this rate.  Gasoline retail prices are also inching closer to $3/gallon as well.  There does seem to be some exuberance in the air unwinding out of COVID and the school year.  We could possibly see the old fashioned run-up on prices to Memorial Day weekend, then sell-off in June.  Only time will tell.

Propane prices are holding firm.  Spot markets are not going any lower at the moment.  With colder weather hanging around, propane inventory building season is off to a slow start.  I am cautiously optimistic that prices will ease, but probably not until July.  I also do not expect next season’s contract pricing to be out until mid-July due to the longer heating season and current future’s pricing economics.

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

Best regards,

Jon Crawford

Pump Up The Jam

Good morning!

Crude prices continued to move higher this week with a small relief starting on Friday.  High hopes of economic recovery are fanning the flames of anticipated record demand.  Many investment banks and so-called “industry experts” are saying we will experience the largest demand increase in history over the coming months. Goldman Sachs continues to push their crude call-price higher and higher saying a 5M bpd increase is going to cause shortages and supply tensions.  In fact, the amount of “pumping up price” talk going on feels like when crypto annalists get on the airwaves to move the price of Bitcoin.  I like to take a step back and look at the big picture.  Yes, demand increases are coming.  We might even experience a 5M bpd increase.  However, there is almost 15M bpd crude production offline voluntarily between OPEC+ and the US!  In addition, Libya just released their hold on crude exports.  The US is looking to allow Iran to increase exports with transparency in exchange for a new nuclear resolution.  Russia and the US are starting to bicker and Russia is not afraid to play politics with their oil supply.  And at these high prices, OPEC countries could finally start to take advantage and make some money.  In addition to the crude markets being well positioned to increase production, refineries in the US still have an additional 10% of increased capacity to meet local demand!  And most refiners locked in crude prices at lower prices so there is nothing holding them back from refining crude!  In other words, the crude market is feeling very frothy with “pumping up price” stories.  I think we could see some higher prices until greed takes over and surplus production starts to enter the market.  But after 2020, who knows!  As always, this is just my theoretical analysis.  In the world of commodities, anything can happen.  🙂

In local retail news, gasoline and diesel prices continue to climb.  Diesel retail prices are getting very close to $3/gal.  In fact, I saw a few smaller markets with diesel prices over $3/gal.  Gasoline retail is holding near $2.74/gal in most markets.  I was quite surprised by the run up in price this week.  If the markets were truly being “pumped up” to cover a squeeze on future options, we could see some relief on pricing in May or June.

Propane prices have started to rise again in tandem with crude oil.  Propane supplies are tight as we start the rebuilding season, but not as bad as years past.  In addition, April has been much colder and May is not looking to start out much better.  The wild card compared to years past is high levels of exportation which we are watching closely.  I do not think that summer fill prices will get much lower than today’s prices.  With so much uncertainty in the propane market, I also do not expect to see next season’s contracts released until mid July.  For now, it’s all about being patient and waiting for the right opportunity.

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

Best regards,

Jon Crawford

STEADY AS SHE GOES

Good afternoon,

Well, the energy markets were fairly calm this week.  Not a lot of movement on crude prices or refined products.  Even though the US, China, and Europe are showing signs of strong recovery coupled with a somewhat tighter supplies, the massive outbreak in India is putting a tight cap on any upside movement.  And as the recoveries begin in some major parts of the world, the reality of the total crude barrels today being voluntarily removed from the market is starting to become a factor.  Although demand is returning with tighter supplies, over 10M barrels/day of crude production is being voluntarily withheld from the market.  As the appetite for crude increases, I have never seen producers remain disciplined for very long.  I am not seeing anything that would cause a massive selloff into the $40’s again, but I do think the talk of extended WTI pricing above $70/barrel is a bit wishful.

In local retail news, gasoline prices have remained higher near the $2.75/gal price point.  Diesel retail prices have remained under $3/gal except for a few larger truck stop chains.  I am hoping that we top out around these prices, otherwise the massive amount of savings from stimulus packages will end up in fuel tanks.

Propane is continuing it’s cautious moves into summer.  We are officially at the third lowest level of inventories over the past 10 years.  The major difference between now and then is exports.  Our export capacity is nearly double compared to other years of low inventories.  I am a bit cautious on whether or not propane supplies will be able build to a point of calm going into winter.  Because of the current supply conditions, allocations and multiple supply points will be vital for success.  I do not expect to see propane prices go much lower.  I am also not seeing much movement on futures pricing.  Unfortunately, I think propane prices for next winter will be near the prices of today.  Hopefully we can maintain prices under $1.50/gal which is usually a good bench mark for good value in comparison to other forms of energy.  More to come on this as we go through May and June.  Stay tuned!

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

Best regards,

Jon Crawford

Crude Prices Take A Jump Higher

Good morning,

The markets were fairly quiet and calm this week except for Wednesday.  On Wednesday, the EIA released their weekly inventory report and the drawdown on crude oil inventories was almost 6M barrels.  The report supported the statements from many shale oil producers saying there were going to hold off on pumping crude back into the market too quickly.  In addition, demand for gasoline and diesel fuel outside of jet fuel is starting to return.  Crude prices spiked over $2/gallon this week.  But, OPEC+ is slowly unwinding their cuts and I do think that eventually someone will blink.  China and India are increasing imports at a dramatic rate and all producers want a slice of that pie.  In addition, Iran and the US continue to try and negotiate a new nuclear deal that will allow Iran to export more oil with transparency.  So although we are experiencing this slight uptick in crude price, I don’t see the trend continuing too much higher.

In retail news, gasoline cost continues to go up, and retail prices continue to go down.  Therefore, I expect to see retail gasoline prices jump fast past $2.69/gallon at any moment.  Diesel retail prices have eased a bit, even though cost has increased.  But I don’t see diesel retail prices going over $3/gal anytime soon.

Propane prices continue their slow and cautious moves lower.  The cold snap in April will provide a bit of support for prices, but national inventories are slowly starting to rebuild.  We have a long ways to go to move our national inventory above the five-year average.  Therefore, I still see prices being higher than usual for summer.  I still believe that customers should consider taking delivery of any contract gallons left on account by 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

Crude Prices Trading in Narrow Range

Good morning,

Crude prices traded in a very narrow range this week.  Supplies are ample and demand is healthy in the largest economies, but the virus variants and targeted lockdowns in various countries are keeping any major price runup in check.  On the downside, a potential deal with the US and Iran is back on the table which would throw the crude markets into supply surplus.  The beginning of talks is putting downward pressure on crude prices, but not too much pressure as the negotiations with Iran are usually quite volatile and unpredictable.  For now, WTI crude price seems to be in a holding pattern around $59/barrel.  Jobless claims were a bit higher than expected and small business closures are climbing which is keeping American demand in check.  However, vaccinations are flowing at a record pace and a fourth wave seems like it will be targeted areas as opposed to widespread.  The crude market continues to be in a push-pull relationship with many economic issues, but the range of the swing has become much more narrow.

In local retail news, gasoline prices have eased a little from recent highs, but not much.  I don’t see gasoline retail prices falling below $2.49/gallon anytime soon based on current market conditions.  Diesel cost has also balanced out which will keep retail prices from breaching $3/gallon which is good for farming, construction, and shipping this spring.

Propane prices continue to slowly unwind but not as fast as some would like.  I am not expecting very cheap summer fill prices below $1.  I also know that next season’s heating contracts will be priced higher than this year.  I highly recommend that customers take delivery of any remaining contract gallons on their account.  If propane prices start to drop dramatically, I don’t see that possibly happening until at least August.  Stay tuned for more info as we wind down the heating season and approach allocation building season.

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

Best regards,

Jon Crawford

WTI Crude Price Holding Above $60/Barrel

Good morning,

I hope everyone has a safe and enjoyable Easter weekend.  Nice to see the Brewers start out their season with a come-from-behind win yesterday!  Markets are closed today due to Good Friday.  WTI Crude prices closed for the week above $60/barrel.  Many were surprised, including myself, because yesterday OPEC+ decided to start easing production cuts which usually causes a bit of softening.  But the anticipation of the strong jobs report and the drop in the value of the dollar supported much higher crude prices.  I have a feeling that inflation fears coupled with anticipated stronger demand will hold crude prices steady into summer.  I think we won’t get to a point of seeing potential oversupply in the market until after Fourth of July.  There is a chance that we could experience the backwardation of cheaper prices on the back half of summer.  But I think that would also mean that the fourth wave of COVID-19 in Europe would need to greatly accelerate, which would be bad in general.  For now, keep your wallet out.  Prices at the pump are going to hold.

Gasoline retail prices continue to climb going into spring.  I do not expect to see much relief on gasoline prices in the near term.  Diesel retail prices have eased a bit but stabilized.  I feel that diesel retail prices will hold under $3/gallon for the next couple of weeks.

Propane prices are starting to stabilize.  Retail prices have unwound a little bit, but I do not see any downward pressure on propane prices until national inventory levels start to build.  We are very low on national inventory.  Production is strong so rebuilding can begin in April.  But the rate of rebuild will be watched very closely.  We are not out of the woods yet.  So for now, if you have last season’s contract gallons remaining on your account that expire in April, I recommend that you take delivery of those gallons if you have the storage capacity.

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

Best regards,

Jon Crawford

Crude Stuck In a Yo-Yo Motion

Good afternoon,

Crude prices have been on a yo-yo ride all week.  The price moves have been dramatic.  The motion is being blamed mostly on the ship stuck in the Suez Canal.  The canal allows the movement of many commodities, including crude oil and refined products.  In addition, so many other goods that were behind on shipment are now even further behind.  Crude oil moved $2/barrel-plus per day back and forth all week!  I have not seen such volatile yo-yo motion in quite some time.  Couple the Suez Canal event with lockdowns in Europe, a stronger dollar, supplies building again in the US, a talk of a carbon tax, decrease in unemployment, a rocket attack in Saudi Arabia, and North Korea firing a couple of ballistic missiles for a cherry on top, and we made for one heck of a week in news for crude oil!  And I’m sure I’m missing even more events.  Honestly, I think traders are trying to figure out if a retreat from $60/barrel WTI is real or not.  I don’t think the swings will calm down until the ship is moved in the canal.  For now, buckle your seat belt and keep your helmet on!

Retail cost of gasoline and diesel experienced extremely volatile moves all week.  In addition to the market news, in production news, Chicago moved the forward price curve on RVP causing the cost of gasoline to jump 10 cents in one day as opposed to going down 7 cents according to the spot market.  Therefore, I do not expect to see retail gasoline prices ease in the coming weeks.  Diesel cost has eased a little and I could see retail prices now holding below $3/gallon.

Propane prices continue to slowly unwind but are holding on tightly until the expiration of the March contract.  I was pleased to see an increase in inventory levels this past week.  I hope the country continues to build inventory going into the summer.  If so, we have a shot at some more attractive summer fill rates.  For now, I am still advising customers to use up their remaining contract gallons by the end of April just to be safe.

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

Best regards,

Jon Crawford

Crude Correction, the FED, and Lockdowns

Good morning,

Crude oil prices have dropped for five straight days.  Yesterday WTI crude dropped 7%.  The last time crude prices dropped that much was in September of 2020 and the third wave of COVID was starting in the US.  Crude prices are coming under pressure as the FED manages the US monetary policy.  Bond markets are heating up and some traders are liquidating long crude positions and buying into bonds.  In addition, Europe halted their vaccinations with AstraZeneca and starting lockdowns in various cities.  Crude prices have been very frothy and we have been waiting for something to break the cycle.  Well, the cycle has been broken and now many traders are frantically trying to “talk up” crude to cover short positions.  The correction might be a good buying opportunity for future positions, but I don’t know if the correction is over yet.

In a surprise move, gasoline and diesel retail prices might ease a bit in the coming week due to the drop in cost.  Although margins were slim at these higher prices, I believe you might see some cheaper prices at the pump next week.

Propane prices are continuing to slowly unwind from the back-t0-back short squeezes on the market and the effects from the Texas Deep Freeze.  I do not expect to see propane summer fills below $1/gallon, but we could get close.  For now, if you still have contract gallons remaining on your account, I recommend using them up and waiting to see if prices are down towards the end of August.  Inventories of propane are still 15% below the five year average so we won’t know until at least August if we are out of the woods on supply issues going into next season.

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

Best regards,

Jon Crawford