Speculation Is Driving The Bus

Good morning!

Happy cold Friday!  WTI crude oil prices pushed up through $80/barrel briefly today before retreating on a terrible December jobs report.  There is a push/pull relationship going on in the crude oil trade right now.  The facts are that the FED is going to raise interest rates, OPEC+ is continuing on path to increase production, the US is going to increase oil production, Omicron is causing a ton of uncertainty, and Libya is facing some hurdles with pipelines being shut down.  On the speculation side of the trade, many are believing that inflation is going to still outpace any increase in interest rates in 2022.  Others believe that the push to “green” energy is forcing oil companies to raise prices as they diminish investments in crude exploration.  And even more traders are believing there is going to be a supply shock to the system in 2022.  I have watched many economic scenarios play out since the Great Recession.  Although I have never watched a world pandemic play out, many of the pieces are still the same.  The trade on crude oil is being caught up in news headlines and heavy speculation based on long-term bet positioning.  I am not betting on $100 WTI crude prices, especially in a key election year.  I believe that many oil companies have slashed “exploration budgets” because they were over-levered to begin with.  Developing deep-water wells is much more expensive and dangerous than maximizing crude oil harvesting on land.  I also don’t believe that jet fuel consumption is ever going back to pre-pandemic levels.  World business has forever changed.  Companies are experiencing the savings of not needing everything to be in person all the time.  Travel for work is never going to be at the same level.  I also know that many in OPEC invested billions in crude exporting equipment and will need a return on investment.  I see too many hands trying to get in the cookie car by mid-year 2022.  I think the “hype” of the trade will keep prices higher in Q1 and Q2.  But I think crude prices are ripe for a correction going into the second half of the year.  Even if Omicron becomes that last major variant in the pandemic, I don’t see where demand is going to outstrip supply that is coming online throughout the year.  Patience and cooler heads are going to win this year on the crude oil trade.

In local news, retail prices for gasoline and diesel are slowing climbing higher again.  I expect to see these prices hold and possibly go higher in the coming week.  Also, with the extreme cold, many stations have blended their diesel fuel with more winter components so I expect retail diesel prices to move higher.

Propane prices have leveled off as we move into the heart of winter.  Although demand will skyrocket back in the coming weeks, supplies are in better shape.  However, any Polar Vortex lasting longer than five days will strain the system and push prices higher faster.  For now, please make sure to keep an eye on your tank if you are a will-call customer and call in at a minimum of 25%.  We are very busy and we want to make sure we can efficiently and safely take care of all our customers.

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

Best regards,

Jon Crawford

HERE’S TO 2022!!!

Good morning!

I wanted to take a quick moment and thank everyone again for their support through a difficult year in 2021.  I am optimistic for 2022 and hopefully you are too!  Although crude oil prices are ending the year at almost all-time highs for 2021, I am seeing headwinds on the horizon.  I do not believe we will be at these prices come this time next year.  The US is locked-and-loaded to increase production right out of the gate starting in 2022.  There are economic headwinds starting the year in China.  And OPEC’s relationship with Russia will be put to the test as Russia flexes its’ muscle on the geopolitical world stage.  Overall, demand for jet fuel will increase, but demand for crude has been steady.  Consumers had plenty of money in their pockets to keep the demand train moving forward the past year.  As COVID-19 becomes less dominant in the news, the amount of demand increase will not be the shock that many are predicting.  The only increase could be in jet fuel, but even jet fuel will not bounce back to pre-COVID times as many businesses have permanently pivoted to more efficient models of operation.  As propane continues to be a highly exported commodity in the US, unless crude prices tumble below $50/barrel, I don’t see propane retail prices going under $1/gallon anytime soon.  Propane price as a percentage to crude will probably continue to operate in average to higher-than-average ranges until production starts to really overtake exports again.  So until then, propane retail prices will probably remain in the 10-15 year averages of over $1/gal but under $2/gal.  Although we all enjoy propane prices under $1/gal, the averages predicted are still good value in today’s economy.

But just as COVID-19 was unpredictable, commodity prices are nearly impossible to predict.  My 20k foot prediction for commodity prices in 2022 is based on as much current information and historical data I can synthesize.  Regardless of what crude prices do in 2022, I hope that COVID-19 moves toward the rearview mirror and we start to look forward to more peace and calm in our daily lives.

Thank you again for your business in 2021 and we look forward to providing you with more guidance and great customer service in 2022.  Happy New Year!

Best regards,

Jon Crawford

Merry Christmas and Happy New Year!

Good morning!

I just wanted to take a quick moment and wish everyone a safe and enjoyable time with family and friends over the coming week.  Thank you so much to all our customers for their loyalty and patience through a tough year in 2021.  Hopefully 2022 brings some much needed relief to everyone.  Merry Christmas and a Happy New Year!

Best regards,

Jon Crawford

Crude Confusion For Christmas?

Good morning!

Happy Friday!  WTI crude prices shot up through $70/barrel on the hype of continued increased world demand.  In addition, Saudi Arabia announced price increases for shipments starting in January.  However, the news also gives further support to the continued increased production from the US and OPEC+ going into 2022.  The FED continues to push for rate increases in 2022 and inflation data is off the charts!  I am still sitting on the sidelines waiting for the end of the year to pass.  Markets can behave irrationally, and I am seeing some irrationality taking hold into year end.  Besides the current economic facts surrounding crude oil, I am watching some of the smartest people sell their stocks.  Elon Musk, Jeff Bezos, and Chamath Palihapitiya are all clearing positions going into the the year end.  If a market correction happens, crude prices will sink as well.  I can also see world oil supply going into surplus in Q1 of 2022.  Therefore, in the meantime I am keeping Pepto-Bismol handy and hoping for some entry positions on futures buying to open up the first part of next year.

In local news, gasoline and diesel retail prices have stabilized.  There was a quick sell-off on pricing in the market, but Chicago quickly recovered due to some refinery issues in Toledo, OH.  As crude prices recovered, we are now stable in the market at current retail prices.

Propane prices have stabilized as well with crude oil, but I think propane is oversold.  Propane prices coupled with crude oil on the news of warmer weather.  Yes, propane supplies are getting better, but any sort of cold snap is prime for a whip-saw higher on propane prices.  Propane price has been de-coupled from crude price all year, so am skeptical on the current congruent movement.  For now, customer that didn’t contract at higher prices are getting a little relief, but I don’t see propane prices holding at current levels long-term.  There is too much winter left in the season.  As a reminder, please make sure your driveway is plowed and salted if necessary, and there is a clear path to your tank to receive your propane delivery.  The snow will be here before we know it!

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

Best regards,

Jon Crawford

New Holding Pattern For Crude Prices?

Good morning,

After an epic collapse in crude prices on Black Friday, the energy markets seem to be carving out their new ceiling and floor.  For now, WTI seems to be carving out a floor of around $64/barrel and a ceiling of $69/barrel.  The difference in price from last week seems to be the profit taking of hedge funds and a bit of skepticism on the world recovery due to the introduction of the omicron variant.  OPEC+ met this week and is still planning on increasing production in January.  In addition, US oil firms have said they will be moving more rigs online starting in Q1 of 2022.  Therefore, crude supplies are looking to be very robust in Q1 of 2022.  The US jobs report was less than stellar for November and the FED is talking more and more about raising rates.  I believe this week was a rebalancing act and crude price are currently sitting in the middle of a larger potential range.  The range is as much as $15/barrel in my opinion!  So at the current price of $69/barrel, the low end potential is $55/barrel and the high end potential is $84/barrel!  Volatility is EXTREMELY high right now with crude prices!

In local news, the large drop in crude prices is making its way into the retail supply chain.  Gasoline retail prices are falling below $3/gallon, and diesel prices have eased around 10 cpg.  Diesel prices are supported at a higher rate due to some supply issues in Chicago, but once the issues are resolved, I could see diesel retail prices falling further.

Propane prices have fallen due to lack of demand going into December.  Our board price has fallen again this week and I am shocked at how over-sold propane is.  Any sort of demand bump is going to firm up propane prices quickly, so beware.  I don’t believe this mid-winter price relief is going to last long-term through 2022.  I remember about four years ago I put up my Christmas lights in December in shorts and a t-shirt, then in Jan/Feb we had -30 degree wind chills!  But for now, prices will be lower.

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

Best regards,

Jon Crawford

Happy Thanksgiving!

Good morning!

I hope everyone had an enjoyable Thanksgiving Day!  Since the markets trade on low volume this week due to the holiday, much of the movements will not be realized until the start of next week.  As of now, the profit taking for the year is starting to take shape due to the emergence of a 10x mutated variant of Sars-Cov-2 compared to the Delta variant.  The world is taking notice.  Although the worst case scenario would be a significant step back, we would not be going back to ground zero.  However, the news was enough for traders to lock in the profits for the year that I’ve been talking about.  Even if the news on the variant comes back as positive in the coming weeks, I don’t expect crude prices to take off.  I think the news today was enough to pull a lot of hedge fund firms out of the crude trade, lock in gains, pay taxes at known rates, and move on.  The one event of the week that is affecting crude prices positively is the announcement of the Strategic Petroleum Reserve.  The SPR has only been used three times in our history to deal with global issues:  Persian Gulf War, Hurricane Katrina, and the civil war in Libya.  The previously mentioned events were a huge shock to the global supply chain.  The situation were are currently experiencing is not a supply shortage.  Producers are choosing to withhold product.  The SPR release announcement caused crude prices to trade HIGHER because of the inaccuracy of the need for the deployment.  The amount of SPR coordinated release changes nothing in the grand picture of global supply.  Either the world increases production or not.  There are not enough global reserves to dramatically tip the scales.  Next week is going to be very interesting to watch!

I do expect to see some relief on pump prices in the coming week.  How much is to be determined by how deep and how long the selloff runs.  

Propane price have lost a little strength over the past week.  Our retail price went down for the first time in six months.  I don’t expect to see prices drop too much as we go into the volatile portion of winter.  We escaped supply disaster due to low corn drying demand, but we are not out of the woods.  Periodic price spikes are continuing to lurk in the background.  In other words, I’m taking the recent downward price movement lightly.

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

Best regards,

Jon Crawford

Crude Trade Starting To Collapse?

Happy Friday!

As I have been writing for the past months, the crude oil trade is going to be very choppy until the end of the year.  All components of the trade were in place to keep prices high until the end of the year.  But since there is a massive profit to be gained at these current crude price levels, any strategies to push prices lower could trigger a quick sell to lock in gains for the year.  The foundation of the crude oil trade is based on OPEC+ continuing to withhold crude from the market.  In addition, Saudi Arabia raised their export prices for the end of the year.  I think the act of raising prices further, was a bit too greedy.  This week, Occidental Petroleum, the largest shale oil producer in the US said they would be willing to increase production to help lower prices.  They also said their strategy is to start coming back online fast in 2022.  The actions prompted the International Energy Agency to call a crude surplus in the marketplace starting in Q1 2022.  The announcements set off a selling frenzy as traders tried to lock in record gains in 2021.  OPEC responded by pleading with others that the strategy is working and to hold the course.  But then today, the Biden Administration is looking to work with allies to all release Strategic Petroleum Reserves and flood the market with oil.  The event would cause a crash in price.  And in addition to the US and their allies, China joined the party too, saying that because of rising prices and OPEC’s decision to cease offering discounts on their exports, China would also tap their Strategic Petroleum Reserve.  Crude oil prices are looking to close the week below $80/barrel for the first time in a while.  Could the end of year rally and 2021 crude trade finally be collapsing?  Possibly…. If the US, allies, and China keep their word and flood the market, $70 and below will be the target for WTI moving forward.  The move would be a welcomed inflationary relief going into the holidays.

In local retail news, prices are slowly unwinding from the highs.  However, I do not expect to see diesel prices at the pump drop too much since we are entering into colder weather and the cost of blending diesel with additives and #1 Diesel is entering into the marketplace.

Propane cost is slowly unwinding but with the winter contract cost differentials and lack of demand, I do not see retail prices dropping very quickly.  There will be caution going into the next few months with colder weather on the horizon.  However, the good news is that I do not see propane retail prices going any higher anytime soon.

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

Best regards,

Jon Crawford

Crude Oil Prices: The Wild Ride Continues

Good morning!

Happy Friday!  Colder weather is starting to set in and there was even some snow/mix this morning.  Hard to believe that winter is almost here!  Anyways, crude prices took a wild bumpy ride again this week.  The COP26 concluded this week with not much changed except a wanting to get off of fossil fuels.  However, the conference sparked backlash from Saudi Arabia and others.  The US and other nations have called for the ending of fossil fuel production, yet demanded Saudi Arabia and others in OPEC to pump more oil to bring prices down.  Saudi Arabia responded by saying that since the world wants less fossil fuels, they might pump less fuel and allow the world to experience the pain of high prices.  Saudi Arabia believes the world is not ready for a full transition to alternative energy and they are not going to be bossed around, especially from the US, as we continue to withhold our own oil production from the market.  In addition, Saudi Arabia raised their prices for December and January shipments just to prove a point.  Then, inflationary data for the US came out at the highest in 30 years and the API reported draws in national crude oil inventory.  By Wednesday, crude oil prices were touching on the highest prices for the year.  On Wednesday, the EIA instead showed a build in crude oil inventory and the Biden administration, along with the FED, decided that maybe it’s time to do something about inflation.  The coupled news sent the Dollar much higher and crude prices tanking.  In addition to the bearish sentiments, COVID seems to be coming back for one last major stand in the US and Europe, and China started cutting crude imports due to higher prices.  At one point, WTI dipped below $80/barrel again after being at $85/barrel earlier in the week!  As I’ve been writing, the crude trade is going to be wild going into the end of the year and whether or not traders are going to ring the register on a 70% gain for the year.

In local news, gasoline and diesel prices have remained fairly steady as the market continues to go back and forth every day.  There is not really a directional movement carved out.  I’m expected to see prices remain around the same for the coming week.

Propane prices have continued to stay in check.  As winter approaches and winter price indexes hit the market, I don’t expect too much movement on price for the time being.  We have not moved price at retail for almost a month and I welcome the news considering prices went up over 50 cents/gal since July!  So now we just need to wait and see how hard mother nature hits us this winter.  I am cautiously optimistic going into the winter.  If the FED raises rates sooner and we get a leg-down movement in crude prices, propane prices could stay in check.

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

Best regards,

Jon Crawford

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