Demand Erosion In The Lead

Good morning,

Despite continued tensions with Iran, demand erosion is winning on directing prices of crude oil.  WTI crude fell from over $60/barrel posting last week to now just over $55/barrel.  China has posted terrible economic data.  But we always need to remember that those numbers are not always trustworthy.  In addition, oil tankers from West Africa have been found in the ocean without a home.  In other words, buying is starting to slow down, even though OPEC+ has taken 1.2M barrels/day off the table.  If world demand truly slows down, then we might see crude prices drop another $5/barrel!  I am absolutely stunned at the lack of interest in traders biting on geopolitical issues right now.  With all the turmoil surrounding Iran, the data must be very convincing showing as long as the US continues to pump at current levels and world demand continues to decline, the oil market will move into surplus again, even with all the current OPEC+ cuts in place!  The next six months are going to be very interesting to watch.  If WTI crude breaks through $54/barrel, then we have a shot at seeing the floor fall out back down to $49/barrel.

In local retail news, gasoline and diesel prices have peaked following the landfall of hurricane Barry.  All oil fields have restarted and prices relaxed.  For now, I think we have experienced the highs for the month of July.

Propane prices continue to remain very low.  Propane continues to trade with crude oil, so if crude prices stay low and propane production stays strong, we should have robust inventories for the winter.  However, because propane prices have now fallen into competitive spreads against natural gas, petrochemical companies are starting to bite on stored propane in the south.  If crude prices stay low, I could see petrochemical companies taking a huge chunk out of inventories in the coming six months.  In addition, if corn drying demand is strong, we could see a further draw on inventories.  I do not believe that we will see major price spikes by Thanksgiving, but if the winter is very cold, we could start to see prices spike after Christmas into 2020.  If you have not filled your propane tank this summer, please do so!  Contracts for next heating season are also available.

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

Best regards,

Jon Crawford

Crude Prices Taking Pause

Good afternoon,

After another run up on WTI price this week, the rally has taken pause to wait on the results of the G-20 meeting this weekend and OPEC next week.  WTI has reached $59/barrel after a massive draw down in crude supplies here in the US.  In addition, most traders are expected to see OPEC continue with supply cuts.  The US announced that China has agreed to terms on a trade deal and the details will be released soon.  All of this news is holding WTI at current levels.  For now, markets are taking pause and a “wait and see” approach is currently in place.

Local gasoline prices have continued to rise and will probably continue into the week of the 4th.  Diesel prices have climbed as well.  Prices at the pump will hold until the world meetings next week are completed.

Propane prices are continuing to stay low!  Please contact us now for a summer fill.  Also, contract prices for next heating season will be released next week.

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

Best regards,

Jon Crawford – Pres.

Crude Prices Skyrocketing

Good morning,

I hope everyone had a great week.  Unfortunately, two major events happened this week that caused the price of crude oil to skyrocket.  Iran shot down a US drone plane on Thursday.  The response from Trump went from anywhere including retaliation to maybe it was just a mistake from someone in Iran.  The geopolitical tensions between the two countries put the risk premium on full alert and traders bought in.  The other main event was the FED announcement that rate decreases are back on the table.  A rate decrease devalues the US Dollar and increases the price of crude.  On the supply/demand side, crude stocks decreased over the past week more than expected and a refinery in Philadelphia suffered a large explosion forcing a shutdown.  The refinery in Philadelphia is the largest on the East Coast and puts tremendous pressure on other East Coast refineries to fill the gap because no products from the robust Midwest have direct pipeline access to the East Coast.  Hopefully supplies from the South will be able to be shipped, but it takes time.  For now, we will wait and see.  But the geopolitical and FED announcement just moved the floor on WTI to $55/barrel and put a stop to falling prices at the pump.

In local retail news, I would not expect to see the price of gasoline fall below $2.49/gallon at the pump.  I also think diesel prices will stay in the $2.79/gallon range.  With what happened this week, the sell off on refined products came to a screeching halt.

Although crude prices have risen dramatically, propane prices have only risen a bit.  We are still at the lowest retail price in five years and we recommend everyone filling their tanks now.  With a record amount of propane in inventory, spot prices will continue to be very low compared to forwards contracts.  Once the glut starts to decrease, we will see spot prices rise.  I expect that to happen in October, as we prepare for a potential record breaking corn drying year.  Contracts for next season will be released in the next week or so.  Stay tuned 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

Prices Continue to Collapse

Good afternoon,
 
I hope everyone is enjoying their Friday and looking forward to the weekend. WTI Crude prices have continued to skip along the $50/barrel floor. The slowing world economies and the continued ramp up in the China / US trade war has most speculators spooked on the potential for crude prices to break out higher. In fact, many traders believe that even an OPEC cut is already priced in. Basically, traders are saying that no matter what, the slowing economy is the most damaging issue affecting crude prices. The one potential for a spike in price that is always hanging around is a geopolitical event. And just like that, on Thursday two ships in the Middle East were attacked. Crude prices soared to start the day but reversed course to settle up not even 3%. The IEA and world economists believe that production is far outweighing demand if the economies across the world continue to slow. The US inventories of crude, gasoline, and diesel experienced more builds this week. In addition, jobless claims were higher than expected on the National Jobs Report. For now, you can sit back and watch the prices at the pump continue to fall. But look out. If someone does something to escalate the situation in the Middle East and traders believe that a “risk premium” is back on, crude prices could jump $10-15/barrel in a blink of an eye.
 
In local retail news, retail prices on gasoline and diesel continue to drop. I expect to see prices continuing their downward trajectory until something changes on the world stage.
 
Propane retail prices dropped again this week! The prices of propane are unbelievable. As we sit, propane storage inventories in the US have the chance of breaking the 100M barrel mark, which has only happened three times in history! That being said, if the winter is warmer and the crop yields are low, we will be swimming in cheap propane for the entire year! For now, it’s a game of guessing “how low will propane go?” And no one knows! Please call for a summer fill. These prices are too good to pass up. We will send out next season’s contract information closer to the 4th of July.
 
As always, if you have any questions, comments, or concerns, please feel free to give us a call!
 
Best regards,
 
Jon Crawford

Bottom Forming in the Crude Market?

Good morning,

Well, the price floor carved out last week on WTI gave way under the announcement for tariffs in Mexico, coupled with a dramatic increase in US crude inventories this week.  Much of the increase in inventories is being blamed on demand erosion in the Midwest from flooding.  Farmers are almost 50% behind in most parts of the Midwest which greatly affects demand.  Others are chatting that the EIA has reported false inventory numbers.  Regardless, WTI Crude broke through the $52/barrel technical mark and fell to $50/barrel for a brief moment.  The massive dive in crude prices has caused OPEC to up the talk around extending or increasing production cuts through the end of 2019.  In addition, the trade war with China continues to spook traders on potential economic erosion in China and possible recession in the US.  So then the FED announced this week that potentially a rate cut is on the table.  The chatter from OPEC as well as discussion of a FED rate decrease is putting upward pressure on crude prices and possibly carving out a floor for now.  I do believe that we have experienced a bottom in prices until the OPEC meeting on June 26th and 27th.  So for now, sit back and watch as prices at the pump slowly come down!

In local retail news, gasoline and diesel prices are starting to slowly come down.  I expect to see the downward trend continue into next week.

Propane prices have also stayed very, very low.  We are now at the lowest price in almost five years.  I recommend that everyone fill their tanks as soon as they can to take advantage of the current market condition.  Contracts for next season will be out the first part of the July and will be lower priced than last year!  It’s always nice when we can announce good news. 🙂

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

Best regards,

Jon Crawford

Crude Prices Become a Falling Knife

Good afternoon,

Well, May officially became the worst performing month for WTI and Brent in the last six months.  Not only did the China trade war heat up to a new level this past week, but Trump sent a shock wave to the markets this morning with an early morning tweet announcing tariffs on Mexico.  WTI crude officially fell through the support level of $57/barrel and will now try and target $52/barrel.  Without any change in tone or action on the trade front, I believe that WTI is finding a new home under $60/barrel for a while.  In addition, China’s manufacturing data was weak, showing that maybe the trade war is slowing the second largest economy.  However, there are some geopolitical developments that could cause a pop in price.  In Libya, infighting is continuing and on the verge of another civil war.  If this happens, crude exports could be shut off to zero.  And most market analysts will say that none of this current conflict is priced into the market.  Also, China is about to receive a shipment of Iranian crude which would violate sanctions.  But countries are already figuring out ways to get around the sanctions.  And, major hedge funds have not only left their long positions in crude, but also their short positions!  Basically, “Big Money” is exiting the crude trade.  So for now, crude prices are in free fall.  What a difference a month can make!  The wild ride of crude oil prices has been the most volatile I’ve seen in a few years and I don’t see the pattern changing anytime soon.

In local retail news, terrible flooding in the Midwest has not only eroded demand but also put major bottlenecks in supply chains.  Prices out of the local Chicago and Group markets spiked to their highest differentials in years.  But prices are starting to ease as the bottlenecks are being worked out.  I could see prices at the pump starting to retreat in the next week.  Diesel prices are slowly coming down as well.  The US remains very strong in supplies and not much out their for major supply shocks at the moment.

Propane prices continue to stay very low.  In fact, we are currently at the lowest retail price in almost three years.  I strongly suggest that everyone fill their tanks at these prices.  There is a greater risk of prices going up from here rather than going lower.  Contract prices for next year are shaping up to be cheaper than last year and will be released in the coming weeks.  Stay tuned for more info on contracts.  But in the meantime, fill your propane tank!

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

Best regards,

Jon Crawford

Trade War Jitters Are Winning

Good afternoon!

Although news of unrest in the Middle East continues to ramp up in reporting from news outlets, the fallout from the trade war between the US and China is winning out on the battle to move crude oil prices.  Crude oil prices have relaxed from last week highs and are now moving closer to the lower leg of recent support values.  WTI is moving closer to $59/barrel which is the current floor.  Today the EIA reported large builds not only in crude oil inventories but also in gasoline and diesel inventories.  The builds were surprising considering that refinery utilization was low and crude production dipped just a bit.  For now, as long as the temperature in Iran does not heat up anymore, crude prices are losing some support.  In addition, hedge funds moved out of long positions and are now at the lowest ratio of long-to-short since last year.  In other words, hedge funds are putting their money on cheaper prices later in the year.  I gotta say that the first five months of this year has been one roller coaster of a ride for the crude oil markets!

In local retail news, Chicago spot prices finally fell back down in line with Group spot.  I expect to see retail prices on gasoline continue to drop just a bit.  I was not expecting to see a drop before Memorial Day, but I think the consumer will see a little relief.  Diesel prices are holding more steady on good demand right now.

Propane prices continue to drop with large national inventory builds and a huge stockpile compared to last year.  I don’t see propane prices falling off a cliff, but I think the current spot prices of propane will be here for quite some time this summer.  If you own your own tank, retail prices are now under $1/gallon!  If you can hold any propane I strongly recommend purchasing at these values!  Contract prices for next season will be released closer to July 4th.  Stay tuned 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

Iran Tensions Sending Prices Higher

Good morning,

This week crude prices have increased based on tensions with Iran in the Middle East.  Reports of attacks on crude ships, drones attacking Saudi Arabia pipelines, Iran carrying missiles at sea, UK and US evacuating embassies in Iraq, and the US sending aircraft carriers and defense systems to the region are all putting a huge risk premium on crude prices.   Crude prices would be going even higher, but the tensions with China and the trade war are keeping a lid on a full breakout to the upside.  President Trump is sending messages that he wants to talk with Iran.  If diplomatic talks can be scheduled and firepower starts to recede, I expect to see prices fall right back down.  Next week will be a big week for crude.  In addition to the geopolitical issues, the US is about to enter its peak demand season.  World demand is staying neutral at the moment and on pins and needles with the trade war.  Supplies are ample, but if Venezuela and Iran truly can’t get crude to market, then we could experience some supply tightness in Q3 and Q4.  Next week will be very interesting to watch.

In local news, just as retail prices were starting to recede a little, prices have jumped right back up.  I expect to see retail prices hold or climb on both gasoline and diesel going into Memorial Day weekend.

Propane prices are at the lowest level of the past three years.  I recommend everyone filling their tanks right now.  There is much more risk of upside price movement in propane.  Contracts will be coming out in a month or so.  Stay tuned 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

Crude Pulls Back / Propane at New Price Lows

Good afternoon,

Crude prices pulled back from recent highs due to massive builds in inventories here in the US this week.  In addition, there are a lot of global concerns on demand and how Russia will react to the next OPEC meeting.  The markets are very ripe for crude supplies to turn to surplus, so the fear has put a quick profit taking reaction in play.  The recent pullback is kind of the calm before the storm.  I think we are experiencing a breather in the moment.  If Russia pulls out of the deal, we could easily see crude prices fall $5-7/barrel.  If OPEC steadies with cuts, I think the markets will try a new high.  For now, it’s the yo-yo effect between $62-65/barrel WTI.  More will develop in the coming weeks.

Retail prices on gasoline and diesel have balanced out.  I expect to see current pricing at the pump hold over the coming week.  Refinery maintenance in Chicago has experienced some relief and supplies are flowing again.

Propane prices have continued their detachment from crude.  Right now, our retail price is the lowest it has been in over a year!  If you are in need of propane, now would be a great time to buy!  Contract prices for next heating season are looking to be at or lower than this current year’s contracts.  More info will continue to be released in the coming weeks.

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

Best regards,

Jon Crawford

Problems in Chicago

Good afternoon,

I hope everyone had a chance to enjoy some beautiful weather the past week.  In crude oil news, WTI crude oil has officially closed above $66/barrel and now surpassed a technical resistance price point.  The push over the edge came on the heels of Trump’s announcement that oil waivers would no longer be issued to countries purchasing crude oil from Iran.  Traders viewed the announcement as bullish support for supply tightness coupled with the instability in Libya.  However, Saudi Arabia and UAE said that would be able to easily put another 1M barrels/day into the market.  That announcement capped any significant gains in crude prices.  Since the announcements on Iran, economic data from South Korea was terrible; the worst posting since the great recession.  US Jobless claims rose, and the Fed is starting to think about staying firm on rate increases.  Oil is struggling to hold these current price levels, but the bulls have a pretty strong platform built around $60/barrel WTI.  As I have been saying, I expect prices to stay high for a while longer.  But I think June is going to be very interesting.  Russia is not happy with the deal that the US cut with Saudi Arabia and UAE.  I think Russia might pull out of the OPEC deal in June and start pumping more crude.  In addition, the US continues to keep crude production levels high.  And the last piece of caution news to look at is a rumor floating that Trump is considering giving China a waiver for Iranian crude as part of a trade deal.  He really wants to ink a trade deal quickly to cool the heat that has been burning in DC.  I guess we’ll see if anything comes out in the next few days.

In local retail news, gasoline prices East of Rockies started to sell off except for Chicago.  Chicago is having continued supply problems at refineries and is about 10 cents/gallon inflated compared to neighboring markets.  So unfortunately our current retail price will hold for some time yet.  Diesel retail prices are holding steady and I expect the current prices to remain, especially going into the start of planting season for the farmers.

Propane prices are continuing their trend of detaching from crude prices.  Retail prices are slowly dropping into summer.  I expect to see next season’s heating retail prices be at about the same price as last year, even though crude prices are 20% higher!  That’s some good value!  For now, make sure you consider getting a summer fill and watch out for contract info that should be mailed out around the 4th of July.

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

Best regards,

Jon Crawford