Starting To Peak???

Good morning!

I hope this message finds you safe and warm.  Winter is upon us!  Crude prices hit their highest level since 2014.  The geopolitical events in the Middle East along with Russia/Ukraine are adding some risk-premium to the bullish sentiments around crude oil supply.  In addition, OPEC has been unable to fully produce their quotas the past two months.  However, supplies look to surpass quotas moving forward and the US crude oil production is in full swing.  I expect to see crude supply move to surplus by Q2 of this year.  In addition, interest rates are probably going to increase sooner than later.  The faster interest rates rise, the cheaper crude will be to purchase on the open market.  So one can hope that has interest rates go up, crude prices will come down.  Crude prices ended the week off of highs based on supply forecasting and the strength of the dollar.  And China CUT interest rates at a time when most are raising!  These actions all are giving pause to this unreliable recent rally in crude prices.  However, the market is on pins and needles right now, so any further events that are interpreted as bullish could try and push WTI crude price to $100/barrel!  It’s truly mindboggling when you take a 20,000 foot view.  Part of me is seeing the market behave in a “pump and dump” scenario.  Banks and hedge funds are pumping the price up to dump it before full supply/demand economics take over.  I also saw that Goldman Sachs reported a Q4 loss and they are VERY long on crude oil hedge contracts.  As I’ve been writing, it’s time to get your popcorn and sit back!

In local retail news, I expect to see gasoline retail prices hold at or above $3/gallon for some time yet.  And I would also expect to see diesel retail prices near $3.50/gal.  Hopefully we start to see prices ease by Memorial Day this year.

Propane demand has been very strong with cold temperatures.  Supplies have remained steady and prices relatively stable.  Fingers crossed, and we could be going into a calm February for the first time in a few years.  If the crude markets play out as anticipated, I am seeing lower prices for propane next year.  In addition, China is canceling shipments of propane due to high prices which will help build national inventories putting downside pressure on future pricing.  As a reminder, please make sure your driveway is plowed and there is a clear path to your propane tank to ensure a safe and efficient delivery.

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

Best regards,

Jon Crawford

Russia and the Inflationary Wildfire

Good morning,

I hope this message finds everyone well.  WTI Crude prices broke higher through $80/barrel as inflation data continues to run wild.  The market seems to be shrugging off any mention of the FED raising rates until something happens.  We seem to be stuck in a “I’ll believe it when I see it” attitude towards the FED.  Until inflation starts to cool, I’m afraid that energy prices are going to remain high.  Although true supply/demand economics are pointing towards surplus supply in the first half of the year, for now inflation has the market.  I believe the FED will need to act hard in order to put any stop to the rising prices.  At this point, I don’t think a quarter-percent rate increase will even move the needle.  In addition to our inflation troubles at home, the US and Russia are stalled in talks discussing a potential Russian invasion of Ukraine.  Both sides are keeping tensions high and coupling the tension with potential supply disruptions in the Ukraine if an invasion happens.  The geopolitical issues are baking “risk premiums” into the price of crude as well.  So, in order for crude prices to pop and drop, I think we need to see swift and hard action from the FED and the tensions in Ukraine dissipate.  Until then, I unfortunately see prices staying high and slowly climbing higher.

In local news, retail prices for gasoline and diesel slowly crept higher last week.  I expect to see those prices hold and even slowly move higher with the price of crude.

Propane prices are trading in a narrow range as producers and suppliers argue over the potential heating demand for the remainder of winter versus the price of crude oil.  Propane rail shipments have been a disaster as weather and COVID brought shipments to a halt at the start of the year.  Train cars are moving again and I think we will be in better shape by end of next week.  For now, supplies are a little wonky in Wisconsin but we should all be ok.  As a reminder, please make sure your driveway is plowed and there is a clear path to your propane tank to ensure a safe and efficient delivery.

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

Best regards,

Jon Crawford

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

It’s a Pogo Stick For Christmas!

Good morning!

I hope this message finds everyone safe and well.  I didn’t know that I asked for a pogo stick this Christmas, but that’s what I got!  🙂  Crude prices continue to bounce up and down the past week.  WTI jumped back up over $70/barrel due to most traders shrugging off omicron as a threat to the economy.  Well, then this week omicron is looking to spread like wildfire, some countries are putting in economic shutdowns and slowdowns, and the FED announced a faster-to-market rate increase next year.  WTI prices peaked at about $75/barrel this week but are now looking to close near $70/barrel.  The bullish factors playing on crude prices are Russia/Ukraine relations, OPEC+ and their production quotas, and COVID-19 treatments hitting the market along with omicron being less in severity of disease.  Only time over the next few weeks will flush out these bullish potentials.  For now, I eating Christmas cookies while I ride my new pogo stick on crude prices into the end of 2021!

Local retail prices on gasoline and diesel have stabilized and I don’t see much movement going into the year end.  I believe most consumers in Wisconsin will pay under $3/gallon on gasoline and near $3.25/gallon on diesel until the new year.

Propane prices have also found a floor and stabilized as we enter the depths of winter.  Cold winter is being predicted from here on out.  In fact, our winter is mirroring 2017 which had two polar vortexes in the first quarter of the new year!  So don’t let your guard down with this recent warm snap!  I think propane prices will start to recover and go higher in the first part of the new year as supply chains and logistics could get occasionally dodgy with cold snaps.  As a reminder, please make sure to keep your driveway salted and a clear path to your propane tank to ensure an efficient and safe delivery this winter!

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

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