Crude oil started off the week where we left it last week. All information seemed to be pointing to higher prices. In addition to supply tightness, Libya announced a pipeline going offline on Monday taking even more crude oil out of the market with no date of return. And then on Wednesday, the U.S. reported a 12 million barrel draw in crude oil inventory. I have not seen a number over 10 million barrels in years. These factors are some of the most bullish news for crude prices in weeks. Although Saudi Arabia and Russia are reporting to bring more crude oil to market, it will take time. And then Trump announced that maybe he will offer waivers on Iran imports. And then Libya “mysteriously” fixed its terrible pipeline problem in one day. And even further, the U.S./China trade war took a new turn. Regardless of this additional news, not much changed in the crude oil supply. In fact, I thought by Wednesday morning, I would be writing that WTI crude prices were going from $75/barrel to $80/barrel. Instead, WTI fell…yes fell… to almost $70/barrel. The largest one day drop in years. Myself and others are scratching our heads. Refined products fell over 10cents/gallon as well. I feel like we are living in a Seinfeld “Bizarro World”: down is up, and up is down. For now, I’m sitting back waiting to see if we can truly unwind prices back to the original support price of WTI at $64/barrel. My thought is that we will not fall that far, but in “Bizarro World”, your guess is as good as mine!
Refined product cost dropped for both gas and diesel. I expect to see prices at the pump start to go down a little. But who knows with these market conditions. We could take off again higher next. For now, volatility is the name of the game.
Although crude prices have dropped over 6%, propane prices have not. I believe that propane has carved out a floor. Basically, traders are saying with these prices that no matter what happens to crude, prices can’t go below current levels. If propane drops any further, traders would be better off exporting all propane instead of storing for winter. Summer fill is in full swing. We also released next season’s heating contracts. Please call now and have your tank filled at the lowest price of the year, and lock in your cost for next season. I am still calling for propane prices to increase this heating season.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Jon Crawford – Pres.