For the first time in weeks, WTI crude price dropped below $70/barrel. As I have been discussing, there are reasons to believe crude prices could go higher, and also reasons for prices to drop. Over the past weeks, the reasons for crude to climb (healthy demand, supply tightness, Iran sanctions, political instability in the Middle East) were winning the discussion and the bull market took off. Once hedge fund positions took a record long position on crude, I took pause. I was in agreement on the runup in price because emotions had clearly taken over the market. And then, just like that, profit taking took over. Announcements came out that Saudi Arabia and Russia were looking at secret production increases to offset Iran sanctions, the FED announced that it’s ready to keep going on rate increases, China’s economy showed headwinds, hurricanes eroded demand and supply surplus came back in the US, refinery maintenance moved closer to completion, and the hedge funds started to ring the register. Within a week, $7/barrel came off of WTI and refined products started to relax in price. I am cautious about any further downward movement considering the political instability in Saudi Arabia. All eyes are on deck surrounding the international situation with the disappearance of Jamal Khashoggi.
In local news, gasoline retail prices started to relax a bit. We are moving back down closer to $2.50/gallon. Time will tell, but for now, the big upswing in price is on hold. Diesel prices might come down a touch, but diesel cost has not dropped as much as gasoline.
Propane prices are holding a bit of a flat pattern after running up last week. The supply situation seems to be a little bit stronger, but the weather forecast is looking like a potential for a 10% colder winter compared to last year. This would be a dramatic increase in demand. So for now, it’s wait and see. I still am calling for propane prices to rise in the coming months, and it’s not too late to lock in your prices for this winter.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Jon Crawford – Pres.