Crude Prices Trading in Narrow Range

Good morning,

Crude prices traded in a very narrow range this week.  Supplies are ample and demand is healthy in the largest economies, but the virus variants and targeted lockdowns in various countries are keeping any major price runup in check.  On the downside, a potential deal with the US and Iran is back on the table which would throw the crude markets into supply surplus.  The beginning of talks is putting downward pressure on crude prices, but not too much pressure as the negotiations with Iran are usually quite volatile and unpredictable.  For now, WTI crude price seems to be in a holding pattern around $59/barrel.  Jobless claims were a bit higher than expected and small business closures are climbing which is keeping American demand in check.  However, vaccinations are flowing at a record pace and a fourth wave seems like it will be targeted areas as opposed to widespread.  The crude market continues to be in a push-pull relationship with many economic issues, but the range of the swing has become much more narrow.

In local retail news, gasoline prices have eased a little from recent highs, but not much.  I don’t see gasoline retail prices falling below $2.49/gallon anytime soon based on current market conditions.  Diesel cost has also balanced out which will keep retail prices from breaching $3/gallon which is good for farming, construction, and shipping this spring.

Propane prices continue to slowly unwind but not as fast as some would like.  I am not expecting very cheap summer fill prices below $1.  I also know that next season’s heating contracts will be priced higher than this year.  I highly recommend that customers take delivery of any remaining contract gallons on their account.  If propane prices start to drop dramatically, I don’t see that possibly happening until at least August.  Stay tuned for more info as we wind down the heating season and approach allocation building season.

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

Best regards,

Jon Crawford

WTI Crude Price Holding Above $60/Barrel

Good morning,

I hope everyone has a safe and enjoyable Easter weekend.  Nice to see the Brewers start out their season with a come-from-behind win yesterday!  Markets are closed today due to Good Friday.  WTI Crude prices closed for the week above $60/barrel.  Many were surprised, including myself, because yesterday OPEC+ decided to start easing production cuts which usually causes a bit of softening.  But the anticipation of the strong jobs report and the drop in the value of the dollar supported much higher crude prices.  I have a feeling that inflation fears coupled with anticipated stronger demand will hold crude prices steady into summer.  I think we won’t get to a point of seeing potential oversupply in the market until after Fourth of July.  There is a chance that we could experience the backwardation of cheaper prices on the back half of summer.  But I think that would also mean that the fourth wave of COVID-19 in Europe would need to greatly accelerate, which would be bad in general.  For now, keep your wallet out.  Prices at the pump are going to hold.

Gasoline retail prices continue to climb going into spring.  I do not expect to see much relief on gasoline prices in the near term.  Diesel retail prices have eased a bit but stabilized.  I feel that diesel retail prices will hold under $3/gallon for the next couple of weeks.

Propane prices are starting to stabilize.  Retail prices have unwound a little bit, but I do not see any downward pressure on propane prices until national inventory levels start to build.  We are very low on national inventory.  Production is strong so rebuilding can begin in April.  But the rate of rebuild will be watched very closely.  We are not out of the woods yet.  So for now, if you have last season’s contract gallons remaining on your account that expire in April, I recommend that you take delivery of those gallons if you have the storage capacity.

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

Best regards,

Jon Crawford

Crude Stuck In a Yo-Yo Motion

Good afternoon,

Crude prices have been on a yo-yo ride all week.  The price moves have been dramatic.  The motion is being blamed mostly on the ship stuck in the Suez Canal.  The canal allows the movement of many commodities, including crude oil and refined products.  In addition, so many other goods that were behind on shipment are now even further behind.  Crude oil moved $2/barrel-plus per day back and forth all week!  I have not seen such volatile yo-yo motion in quite some time.  Couple the Suez Canal event with lockdowns in Europe, a stronger dollar, supplies building again in the US, a talk of a carbon tax, decrease in unemployment, a rocket attack in Saudi Arabia, and North Korea firing a couple of ballistic missiles for a cherry on top, and we made for one heck of a week in news for crude oil!  And I’m sure I’m missing even more events.  Honestly, I think traders are trying to figure out if a retreat from $60/barrel WTI is real or not.  I don’t think the swings will calm down until the ship is moved in the canal.  For now, buckle your seat belt and keep your helmet on!

Retail cost of gasoline and diesel experienced extremely volatile moves all week.  In addition to the market news, in production news, Chicago moved the forward price curve on RVP causing the cost of gasoline to jump 10 cents in one day as opposed to going down 7 cents according to the spot market.  Therefore, I do not expect to see retail gasoline prices ease in the coming weeks.  Diesel cost has eased a little and I could see retail prices now holding below $3/gallon.

Propane prices continue to slowly unwind but are holding on tightly until the expiration of the March contract.  I was pleased to see an increase in inventory levels this past week.  I hope the country continues to build inventory going into the summer.  If so, we have a shot at some more attractive summer fill rates.  For now, I am still advising customers to use up their remaining contract gallons by the end of April just to be safe.

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

Best regards,

Jon Crawford

Crude Correction, the FED, and Lockdowns

Good morning,

Crude oil prices have dropped for five straight days.  Yesterday WTI crude dropped 7%.  The last time crude prices dropped that much was in September of 2020 and the third wave of COVID was starting in the US.  Crude prices are coming under pressure as the FED manages the US monetary policy.  Bond markets are heating up and some traders are liquidating long crude positions and buying into bonds.  In addition, Europe halted their vaccinations with AstraZeneca and starting lockdowns in various cities.  Crude prices have been very frothy and we have been waiting for something to break the cycle.  Well, the cycle has been broken and now many traders are frantically trying to “talk up” crude to cover short positions.  The correction might be a good buying opportunity for future positions, but I don’t know if the correction is over yet.

In a surprise move, gasoline and diesel retail prices might ease a bit in the coming week due to the drop in cost.  Although margins were slim at these higher prices, I believe you might see some cheaper prices at the pump next week.

Propane prices are continuing to slowly unwind from the back-t0-back short squeezes on the market and the effects from the Texas Deep Freeze.  I do not expect to see propane summer fills below $1/gallon, but we could get close.  For now, if you still have contract gallons remaining on your account, I recommend using them up and waiting to see if prices are down towards the end of August.  Inventories of propane are still 15% below the five year average so we won’t know until at least August if we are out of the woods on supply issues going into next season.

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

Best regards,

Jon Crawford

Higher Prices Continue

Good afternoon,

There is not much new information to report this week.  Crude production continues to be strong, but refining capacity is lagging.  The stimulus bill was signed by President Biden fueling fears of inflation along with increased demand.  The virus situation in America continues to look positive adding to hopes of robust economic rebound.  Couple the positive news in the US with OPEC holding firm on production cuts, and we now have WTI crude prices and refined products at the highest level in years.  The interesting dynamic to watch is the relationship between spot crude prices and long contracts.  The higher crude prices go now, the lower the back end of the curve moves.  Therefore, traders are hedging on crude prices being too frothy at the moment and the situation will incentivize OPEC and Russia to start pumping sooner than later.  We might have a year where the cheapest prices of the year are in summer.  Honestly, there is no real road map to our situation.  Only time will tell.

Refined products are at their highest levels in years.  Gasoline retail prices will break $2.75 and diesel retail prices might even break $3.00/gallon.  I don’t expect any price relief in the short term.

Propane prices are slowly unwinding with the end of winter.  However, given the low levels of inventory and continued exports, I do not expect next season’s cost or summer fill prices to be as low as this year.  If you have contract gallons remaining until the end of April, I tend to recommend that you use them up rather than waiting for cheap summer fill prices.  There is just too much uncertainty in the market right now.

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

Best regards,

Jon Crawford

OPEC+ Surprise

Good afternoon,

I hope this message finds everyone safe and well.  The big news of the week was the EIA Inventory Report post Texas restarting and the OPEC+ meeting this morning.  Yesterday, the EIA reported a MASSIVE build in crude oil inventories that gave support to the theory that crude production would come back online faster than refinery capacity.  Given that gasoline and diesel inventories reported MASSIVE draws in inventory, the theory was further supported.  WTI crude prices backed off from recent highs and retreated back below $59/barrel with anticipation for the OPEC+ meeting today.  Many analysts were reporting that Saudi Arabia was planning on removing their “self-imposed” additional production cut of 1M barrel/day and they would support an additional 500k barrel/day increase from other members.  Russia was very adamant that production curbs be lifted due to the market being in balance back in February.  Considering that the US is trying to figure out which rigs to restart from the 50% decimation in 2020, I thought that this meeting would be the “message sender” from Saudi Arabia and Russia showing that they would control the oil recovery in 2021.  That being stated, I figured at least 1.5M/day production increase would have been announced.  Instead, with another surprise that no one really believed would happen, OPEC+ decided to keep all cuts, including “self-imposed” cuts in place until the end of April.  The news sent crude prices on a whipsaw higher.  WTI and Brent crude prices are now officially higher than the peak before COVID started.  I find this optimism in price to be very frothy and reactionary.  Demand is nowhere near it was pre-COVID, and production is all in place to rock-and-roll here in the US starting in 2021.  I believe that speculation is driving the crude trade, and therefore, crude prices are going to be highly volatile for the remainder for the year.  In the meantime, expect energy prices to remain higher through at least April until OPEC+ meets again and decides to possibly increase production.

Retail prices of gasoline and diesel continue to be inching higher.  I would not be surprised to see retail diesel prices at the pump near or over $3/gallon soon, and gasoline retail prices over $2.75/gallon.  Unfortunately, any short-term relief that was possible due to the potential outcomes of events this week has disappeared.

Propane prices are slowly unwinding from the disaster in February.  We are just so fortunate that it’s March and not January.   I do not see the Midwest running out of propane this season.  However, it’s still not time to relax.  The past years have given us very cold Aprils and I would not be surprised to see a colder April this year.  If you watch your own tank, please make sure to check your propane level occasionally in March and April as propane will continue to burn even at these warmer temps.

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

Best regards,

Jon Crawford

What A Mess…

Good morning!

What a mess.  The disaster in Texas has sent ripple effects through the country affecting everything from the price of gasoline to the strength of the dollar.  As we settle out the week, crude prices are leveling off from their recent run higher.  Finished product prices are starting to level off as well.  Forecasts are all over the map on when Texas production will return.  I feel that crude production will come back online faster than refined products.  If that is the case, we might see crude prices ease in the coming weeks.  However, OPEC+ meets on March 4th, so a twist is added to the mix.  OPEC+ might look at the loss of 4M barrels/day in the US as an opportunity to go after market share and increase production.  Although they are enjoying these higher prices, the amount of market share lost to the US in the past two years has been dramatic.  If OPEC+ does increase production, I do believe there will be a chance that WTI crude prices drop towards $55/barrel again briefly.  I write “briefly” because I do believe that by summer and into the fall, demand will catch up to increased production.  Although I am long on crude prices for the year, there is a chance at one more dip here in the spring.  But, this is all speculative.  If the virus ramps up and causes any demand shocks, crude prices could tumble quickly.  Or if OPEC+ decides to keep production cuts in place, crude might have more upside momentum.  In other words, the mess in Texas completely threw energy into a speculative nightmare.

Local prices of gasoline and diesel continue to rise.  As I have been writing for the past couple of weeks, I just don’t see much relief on prices at the pump.  We need to get through March before more accurate price predictions can be called.

Propane has been on an absolute wild ride.  Prices have continued to swing 30 cents/gal almost every day!  The market is truly unstable and impossible to manage.  Although I do not see our company going above $2/gallon for delivery, the prices are looking to stay higher for longer due to the Texas storm and lack of inventory in Conway, Kansas.  I’m not quite sure what more needs to happen in order to persuade the US Government to enforce a strategic reserve on propane for their citizens.  As record propane exports flowed to Asia, our inventory across the country depleted quickly.  Many starting sounding alarms back in November and December.  But because of mild weather predicted for the rest of winter, producers shrugged it off and continued to keep exports strong.  The reasoning was “what are the chances of a polar vortex or an emergency happening.”  Well, a disaster did happen and the storage facilities were not at the best of levels when Texas shut down.  All I can say, is I’m glad that it’s the end of February and not January.  We are going to avoid a very dangerous situation like the one we experienced in 2014 but not by much.  We are only avoiding disaster because of timing.  The potential for disaster should not even be on the table when propane is at record producing levels.  I hope the propane industry finally comes to the table and demands that a strategic reserve be put in place during certain months in order to protect our citizens from supply shocks and price swings that are ludicrous.

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

Best regards,

Jon Crawford

Texas Disaster and Commodity Prices

Good morning,

This week at one point, two-thirds of the entire nation was below freezing.  That hasn’t happened in over sixty years!  The entire state of Texas went below freezing and into negative temperatures in some parts.  The electrical grid was unable to handle the storm and millions of people were left without power.  In addition to the electrical disaster, natural gas lines and water lines froze all over.  Millions of people by mid this week were without electricity, heat, and water.  The snow and cold shut down the entire oil and natural gas industry in Texas, which in turn shut down much of the propane production.  Natural has prices prices traded as high as 1,000% over previous day’s cost (yes, 1,000% increase in one day), and propane prices skyrocket over 60%.  To put things in perspective, the increase in propane price would be the equivalent of waking up and seeing the price of gasoline at the pump almost $2/gallon higher overnight!  That’s $4/gallon gasoline!

WTI crude prices broke through the psychological barrier of $60/barrel.  Gasoline and diesel spot prices also went on a run higher, chasing crude prices and the news stories of the day.  Overall, energy prices were shocked as if a hurricane decimated Texas and the damage from the subzero temps to crude refineries, wells, and pumps is still left to be determined.  We know that warm temperatures have landed in Texas and next week will be telling.  I do believe that prices will start to ease as the warmer temps move through the nation and production resumes.  But for now, we are trying to control our retail prices as best we can as the cost-increase shock works its way through.  Prices are moving as much as 40-60 cents per gallon in one day!  Please have patience as we navigate through the coming weeks.  I can assure you that if you call around and hear propane prices from companies that are a difference of 50 cents to a $1.00/gallon, it’s not crazy. The market is truly that volatile right now.  We are doing our best to hold our prices at the lowest averages possible to try and help our customers absorb these increased heating costs.  The good news is that I think by the end of next week, cost of propane will start to retreat, and we are not in a full propane supply crisis at the moment.  We are still able to deliver and do not see shortages or rationing on the horizon.

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

Best regards,

Jon Crawford

Extreme Cold Leaving Next Week

Good morning,

I hope this message finds you safe and warm.  We are in the midst of the coldest week in winter and so far we are surviving without too many hiccups.  Our staff and driving team have been working overtime to ensure everyone stays warm.  We appreciate everyone’s patience as we continue into next week.  Hopefully temperatures warm up and we can all catch some relief from the bitter cold.

Crude oil prices continue to rise as vaccine rollouts ramp up and the economy looks to pop this year.  In addition, the continued talks of stimulus and printing more money is supporting higher crude prices.  There was talk of Iran and the US negotiating a potential nuclear deal again this week.  If a deal is struck and sanctions on Iran are lifted, there is a potential for crude prices to drop.  But talks are just beginning and I don’t expect any traction until summer.  For now, higher crude prices look like they are here to stay.

The rise in crude prices have continued to hold retail prices higher at the pump.  I do not expect to see gas or diesel prices drop at the pump for the remainder of the month.

Propane supplies have been tight but manageable.  Rail cars have been delayed and long lines at terminals have caused hiccups in distribution.  However, with warmer temps coming I believe the short squeeze on wet barrels of propane is starting to unwind.  In addition, the supplies at the main hub in Conway look like they will hold.  Record exports have dropped a bit do to the extinction of the arbitrage economics with Europe and Saudi Arabia.  I am hopeful for some price relief in March.  As a reminder, please make sure to keep your driveways clear and salted to ensure a safe and efficient delivery of your propane.  We appreciate your help as we are entering the final lap of winter.

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

Best regards,

Jon Crawford

Up, Up, and Away!

Good morning,

I hope this message finds you all safe and warm.  Dangerously cold weather will be entering our area all of next week.  We have taken precautions to prepare and we are ready to serve our customers through what will probably be the toughest week of the winter.  If you are a call-in customer for propane or fuel oil, please make sure to check your tank.  Usage will be dramatically increased next week and with the negative temperatures over night, running out of fuel can cause a house to get cold quickly.  In addition, please make sure to have your driveways clear and salted if necessary.  Our drivers are very busy and want to make sure they can safely and efficiently deliver to as many customers as possible.  We appreciate your help!

In the news, WTI Crude prices have broken through $55/barrel and are approaching closer to $60/barrel.  As I have been writing, there is much more upside risk to crude prices than downside.  OPEC+ is holding firm on production cuts.  Production in the US has been slowly increasing, but not much.  The economy is looking to be holding and gearing up for a recovery with strong fuel demand.  And the Senate just passed Biden’s COVID Relief Package which gives further support to jumpstart the economy but also potentially at the expense of devaluing the dollar.  Any devaluation to the dollar raises crude prices, as crude prices are traded against the dollar.  Therefore, the relief package is a potential double-whammy to crude prices: increased demand and devaluation of the dollar.  As I have been writing, I believe the days of retail gasoline under $2/gallon are behind us.

In local retail news, gasoline retail prices are averaging near $2.29/gal and diesel retail prices are averaging near $2.59/gal.  I do not expect to see any price relief at the pumps in the coming week.

Propane prices are under a lot of pressure.  Exports continue to remain strong and with the recent cold snap in the Midwest and Northeast, Conway “wet” barrels are getting harder and harder to procure.  The spreads between Conway and Mt Belvieu are widening again to try and keep propane in Conway as opposed to going south and out the door in exports.  But with the recent surge in demand throughout the Midwest and Northeast, I do believe that propane prices will remain high until winter crosses the finish line.  The only possibility for price relief is to see temperatures in the Midwest and the Northeast go to above normal at the end of February or beginning of March.  If not, I feel that current retail prices are here to stay and possibly get higher.

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

Best regards,

Jon Crawford