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Happy Thanksgiving and Safe Travels!

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Good afternoon!

I just wanted to take a quick moment and wish everyone safe travels this week and a Happy Thanksgiving! The markets are low in liquidity this week due to many workers taking time off. In addition, the NYMEX is closed on Thursday and only open half the day on Friday. This week the FED reinforced that rate hikes are probably done but will stick around for longer next year. OPEC+ delayed their meeting by four days, so that will happen next week. Also, Israel and Hamas agreed to hostage releases in exchange for a ceasefire.

Gasoline and diesel spot prices fell in Chicago so I expect to see cheaper retail prices this holiday travel season. And propane prices skipped right along with crude oil prices showing no surprises. I will offer more commentary next week once more data is digested into the market after the Thanksgiving break.

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

Best regards,

Jon Crawford

Small Black Swan Event

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Good morning and Happy Friday!

I first would like to wish all the deer hunters safe travels this weekend and a safe hunt next week. 🙂 This week, WTI crude oil experienced a small “Black Swan” event on Thursday and dropped as much as $4/barrel. Large US retailers released lackluster earnings and weak guidance going into the holiday season. The news spoked many traders to clear positions, book some profit, and maybe buy back in before year end at a lower price. The contagion of demand destruction also spread after Biden’s and Xi’s meeting failed to produce meaningful trade agreements with the US’s largest enterprises. However, the news of yesterday also reinforced the idea that the FED might cut rates sooner. If the FED cuts rates to spark consumer demand, crude oil prices could rally. A weaker dollar, coupled with increased demand would make crude oil more expensive. Regardless, Saudi Arabia is keeping a close eye on the market. Although it looks as if WTI crude oil price will post four straight weeks of loses, I do not see Saudi Arabia letting the price collapse. I still believe there will be one or two more mini “Black Swan” events that could pull WTI crude oil price below $70/barrel for a brief time; even as short as one day. There was a lot of buying/selling liquidity in the market yesterday, so clearly any events such as yesterday will spark massive trade volume. I am still long on crude oil prices for next year, but believe there will be one or two more events like yesterday between now and end of January as traders look to book year end profits and buy back in at a lower hold price for next year.

In local news, Chicago diesel spot differentials finally collapsed and are now lower than our neighbors in the Group spot market. I expect to see retail diesel prices drop in the coming weeks. Gasoline came down a bit as well. I do not expect to see a jump in gasoline prices prior to the holidays. Many economic forecasts are sending signals of weaker travel plans this holiday season.

Propane is truly carving out and skipping along the bottom. Propane prices have not dropped at the same percentage rate as crude. As I wrote in the past, propane is trading at the lowest percentage to crude in years, so the markets are just letting the price of propane catch up to normal crude percentage economics. I really don’t think propane producers are going to produce propane much cheaper this season. Especially with calls for the warmest winter on record…again.

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

Best regards,

Jon Crawford

Bears Were Hungry, But The Bulls Formed A Strong Defense

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Good morning!

Happy Friday! Again this week, the news of terrible economic data poured out over the news wires. The stock market ripped as traders looked for places to possibly make more money than long-term treasuries/bonds. China’s exports continued to dwindle. The EIA lowered their demand forecast for 2023. Chairman of the Fed Powell said that they are not done fighting inflation. Overall world economic slowdowns were reported. And Russia announced that they will lift their ban on refined fuel exports. Russia exports the most diesel in the world. The combination of all this data caused WTI crude to fall below $75/barrel for a brief moment. $75/barrel WTI has not been hit since July. As I have been writing, if WTI gets close to $70/barrel, I believe that is a good place to start slowing dipping toes into future crude purchases. This morning, Saudi Arabia announced they believe the economic slowdown is “overhyped”. The news was interpreted as Saudi Arabia will do whatever it takes keep prices higher. As their Sovereign Wealth Fund reported economic gains this past month, their strategy of keeping crude oil prices higher and selling less oil is working. I do not see Saudi Arabia changing their strategy anytime soon. In fact, I believe they will cut more production if necessary. As they also enter the LPG export business for the first time this year, a new revenue stream will flow into their economy. At the end of the day, I believe there could be a “black swan” event once the American consumer’s back is truly broken economically, which in turn will produce a nice futures buying opportunity for crude oil. However, if the event does occur, Saudi Arabia and even other oil companies outside of OPEC, including American companies such as Occidental, will cut production quickly to keep prices from free falling. As I have been writing, I am still bullish on crude oil prices long term, and one should be patient for the short lived opportunities that will most likely present themselves in the coming months and into 2024.

In local news, diesel prices out of the Chicago spot market continue to be inflated compared to our neighbors in the Group spot market. But I believe that once harvest winds down, we will see diesel prices fall back into the normal trading range out of Chicago. Gasoline prices fell this week in tandem with the price of crude. Gasoline is tracking crude oil prices very closely.

Propane continues to trade narrow and is ticking up a little bit in price due to demand increase. As a reminder, please keep your driveway clear and salted in the winter, and a clear path to your tank. We want to ensure safe and efficient deliveries. It’s hard to believe that snow is right around the corner!

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

Best regards,

Jon Crawford

Wars?.. What Wars?..

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Good evening and Happy Friday!

This week, crude oil completely traded on economic data coming out of the US and China. WTI Crude price was on the way to break through $90/barrel in October based on the never ending war in Ukraine and the continued developing war between Israel and Hamas/Hezbollah/Houthis. Instead, the markets turned a blind-eye and focused on company earnings, job reports, and the FED meeting/minutes. In addition, China’s economy is not looking strong and stimulus as well as bailouts for bankrupt commercial building powerhouses will be needed. All the released economic data combined caused WTI crude price to close at $80/barrel for the week! The FED decided to keep rates the same as expected, but left the door open for one more raise. New jobs added to the American economy were less than expected. Company earnings were not as stellar as most were expecting this week. And inventories of refined products in the US were interpreted as “bearish”. In addition to the never ending credit card debt piling up in America, cars are being repossessed at the greatest clip since “The Great Recession” and high mortgage rates are holding causing the housing market to cool. Overall, the fear of an economic slowdown caused crude prices to drop. Therefore, crude oil prices dropped as treasuries continued to remain strong and the strength of the dollar held. I am still bullish on crude oil prices but if WTI crude price falls much below $80/barrel, I see some future buying opportunities. And if WTI crude price was to really fall and hit below $70/barrel, I would take long positions on futures. I believe there will be world crude oil distribution issues that develop from the instability in the Middle East. We have plenty of spare crude oil production capacity across the globe, but I see the potential for destruction in world crude oil distribution channels. I guess we will see what November brings!

In local news, after our neighbors to the west (Minnesota, Iowa, etc) experienced tight diesel supplies that ended up raising the cost of diesel over $1.25/gallon compared to our market, now our market is paying more for diesel than our neighbors! Chicago spot prices on diesel closed 20 cents/gallon higher than the Group to end the week. Within four weeks, we’ve experienced over a $1.50/gal swing in diesel cost across the two spot markets. Gasoline prices continue to fluctuate, but are now balanced with the Group. However, the balancing caused differentials on gasoline in Chicago to rise, so consumers will possibly see a slight increase in gasoline price at the pump. I expect diesel prices to trade in the current range out of the Chicago spot market until harvest in the Midwest region is almost completed.

Propane prices traded in a very narrow range as an early cold snap in the Midwest and corn drying demand kicked in at the same time. The combo caused national supplies to draw more than expected keeping prices fairly firm. We still have the most propane in national inventory that we have experienced in years. I am not worried at all about propane supplies this winter. I do expect the occasional logistical issues with pipelines and delayed train car deliveries, but nothing out of the norm for propane in a winter season. We are well positioned for a successful winter propane delivery season.

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

Best regards,

Jon Crawford

Crude Oil Tug of War

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Good morning!

Happy Friday! Well, again the tug of war on crude oil prices continued this week. WTI prices dropped from $90/barrel back down below $85/barrel and looking to move closer to $80/barrel. As I have been writing, I believe that WTI crude oil prices will trade in the $80-90/barrel range. The war between Israel and Hamas doesn’t seem to be throwing as much fear into the markets this week compared to last week. In addition, the US launched air strikes into Syria last night putting the US officially in the middle of the conflict. Even the strikes from last night did not cause crude oil prices to climb much higher. The big news of the week was that the US reported the highest GDP growth at 4.9% in the third quarter. Most would think that the report is great news of a healthy growing economy, but the devil is in the details. As the consumer looks to run out of cash going into the high spending time of the holidays, most large banks are now convinced the GDP bubble will burst. If the economy moves into recession, crude demand could drop. In addition, a recession in the US could cause contagion to other parts of the world. Therefore, the futures bears won this week on the crude oil trade. Throughout all the chaos, there was some positive news between China and the US. Xi Jinping met with a couple of US Senators and US Secretary of State Blinken expressing that there are thousands of reasons for the US to come together rather than grow apart. The willingness from Xi Jinping to push for reconciliation is a dramatic shift in China policy. Many believe that a summit between Biden and Xi will occur sooner than later. If the US and China are able to strike some trade deals that are transparent and manageable, then I believe China will inject cash bailouts into their failing real estate market. If everything falls into place between China and the US, the cooling tensions could spark a boost to both economies. A boost to both economies would cause an increased appetite for crude oil. Time will tell and we will see what happens next week. As of now, we are truly living on a week-by-week basis with the crude oil trade. There is so much volatility all over the world, and I don’t see situations calming anytime soon.

In local news, diesel cost has come down from their highs following lower crude oil prices. The spread in diesel cost between the Group and Chicago spot markets has settled down. Diesel supplies are starting to loosen up as harvest moves over the hump to the west. Gasoline prices have dropped as well following lower crude oil prices.

Propane price has remained fairly flat and moving a bit higher as winter economics continue to drive the vehicle. With an early cold snap on the horizon, I expect propane prices to remain firm independent from crude oil prices. You can still lock in your propane price for winter if you have not done so already.

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

Best regards,

Jon Crawford

Risk Premium With Crude Oil Prices Continuing To Increase

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Happy Friday!

I hope this email finds everyone well. Unfortunately, the Israel/Palestine conflict is looking to turn into a war as Hezbollah and the Houthis both entered the fight this week. Saudi Arabia and the UAE are meeting for the first time in years to discuss how to make sure the war does not escalate across the entire Middle East. The King of Jordan cancelled his meeting with President Biden while Biden was in mid-flight to Israel. Jordan is looking to other countries for a security strategy. The UK Prime Minister also visited the region this week. Iran continues to fund Hamas according to almost all accounts across the globe. And now that Hezbollah and the Houthis made their voices heard, the Gaza Strip is a powder keg waiting to fully explode and possibly spread across the Middle East. Although economic data in China and the US was very weak, the dollar continued to climb as Fed Chairman Powell said that a rate pause is on the table, but another raise is possible if inflation continues. Treasury yields broke through 5% this week. Americans surveyed this week are saying they are now cutting back on discretionary spending. This coming Christmas season will be very telling for economic predictions in 2024. Home mortgage averages hit 8% for the first time in decades. Oh, and Russia moved nuclear weapons into Belarus this week. We can’t forget that Russia and Ukraine are still at war. China’s power of influence over their Belt and Road initiative hit a setback this week as most of Europe and other countries sat out of the Summit. Overall, China and the US are losing major influence as super-powers across the globe. There are trust issues and economic issues that are scaring many of their friends to distance themselves from both countries. All-in-all, the data from the week sent WTI to $90/barrel. If we close above $90/barrel, I believe that $100/barrel WTI crude oil is on the table by year end. Especially if the conflict in the Middle East continues to escalate.

In local news, the cost of diesel for our neighbors to the east (Minnesota, Iowa, etc) on Group spot pricing rose to $1.25/gal HIGHER than the Chicago spot market! Diesel supplies are extremely tight in the Group, and I believe eventually the shortage will spill over into the Chicago market as harvest picks up steam all over the Midwest. Right now, diesel prices are like the Wild West. So much volatility and no predictability. We are living in a day-to-day environment. Gasoline prices rose with the price of crude oil this week, but supplies seem to be in ok shape heading into end of year.

Propane cost rose a bit this week along with crude oil price increases. I could see retail propane prices potentially increasing in November if crude oil moves higher in price and cold weather demand starts to kick in. Supplies of propane are in very good shape compared to years past. Therefore, any fears of a shortage are low risk this winter.

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

Best regards,

Jon Crawford

Risk Back On And The Bulls Are Running

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Good morning,

Happy Friday! This week was completely focused on the largett attack from Hamas on Israel in 50 years. The response from Israel is sending shockwaves through the markets as the world braces for a potential full invasion of the Gaza Strip by Israel. A full invasion would be a humanitarian crisis. In addition, Iran has offered support to Hamas and Saudi Arabia is panicking. Not too long ago, Saudi Arabia was looking to be a possible peace broker along with China, between Israel and Palestine. Now Saudi Arabia is stuck in the middle. The US responded this week by freezing nearly $6B in oil payments to Iran from UAE. In addition, the US placed further sanctions on Russia for violating the terms of the oil price cap with the G7. China is also opening up sovereign wealth fund to buoy the commercial real estate disaster in the country. Also, the FED minutes from last month’s meeting seem to say that rates will hold higher for longer. Many believed this would would lower crude prices. However, producers are being very vigilant in keeping production quotas tight around the world to support higher oil prices. But the biggest driver of the bulls this week is the conflict in the Gaza Strip. Many are now worried that the conflict will spill over to many other countries, including those in the Middle East that would affect oil production. The US moved an aircraft carrier into the region and Saudi Arabia announced that they would increase production if needed to keep oil prices under control. As of today, WTI oil price has it’s eyes on $90/barrel when just last week the price was about to fall through the floor of $80/barrel. If traders start to take some risk with long positions leading into the end of the year, I believe that $100/barrel WTI crude oil could be possible. For now, we are hoping for a miracle that could de-escalate the potential for a disastrous humanitarian crises in Israel and Palestine.

In local markets, gasoline prices continue to trade in a narrow range but have slowly started to climb higher again. After diesel prices collapsed last week, diesel prices are recovering this week and seem to have carved out a bottom for the time being. As harvest goes into full speed ahead along with the conflict in the Middle East, I believe that prices in our market will be be supported and start to move higher.

Propane prices have not moved around too much the past week. As I’ve stated before, propane producers are drawing a line in the sand going into the winter months that they will just not produce propane for much cheaper than the price of today. As interest rates stay higher for longer and the prediction of a warmer winter, propane producers are hesitant to move the floor price. However, if crude prices start to rocket higher, propane price will follow.

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

Best regards,

Jon Crawford

The Bears Had Breakfast, Lunch, and Dinner This Week

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Good morning!

Happy Friday! Crude Oil prices fell off of a cliff this week. Crude oil prices just got hammered on fears of recession and betting that the jobs report today would be awful. Not only was the jobs report MUCH stronger than predicted, but nothing changed in market fundamentals surrounding crude oil. OPEC decided to keep deep cuts in place until the end of the year. The US crude oil inventory continued to draw down this week. President Biden is probably going to meet with Xi Jinping to try and heal relationships with China. And the US consumer seems to be in better shape that previously reported. Many banks came out this week with bearish sentiment for crude oil out of left field. The majority of the drop in price was due to options being liquidated on the market and then causing contagion. When statements from banks turn bearish and prices fall, usually this means that banks are liquidating their positions and looking to buy back in at lower numbers. Crude oil hitting $100/barrel started to look unattainable by year end, so the banks did their old “switch-a-roo” and traders outside fell for it hook, line, and sinker. Although spot prices collapsed, WTI has yet to fall through $80/barrel. I have been calling a hard floor at $80/barrel. We need to remember there is still a war going on and economic growth continues to accelerate in countries like India and Vietnam. Once again, all economic situations remained neutral this week. The only changes were the statements being made by banks and the news running with the stories all over the airwaves. As a reminder, the market can be very irrational. Volatility is in full-swing right now.

The price of diesel and gasoline collapsed in our spot market as well. However, the differential spread between the Group Spot and Chicago Spot remains at 50+ cents/gallon for diesel! The Group Spot is more in-line with the NYMEX, so I still believe it’s not a matter of “if”, but a matter of “when” Chicago Spot price on diesel jumps dramatically higher.

Propane price continues to slowly follow crude oil prices. Now that we are into winter economics, producers are reluctant to give too much back on dips because demand is fairly weak right now. I believe propane will take back all the pricing it gave away this week if crude prices go back up. Inventories remain healthy but exports could stay at record levels if business deals are cut with China, India, and Vietnam.

If you are a business, I also wanted to mention that there are rebates for installing certain appliances and machinery with propane as the source of fuel. https://focusonenergy.com/business/propane

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

Best regards,

Jon Crawford

The Bears Are Still Trying

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Good afternoon!

I hope this message finds you well. The bears in the crude oil trade are trying to move the floor price below $90/barrel. But they failed to accomplish the job, in spite of strong bearish sentiment and news. The dollar continues to gain strength which increases the purchasing power for crude oil. The action usually lowers the price of crude on the market. In addition, the amount of savings in the hands of consumers is dropping fast. Student loan repayments are beginning. And inflation is starting to sting in many areas of the economy. And China is still struggling with their commercial real estate problem. However, Saudi Arabia and Russia remain lock-step in limiting crude oil and refined supplies to the market. And the US reserves of crude oil continue to drop to lowest levels in years. As demand for crude oil in the US ramps up with the harvest, suppliers and refiners are remain disciplined and not oversuppling the market at home. The actions of world oil producers and the US oil industry are winning the battle between the bears and bulls. Therefore, even though the world economic data was awful this week, WTI crude oil still closed above $90/barrel to finish the week.

Diesel prices out of Chicago started to move higher as differentials changed in cycle timing. Although Chicago is still cheap for diesel in comparison to other spot markets, I am still betting that harvest is going to cause diesel inventories to drop and prices to rise. Gasoline continues to be very long in the market and remains trading flat-to-down. I don’t expect to see any major jump in gasoline prices anytime soon. Even though diesel prices rose this week, I remain firm on my recommendation to keep your diesel tanks full.

Propane continues to trade in a narrow range. The heating season is officially underway, although it doesn’t feel like it! I expect propane to move higher as the winter goes along. Producers of propane are sounding alarms loud and clear that they just won’t sell propane for much cheaper than the current trading price. Keep-fills have started and before we know it, the weather will be cold and the holidays will be here! Enjoy the hot weekend while you can!

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

Best regards,

Jon Crawford

Hold Steady

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Good morning!

Happy Friday! I wish I had positive news to report, but this week was a “hold steady”. WTI Crude Oil prices maintained a floor of $90/barrel. I do believe that traders are going to try and push crude prices to $100/barrel by the end of the year. With the current capital gains structure, traders can ring the register as close to $100/barrel and pay a “known capital gains tax”. Everything surrounding taxation could change when the “Trump Tax Cuts” run out. There has been support for crude prices around the world to remain strong as well. Japan continues to provide stimulus to their economy. China continues to work hard to push their economy forward. India’s economy is strong. The United States economy also looks like a “soft landing” from FED policy is possible. In addition, Russia announced cuts to exports of gasoline and diesel into the world market to help support the current price of crude oil. In other words, the world economic sentiment has strong support for higher crude prices. But a recession in 2024 is a very real possibility. However, I continue to sound the horn that if recession hits, all major oil producers will cut production to keep prices higher. As I’ve said for the past few months, I believe that WTI Crude will trade in a range of $70-80/barrel for a long time. When crude prices hopefully drop at some point towards the end of the year when traders “ring the register”, the drop in price could be a possible futures buying opportunity depending on how far the price falls.

In local news, gasoline prices continue to trade in a narrow range. Gasoline supply looks to be long in Chicago. But diesel prices are still primed to jump 30-40 cent/gal at any point. If you are a bulk diesel purchaser, I highly recommend keeping your tanks as full as possible. The jump in diesel price is not a matter of “if” but “when” and the jump will happen quickly.

Propane prices continue to trade in narrow range as well. Summer allocation building ends in September. I expect a small bump higher in price starting in October due to the fundamental change to winter spot pricing. Regardless, propane prices continue to be cheaper than last year which is incredible considering the massive inflation inflicted upon our economy. There are small potentials for propane price blow outs this winter depending on weather. But supplies are healthy and logistics will be the only issue to deal with this winter.

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

Best regards,

Jon Crawford