Well, I think this might be the craziest week with crude prices I have ever experienced. President Trump issued the order for the execution of General Soleimani from Iran in Bahgdad on January 2nd. The drone attack caused crude oil prices to sky rocket. Iran threatened retaliation and Trump responded with further attacks if Iran killed any more Americans. The escalation in the Middle East pushed WTI prices to the highest level since April 2019 when Iran attacked Saudi Arabia’s oil refineries. Then on Wednesday, Iran launched rockets into Iraq targeting bases that housed American soldiers. As we feared for the worst, we were told that no American lives were lost. Trump gave a speech declaring that Iran announced the rockets were the retaliatory strike and no more attacks would be issued. Trump considered the escalation diffused. Then something strange happened. Crude oil prices sold off at a greater volume prior to the attacks and are now sitting below $60/barrel and continuing to find weakness. The US executed an Iranian general, Iran launches rockets at American bases, and crude prices go down. Never before have we experienced this type of fluctuation based on the events.
This week shows how oil production in Russia and the US have taken away much of the risk premium in the Middle East. We were on the brink of potential conflict with Iran and oil prices only rallied 5% and now sold off more than 6%. The incident really displayed the new world we live in with crude oil production. Production is incredibly strong and no major supply hurdles are on the horizon. Therefore traders are shrugging off the Iran conflict, just like the Iran attack on Saudi Arabia.
In local news, gasoline prices and diesel prices continue to move around with crude price fluctuations. Gasoline retail prices are averaging 2.44/gallon across the state and diesel prices are averaging 2.84/gallon.
Propane supply continues to be very high and the warm temperatures are not helping demand. I do not see any issues for supply problems coming from our main storage facilities in the US. As of right now, we are about to experience the most propane in inventory for January in our nation’s history. If crude prices continue to fall and the weather stays warm, I would expect to see softer propane retail prices and good prices for next year as well.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.