Public Service Announcement: EXTREME COLD

Good morning,

I would like to discuss the EXTREME cold temperatures that are hitting our area for the next week.  The arctic blast from the Polar Vortex is going to hang around for some time.  In addition, we might see snow on Monday.  If you are a will-call heating oil or propane customer, please keep an eye on your tank.  Your consumption will greatly increase over the coming days.  These temperatures are very dangerous so please take caution when being outside.  Frostbite can happen in under 30 minutes with some of the temperatures predicted.  Our drivers are working extra hard to stay ahead of this cold snap.  Please make sure that your driveway is cleared and there is a safe path to your tank.  We want to complete safe and efficient deliveries over the coming week.

As far as prices are concerned, crude oil continues to be volatile.  The biggest news that we continue to monitor are the developments in Venezuela and the US government shutdown.  The potential for lost crude imports from Venezuela could impact the US.  We import about 300K barrels of heavy crude from Venezuela and the loss of that product could push up diesel prices.  The government shutdown continues to put pressure on the economy.  As long as the government opens soon and the Chinese/US trade teams continue to talk, we expect to see crude oil consumption stay healthy this year.

In local news, the crack spreads on diesel in the Chicago market dried up driving the cost of diesel in our market up by more than 20 cents/gallon.  Our cost is now on average with the rest of the East of Rockies markets.  I expect to see diesel prices at the pump rise.  Gasoline retail prices continue to resist breaking back over $2/gallon.  I would expect to see most markets back above $2/gallon in the near future.

Propane prices are starting to creep back up with winter weather causing healthy demand.  However, production is very strong and inventories are high.  So I don’t see any potential for major prices moves higher in propane this winter.

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

Best regards,

Jon Crawford – Pres.

Crude Prices Holding Steady

Good morning!

Crude oil prices continue to trade in a very narrow range based on the news of the day.  We seem to be bouncing along between $51-53/barrel on WTI.  I continue to believe we will stay in this range for a bit longer.  Refineries are making great money right now so supplies are ample.  But crude and refined exports to China are starting to show up again, so possible relief on trade tensions are being discussed as well.  Basically, as the US floods our local markets with additional refined products coupled with record crude harvesting, and as long as there are buyers, prices will stay steady.  If the US refineries hit a hiccup in production, crude oil inventories could build quite quickly in the US.  But OPEC, particularly Saudi Arabia, are drumming up continued support for their cuts and are offering side deals to anyone in the world that wants to work with them to help keep prices higher.  Canada is also joining in the party with cutting production.  Russia is slowly cutting back on production as long as prices don’t go up too fast.  The biggest area of concern for the year is the world economies.  If economies stay healthy in 2019, then I believe we have experienced the bottom in prices for the year.  But if we start to slow down demand for oil, I’m not so sure OPEC can cut fast enough to deal with the record production here in the US.  So as the last few weeks have been, it’s a “be patient” scenario.  I still believe that hedging diesel supply for the future months is a smart hedge.  Diesel inventory levels are lower than the five year average and if crack spreads decrease, we are going to run into some supply constraints later in the year.  In addition, the new IMO standard for marine fuel starts in 2020 and is going to push up prices due to production cost increases.

In local retail news, gasoline prices are trying to push back up above $2/gallon.  Cost has increased enough to justify pushing prices back up over $2/gallon, but retailers are hesitant to give in.  Diesel prices have increased a little, but hold on to your seats.  Diesel cost is 25 cents/gallon lower out of the Chicago Spot market due to insanely great crack spreads.  Once we have a production issue or a drop in supply, diesel prices in our local market are going to sky rocket.

Propane prices are holding steady with demand increases due to cold weather.  Our prediction services are calling for very cold temps the rest of January and possibly all of February.  So for now, we are preparing for increased demand in the coming weeks.  Please make sure an icy driveway is salted or sanded and that there is a clear pathway to your tank to make sure we can safely and efficiently deliver.

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

Best regards,

Jon Crawford – Pres.

WTI Crude Back Above $50/Barrel

Good morning,

Well, that didn’t take long!  WTI Crude price climbed back above $50/barrel this week and looks to close above for the week.  Signs of progress on the China/US trade war seem to be coming to fruition.  In addition, economic data in the US seems to be better than expected with retail sales strong and jobs hiring on the rise since December.  Furthermore, Saudi Arabia cut more than expected in crude production for December and announced that they are willing to shed market share to increase prices.  Saudi Arabia also floated the possibility again of an IPO for Aramco in 2020.  The announcement is meant to give support to their position of wanting higher crude prices.  Back at home, the FED is starting to take a softer position on rate increases for 2019 which caused the stock market to climb along with energy prices.  So for now, the bottom on WTI seems to have been carved out at around $45/barrel.  There are still some bearish scenarios floating around the marketplace.  China’s economy is murky at best.  True data is hard to find so time will tell if the economic giant is truly in troubled waters.  The US production of crude has soared past 12M barrels/day.  With OPEC cuts and healthy demand, the production levels in the US are not a damper on prices.  But if China truly is slowing down or something changes in the US economy, crude prices could tumble back down quickly.  In other words, volatility is going to be the name of the game for crude in 2019.  Major banks are changing their forecasts on crude prices every other week by as much as $10/barrel swings.  In other words, nobody knows.  It’s a big guessing game this year.  My advice, buy some upside price protection if possible at these current values.

In local retail news, prices of gasoline are starting to climb.  We have seen cost increases come to both gasoline and diesel.  In fact, diesel is set to rise almost 20 cents/gallon at any moment!  Our Chicago market spot prices are well below the rest of the markets East of Rockies.  It’s not a matter of “if”, but “when”.  My advice for those larger diesel customers is to fill up your tanks now and keep them full.

Propane prices are also starting to climb again with the rise of crude prices, but not as fast.  We need to see some cold weather push demand to over 2M barrels/day consumption for propane prices to really rally.  For now, prices are good and supplies are ample.  As a reminder, please make sure your driveway is plowed and sanded/salted if needed.  And also to be sure there is a clear path to your propane tank to ensure a safe and efficient delivery.

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

Best regards,

Jon Crawford – Pres.

Happy New Year!

Thank you to everyone for a safe and wonderful 2018!  I hope everyone enjoyed their New Year celebration and is looking forward to 2019!

Fuel prices are starting to carve out a bottom.  Stocks and crude are starting to trade at normal volumes.  There is not too much to report at this time.  Oil prices are starting to cautiously rise but more predictions will come next week.  OPEC is looking like they are sticking to their proposed cuts.  The dollar is losing strength.  Global economic acceleration is in question.  Trade wars are in discussion.  And demand strength is debatable.  All great topics that will be better covered next week.  So hang tight.

For now, enjoy some cheap gasoline and diesel prices at the pump!  The Chicago SPOT market which sets cost in our area is WAY oversupplied in the moment.  I would expect to see gasoline prices jump about 5 cents in the next couple weeks, and diesel is ripe for nearly a 20 cent+ price jump in the coming weeks!  More to come!

Propane retail prices are stable and supplies are good.  The warm weather is keeping demand in check.  But the cold is coming.  It’s just a matter of time.  Please make sure that your driveways are plowed and there is a safe path to your propane tanks to ensure driver safety and efficient delivery.

Thank you again for a great year in 2018 and if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.

Merry Christmas and Happy Volatility!!!

Good morning,

I hope everyone had a safe and Merry Christmas!  The weather was nice for travels and fuel retail prices were low for keeping some extra spending money in your pockets.  The last few days have been an absolute wild ride.  On Christmas Eve, the stock market and crude oil futures posted one of the worst sell offs in history.  The causes were fear of economic downturn in 2019, surplus crude oil supplies overtaking demand, Munchin giving a weird call to the banks to try and calm markets, OPEC not cutting enough, record US crude production, and the US Government shutting down.  Then we had Christmas and a day off.  And then we woke up yesterday to a completely different outlook.  The outlook included the following gems: crude oil supplies might be in balance soon according to OPEC;  OPEC, Russia, and Canada are all willing to cut even more supplies and sooner if needed; economic outlook is very positive for 2019 with high demand for crude oil; record spending on retail for the holidays; and overall “everything is awesome and gonna be great in 2019.”  The sentiment change caused a volatile record day gains in the stock market and crude futures…. Our troubles are over!!!…  The sell off is over, crude has bottomed, and December was a fluke…  Then we woke up this morning and the markets are selling off again.  So basically we have markets that are out of control and I say “get out of the way.”  Traders are desperately trying to call a bottom but it just doesn’t want to show its face yet.  So for now, sit back and watch probably the bumpiest ride in the market since the last correction.

In local retail news, retail gasoline has hit $1.99/gallon in the surrounding market areas.  Diesel retail prices are holding near $2.79/gallon.  I don’t think we will go much lower at the pump.  But I also don’t see it going back up anytime soon, especially since we went below $2.00/gallon on gasoline at the pump.  Once that “1” comes out in front on the price signs at the street, it’s very hard to put the “2” back up.

Propane retail prices are holding steady on good demand.  Inventories are around the five year average.  Although we had some warm weather here in December, don’t forget to keep your hat and mittens handy.  Some cold weather is on the way with some arctic blasts possible in the middle of January.  Stay tuned for more info.

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

Have a safe and Happy New Year’s celebration!

Jon Crawford – Pres.

Fundamentals Ignored

Good morning,

Traders continue to ignore fundamentals and have abandoned all hope on investing in crude.  WTI crude dropped below $50/barrel and is fast approaching $45/barrel.  The main driver is a fear of economic meltdown in 2019 causing demand destruction coupled with over supply.  Currently the U.S. is exporting more crude than importing and our production is at record levels.  In addition, Russia is pumping strong.  However, demand is still strong in the U.S. and crude inventories have dropped a bit in the U.S.  And world demand continues to be strong.  Also, the Middle East is continuing to struggle with geopolitical issues, the largest Libya oil field is under siege and out of production, and Saudi Arabia is cutting production more than expected.  In other words, when looking at supply and demand, we are moving closer to a crude deficit than a surplus, coupled with extremely volatile geopolitical issues.  But traders are staying on the sidelines and buying the rumor of economic meltdown in 2019.  So for now, we sit back and wait.  There is a potential for the bottom to fall out, but the true fundamentals point to higher prices.  The crude market is now trading on emotion which is scary.  Therefore it’s best to stay away and wait for a bottom to be carved out.  There is a tremendous opportunity at these low prices, but I’m not 100% in until a bottom is carved out.  At the end of the day, there is still more long term risk of higher prices as compared to lower prices.  The question is, how long will these lower prices stay?  That’s the billion dollar question and only time will tell.

In local news, retail prices on gasoline are ever so close to $1.99/gallon in Central Wisconsin and will probably get there.  Diesel prices have now moved below $3.00/gallon and will probably stay there for some time.  These lower prices will help for the holiday travel season coupled with warm weather.

Propane retail prices have remained steady as we experience a lull in demand before January.  For now we are predicting a cold January.  The weather is looking to change around the end of December and move colder into January with a deep freeze possible by the middle of January.  The analog data is also starting to show that February could be very cold as well.  So enjoy the warm Christmas weather because this could be the last warmth for a couple months!

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

Best regards,

Jon Crawford – Pres.

Tug of War

Good morning,

Crude prices this week are stuck in a game of “Tug of War” right now between geopolitical issues and true fundamentals.  Global recession fears are weighing on traders’ minds as we end the year which is keeping “Big Money” from going long on crude.  The fears are weighed by China/US trade war, disappointing economic data, and BREXIT drama.  Not to mention that Saudi Arabia and Russia continue to make headlines which have potential for supply issues.  But in true fundamentals, the US exported more crude than consumed last month.  So there are buyers out there.  It’s a head scratcher.  Big Money is stuck on short positions right now which I think will hold until the end of the year.  I feel that money managers are going to look at January as a potential entry point on crude.  So for now, enjoy the Christmas gift that the traders have given us!  But when Big Money enters the market, be prepared for a quick increase in crude prices.  And I do believe it’s not a matter of “if”, but “when”.

Retail prices on gasoline and diesel have stabilized for the moment.  We are looking at around $2.15/gallon on gasoline and $3.00/gallon on diesel.  I think that these prices will hold potentially for the end of the month.

Propane prices have also stabilized but are starting to carve out the potential for an uptick.  Demand is rip-roaring right now.  The current warm spell is looking to end by Christmas, with the potential for colder than normal coming back, including a possible Polar Vortex in early January.  As always, please make sure your driveway is clear and there is a path to your tank this winter.

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

Best regards,

Jon Crawford – Pres.

OPEC Meeting Disappoints

Good afternoon,

The big OPEC meeting today in Vienna did not impress traders.  Hopes were for over a 1.5M barrel/day cut, and that does not look like it will happen, even when Russia weighs in tomorrow.  In addition, the economic outlook is starting to look weak for the U.S. which is causing a massive sell off in the market.  To top it off, China and U.S. trade tensions are high with summit talks being interpreted differently between the two countries as well as Canada arresting an executive from the Chinese firm Huawei.  The traders have reacted by selling off even more crude contracts.  WTI crude prices have now dropped back to their lows for the year.  The bullish news being reported was a major drop in crude supplies here in the U.S., Iran threatening to block the Straight of Hormuz, and Canada offering to cut crude production to help prop up prices.  For now, traders seem to think the world is entering closer to surplus on crude supplies and bearish news on the economy is winning the war of words.  For now, cheap oil prices are maybe here to stay until year end.  We will need to wait for Russia’s reaction as well as OPEC’s official report.

In local news, retail prices on gasoline have bottomed out near $2.19/gallon, and retail diesel prices are right around $3.00/gallon depending on the winter blending applied.  I would expect to see these lower prices through Christmas.  So for now, we can enjoy some lower prices for the holiday season!

Propane prices have bottomed as demand continues to climb.  We officially experienced the coldest November on record.  For all will-call customers, please make sure to keep an eye on your propane tank.  Usage is up more than 20% this year.  As a reminder, please make sure to have yoru driveway cleared and a path available to your tank throughout the winter.  We appreciate all your help for making safe and efficient deliveries. 

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

Best regards,

Jon Crawford – Pres.