Happy Friday! I hope everyone had a safe and enjoyable Thanksgiving!

Crude looks to close this week on the longest losing streak in years. OPEC meets this weekend, and market expectations are leaning heavily toward no additional production cuts. The pressure is on for the group to at least maintain current levels, but Saudi Arabia appears ready to cut prices further to keep its barrels moving—possibly to the lowest levels in five years. Saudi Aramco is even considering selling assets in what could be its most significant divestment ever, as falling crude prices begin to weigh on midstream infrastructure and equipment. Meanwhile, JP Morgan is now predicting OPEC may ultimately cut 2 million barrels per day in 2026 to avoid crude falling into the $40 range.

Israeli forces launched another counterterrorism operation in the northern West Bank and killed Hezbollah’s top military officer outside Beirut despite a brokered truce. The U.S. officially designated Venezuela’s Cartel de los Soles as a foreign terrorist organization, increasing sanctions on President Maduro and his officials. The move adds more pressure and signals continued escalation toward regime change or even potential military conflict with Venezuela.  Tensions remain elevated between China, Japan, and Taiwan. President Trump held calls with leaders from both Japan and China to help cool things down. Any military conflict in this region would be devastating to the global AI and semiconductor industries and could send oil prices sharply higher.

Ukraine and the U.S. continue pushing a peace plan with Russia. Progress is being made, but leaked information suggests Russia will not make major concessions, which helps keep a small amount of support under crude. Even so, traders remain convinced that whether sanctions stay or not, the market is still heading into oversupply by 2026. If sanctions are lifted, the flood of crude entering the market would be enormous.  India, which previously defied Russian sanctions, is committing to halt Russian crude purchases starting in December. However, they significantly frontloaded imports to beat the deadline. Russia is offering India its cheapest crude in two years. Shipping costs are rising as more sanctioned supertankers get stuck at sea. Iranian crude is also starting to build up offshore as China’s demand softens following heavy pre-purchasing of discounted Russian barrels. The volume of oil sitting on ships continues to break records, adding more pressure to prices. If Russian sanctions are lifted, the amount of discounted oil hitting the market would be tremendous, though many traders potentially see that as largely priced in.  Oil companies are now eyeing Argentina as the next major shale play. Early geological surveys suggest Argentina could hold nearly 50 percent more shale oil than the Permian Basin. Chevron has been in Argentina for about a decade, and more companies are evaluating rigs for 2026 under the region’s lighter regulatory environment.

Traders have abruptly shifted to pricing an 80 percent chance of a December Fed rate cut, even though the Fed remains deeply divided and the data is mixed. U.S. Producer Price Index data for September rose 0.3 percent, in line with expectations. Tariffs continue to muddy inflation data, raising costs for businesses, and a rate cut would not directly solve that problem. September retail sales grew only 0.2 percent versus an expected 0.4 percent. The slowing in retail spending is being linked to tariff-driven price increases. U.S. consumer confidence for November dropped 6.8 points to 88.7, and weak economic data continues to weigh on oil demand expectations. Black Friday is expected to be soft. Globally, British retailers reported their lowest confidence in 17 years heading into the holiday season.  Overall, economic data is not great but is it bad enough to push a rate cut through the Fed meeting in December?  That is the million dollar question.

The Chicago market sold off sharply again as crude collapsed. Chicago is awash in diesel, and I expect to see retail prices at the pump move lower. Even though we are in a “falling knife” price scenario, winter blending of #2 with #1 diesel will slow the speed of the drop. Gasoline followed crude lower and is now at its lowest price in weeks, and I expect more declines at the pump in the coming days.

Propane found a bit of support as colder-than-normal temperatures spread across most of the country east of the Rockies. Forecasts for the next 12 weeks continue to show colder conditions than last year, with a steady cold pattern but no major polar vortexes at this time. As we move deeper into winter, we ask all customers to please keep driveways clear of snow and ice and ensure safe, easy access to their propane tank to guarantee a safe and efficient delivery.

As always, if you have any questions, comments, or concerns, feel free to give us a call. Thank you, and have a great weekend!

Best regards,

Jon Crawford

Happy Friday!

Crude oil prices saw a sharp rebound at the end of the week after Ukraine struck an oil refinery in Russia, knocking out roughly 2% of the world’s supply. The attack pushed prices back toward $60 per barrel after collapsing earlier in the week. Meanwhile, Russia continues its push deeper into Ukraine near the Pokrovsk region. Lukoil’s sale of foreign assets continues to find high demand, and Russia intends to use those funds domestically. Despite the recent export disruptions, Russia is still managing to ramp up refining capacity at home.  Russian oil is still officially hitting the market, even as China and India continue to avoid additional Russian purchases. Hungary was granted a sanctions waiver, which will give Russia an easy outlet for some of its floating storage and continue supporting production levels. At the same time, Europe has seen an uptick in sabotage attempts, cyberattacks, and drone incursions tied to Russia.  And in another development, Venezuela is also gearing up for potential conflict, adding more uncertainty to the geopolitical backdrop.

Prices collapsed midweek as the forward trading curve moved into contango, meaning prices farther out are higher than prompt barrels. That’s a classic oversupply signal, and funds also sold off positions for year-end tax harvesting and booking some gains. Global supply concerns grew after the amount of crude floating on ships hit 1 billion barrels. OPEC members Saudi Arabia, Kuwait, and Iraq also increased shipments to India, and the IEA warned of the potential for a record surplus next year. The combination sent crude prices sharply lower.  There was also news that Trump met with the Syrian president as Syria begins exporting oil again. If those barrels grow, they add yet another layer to the oversupply picture.

Despite all the talk of surplus, ExxonMobil and Chevron continue to ramp up exploration. Both are moving into areas that historically haven’t seen much drilling, such as Greece, and are also considering returning to Libya. Oil companies are betting that demand will continue rising over the long term. Their view is that prices may stay depressed for a year or so, but eventually rebalance and recover. OPEC has already revised its outlook to flat demand instead of rising demand, but the IEA now forecasts oil consumption increasing through 2050, giving producers confidence to keep drilling.  Still, China’s manufacturing and retail sales data remained very weak—some of the worst readings in years—which throws a bit of cold water on long-term demand optimism. However, the U.S. and China agreed to suspend port fees for each other, a sign that some trade tensions may finally be easing. That could eventually support each economy, but traders remain cautious for now.

The EIA’s latest report showed a large build in U.S. crude inventories, reinforcing the idea that surplus supply is on the horizon. Trump also opened additional areas of Alaska for drilling. Even though the government shutdown ended on Thursday—a potentially supportive event—prices still sold off sharply on Wednesday.  The Federal Reserve continues debating whether slowing payroll growth is the result of weaker demand for workers or tightened immigration. Most Fed officials lean toward weaker demand. There is a small amount of support for crude prices based on the Fed potentially holding off on a December rate cut, which keeps the dollar stronger and makes crude cheaper for international buyers. At the same time, there’s growing fear of weaker holiday sales weighing on the economic outlook.

The Chicago spot market has been extremely volatile. Massive price swings continue as refineries come back online and previously closed pipelines reopen. We are hopefully nearing the tail end of one of the biggest supply crunches southern Wisconsin has experienced in years. Gasoline retail prices should hold relatively steady, as gasoline hasn’t been impacted nearly as much as diesel. Diesel retail prices, however, are likely to move higher in the coming week, especially as winter-blended diesel enters the market.

Propane prices continue to trade in a narrow, fairly boring range. Retail prices have moved higher as early winter temperatures have boosted demand. Even so, when comparing BTU value across propane, diesel, and natural gas, propane remains a strong value at current prices. If you are a will-call customer, please check your tank more frequently as we start the winter season—this winter is already running 25 percent colder than last year, and usage can ramp up quickly.  We don’t want you to get caught with your tank running out!  🙂

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

Best regards,

Jon Crawford

Happy Friday!

WTI crude oil is looking to end the week below $60 per barrel, marking the second consecutive weekly drop. After briefly finding support midweek, prices slipped again as traders refocused on oversupply and soft economic data.

The war in Ukraine remains intense. Russia has gone on the offensive, targeting the city of Pokrovsk, a key transport and logistics hub for Ukraine. In retaliation, Ukraine struck a Lukoil refinery, escalating damage to Russian oil infrastructure and sparking a brief price rally on Thursday. But as the dust settled, traders shrugged off the event, believing Russia will eventually reroute its barrels somewhere.  Russian exports continue to slide under sanctions, and crude is piling up on tankers across the Asia-Pacific region. Turkey’s decision to scale back Russian purchases has only added to the pressure. A large amount of Russian oil now sits on ships waiting for a home, and if sanctions are ever lifted, a wave of barrels could flood the market.  Meanwhile, Venezuela continues to face political uncertainty. Hints of regime change could eventually open its oil market to more exports, adding to global oversupply. For now, Venezuelan shipments are falling, with most barrels still heading to China.

OPEC announced a small production increase, far less than prior moves, and confirmed there will be no new output hikes in the first quarter as global inventories continue to rise. Analysts now estimate a global surplus ranging anywhere from 200,000 to 3 million barrels per day next year.  Overall, OPEC’s total output rose in October, reinforcing the oversupply story. Traders digested the decision quickly and kept bearish sentiment in place. Saudi Arabia continues to chase market share, cutting its official selling prices to the lowest level in eleven months.

Adding to the glut, China’s manufacturing activity shrank again in October, marking six straight months of contraction. Export orders also fell at the fastest pace since May. China is simultaneously increasing domestic drilling to reduce import dependence, which ultimately adds more crude to the global market. India has also joined the ranks of secondary sellers, re-exporting Russian barrels and building up inventories at home.

On Wednesday, WTI fell below the $60 floor as U.S. inventories climbed, according to the latest EIA report. The ongoing government shutdown is adding more downward pressure to sentiment.  On the economic front, 42,000 U.S. jobs were added last month, signaling a still-healthy labor market. That strength makes it less likely the Fed will cut rates in December, keeping the dollar strong and commodities cheaper. Meanwhile, U.S. manufacturing contracted for the eighth straight month, which supports a bearish case for crude demand.  Market watchers also noted that the “Buffett Indicator,” which measures total stock market value against GDP, has crossed the 2.0 mark. The last time this occurred was in 2001, just before the market collapse. If equity markets were to correct sharply, it could spill into commodities and potentially trigger a “black swan” event for crude if the current surplus expands into early next year.

The Chicago spot market remains an absolute mess. The Westshore Pipeline, which supplies Wisconsin with refined products from Chicago, continues to be shut down. The outage has caused widespread shortages at terminals across south-central Wisconsin.  Thankfully, the harvest season is wrapping up, but diesel and gasoline prices have been extremely volatile, with massive intraday swings. Predicting retail prices right now is nearly impossible—most buyers are simply taking whatever diesel they can find.  Resupply is expected to improve next week as product starts flowing from both the southern and northern systems, which have also been on allocation for over a month. This 15-day stretch has been one of the wildest supply crises in the region in nearly a decade.

Propane continues to hover near the lower end of its trading range. Inventories built again last week as crop-drying demand tapered off, but colder weather is on the way. Forecasts are calling for a deep freeze across the Midwest over the next 7–10 days, which should quickly draw down national inventories and lend more support to prices.  Despite record storage levels, propane remains well-positioned to firm up once winter demand kicks into high gear.

As always, if you have any questions, please don’t hesitate to give us a call.  Have a great weekend!

Best regards,

Jon Crawford