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Good morning,

Happy Friday!

Crude oil prices took a significant hit this week. Over the weekend, Israel reportedly announced they would not be attacking Iranian oil infrastructure, deflating the potential supply shock that had caused last week’s price surge. At the same time, weak Chinese economic data continues to drag down market sentiment. Despite stimulus packages targeting housing and economic recovery, markets remain unconvinced that China will bounce back anytime soon. Chinese factory output continues to decline, and imports of refined products have reached a 15-month low. Refinery runs, particularly on diesel, are also decreasing. Moreover, China has missed its 5% GDP growth target for six consecutive quarters. Given China’s role as one of the world’s largest oil consumers, traders are now flipping their positions on crude oil futures.

Adding to the bearish outlook, OPEC has reversed its position on future oil demand, now forecasting that peak oil demand could arrive as early as 2030. This, combined with the International Energy Agency’s (IEA) similar projections, sent shockwaves through day trading, pushing WTI crude oil prices below the critical psychological floor of $70 per barrel. Even though the EIA reported draws in U.S. crude, gasoline, and distillate inventories, the broader global bearish sentiment overpowered any potential bullish news from the U.S. With Middle East tensions easing, discussions of peak oil demand gaining traction, and China’s continued economic downturn, crude oil prices are struggling to find firm support.

In local news, the Chicago spot basis for gasoline has returned to normal levels, with gasoline spot prices holding lower relative to the NYMEX. I expect these lower retail gasoline prices to hold or potentially decline into next week. On the diesel front, the Chicago spot basis remains in sync with the NYMEX, but supplies are strong. Current data indicates that the Chicago market has enough diesel supply to meet harvest demand in the coming weeks, so I don’t foresee significant changes in diesel retail prices in the near term.

Propane inventories remain at record highs nationwide, but forecasts for a colder-than-normal winter are keeping prices relatively stable. The good news is that with such high inventory levels, even a harsh winter will be manageable in terms of supply. If you haven’t topped off your propane tank yet, I still recommend doing so. We are also still offering propane contracts for the coming winter, and I suggest contracting at least some of your heating needs. Propane prices tend to spike at least once every winter, and locking in now could protect you from paying higher prices during those periods.

As always, if you have any questions, comments, or concerns, please don’t hesitate to give us a call.

Best regards,

Jon Crawford

Good morning,

Happy Friday! This week has been a roller coaster for crude oil prices. WTI crude is holding steady near $75 per barrel after a week of extreme price swings, including a $3 per barrel spike in one day. Prices fluctuated dramatically throughout the week, driven by a barrage of conflicting information that left traders scrambling. By Friday, the market seemed to take a breather, with traders digesting the week’s events. China introduced additional economic stimulus, but markets largely dismissed it as insufficient, leading to a drop in crude prices. Then, Israel abruptly canceled a meeting with the U.S. to discuss a potential military response to Iran, heightening geopolitical tensions. While Israeli Prime Minister Netanyahu did meet with President Biden, many believe Israel is preparing to target Iran’s oil infrastructure. Meanwhile, Ukraine launched more attacks on Russia’s oil infrastructure. In the U.S., inflation showed signs of cooling, though not enough to calm concerns. The minutes from the latest Federal Reserve meeting revealed that several Fed Board members were against the aggressive half-point rate cut, adding further uncertainty. This instability in Fed monetary policy sent crude oil on a wild ride. To complicate matters further, Hurricane Milton pummeled Florida, following closely on the heels of Hurricane Helene. Despite all this volatility, demand for crude oil remains strong, as indicated by the latest EIA inventory report. Some traders are beginning to anticipate a scenario where stagflation develops, but still drives economic spending, which could increase crude oil demand. However, the biggest issue on the horizon for crude prices is the potential conflict between Israel and Iran. Should Israel target Iran’s oil supply, we could see up to a $20 per barrel price shock until Saudi Arabia can ramp up production to offset the supply shortfall.

In local news, the Chicago Spot Market mirrored the volatility of the NYMEX. The Chicago basis fluctuated wildly as harvest demand picked up, refinery maintenance updates were announced, and the potential supply crunch from Hurricane Milton was assessed. However, by the end of the week, diesel and gasoline prices returned to where they started. Supply levels in the Midwest appear healthy, and as of now, I don’t foresee a significant spike in refined fuel costs related to harvest demand. Barring an escalation in the Israel-Iran situation, I do not expect major changes in retail prices over the coming week.

Propane inventories remain at record highs, but forecasts for a colder winter continue to roll in. I continue to strongly recommend topping off your propane tank and locking in some of your winter usage now to protect against a potential price spike this winter.

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

Best regards,

Jon Crawford

Good morning,

Happy Friday! This week’s news cycle rattled the oil markets, causing a selloff that pushed WTI crude oil prices back below $70 per barrel, with prices expected to close the week at a loss. Several factors contributed to the downward pressure on prices. Firstly, Chinese demand remains weak, and despite China announcing a series of economic stimulus plans to reinvigorate its economy, global markets, including commodities, remained skeptical. Many traders believe these measures are insufficient and too late to make a significant impact.

Additionally, Libya announced an agreement between the government and militant groups to restore 700,000 barrels per day of crude oil production, adding further bearish pressure to the market. The biggest surprise, however, came from Saudi Arabia, which announced that it would abandon its push to drive crude oil prices to $100 per barrel. Instead, Saudi Arabia plans to increase production in December to compete for market share. This announcement triggered a sharp decline in crude oil prices. Historically, Saudi Arabia’s strategy of increasing production to gain market share has led to significant price drops—by as much as 25% in the past. However, the kingdom did not provide any new price target, leaving the market uncertain about future pricing dynamics.

Despite these developments, I believe that crude oil prices will stabilize above $70 per barrel going into next year. Other OPEC+ members and even U.S. producers are unlikely to allow prices to collapse. In my view, $70 per barrel represents a sustainable operational price. I also anticipate that Chinese demand will recover next year, with global demand remaining steady. While the threat of oversupply persists, I believe the market has already priced this in, which means crude oil is currently oversold.

On the geopolitical front, several major events could trigger a sudden price spike. Ukraine may launch deeper attacks into Russian territory, Israel is preparing for an offensive against Hezbollah in Lebanon—the first since 2006—and China recently tested an intercontinental missile near Japan. If any of these situations escalate, the potential for a sharp increase in crude oil prices remains high.

In local markets, the Chicago spot market continues to face significant product shortages, as does the Group market. As a result, spot prices have surged compared to the Nymex benchmark. Both gasoline and diesel are trading at a premium due to several factors: Midwest refineries are offline for maintenance, demand is increasing with the harvest season, and Hurricane Helene is putting pressure on Chicago and Group markets to ship refined products they don’t currently have to the Gulf Coast. I expect retail gasoline and diesel prices to rise at the pump, and we could see elevated prices for the next couple of months until refining capacity returns to normal.

While propane prices remain relatively soft, I believe this will be short-lived. Hurricane Helene temporarily halted both exports and production, balancing supply and demand dynamics. NGL has also announced that it will take its export terminal offline for maintenance, though this will only be a brief disruption. As demand picks up east of the Rockies, particularly with corn drying and eventually home heating, I expect propane prices to recover.

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

Best regards,

Jon Crawford