Back Above $90

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Happy Friday!

Oil briefly crossed $90 a barrel on Thursday for the first time since the spring and then pulled back to close the week near $89. WTI is up nearly 40% in July alone, and this was a week that showed exactly why prices are not coming back down anytime soon. Three major supply routes went under attack simultaneously. The Strait of Hormuz running almost no ships. The Houthis made good on their naval blockade of Saudi Arabia. And Kazakhstan lost half its oil production in a single day to Ukrainian drone strikes. Here is what drove the market this week.

Monday arrived with some diplomatic hope after an entire week of escalation. The U.S. had now carried out nine consecutive nights of strikes on Iran, and the weekend brought sad news for America.  Three American military personnel were confirmed killed in Jordan. Iranian forces struck back at U.S. assets across the Gulf and also hit desalination facilities in Kuwait and Bahrain. The Houthis declared a formal naval blockade of Saudi Arabia on Monday morning, calling it an “eye for an eye” response to Saudi airstrikes on Yemeni territory. Two oil tankers were reported immobilized by the IRGC trying to cross the strait. Iran’s foreign ministry sent the week’s most unexpected message saying negotiations could be pursued based on national interests.  But the market heard it as a possible opening after many days that looked increasingly like a runaway escalation.  Oil prices pulled back on the news.  The pattern of this war has been: talk surfaces, oil drops, talks go nowhere, oil climbs back. We have been through that cycle enough times that caution is warranted. The domestic fuel picture on Monday already told you how little cushion exists if talks fail again. Gasoline crossed back above $4 a gallon. Diesel is running north of $5 for farmers and truck drivers.

Tuesday brought another day of steady fighting and a deteriorating supply picture. A commercial tanker was struck in the Strait while trying to cross and crew members had to abandon ship. U.S. forces bombed targets in southern Iran, Iran struck back at U.S. bases in Bahrain, Kuwait, and Jordan, and the covert ship-to-ship transfer network that had been the Gulf’s main workaround slowed significantly after the latest wave of Iranian attacks. The Houthi naval blockade of Saudi Arabia became a real concern Tuesday, with the focus sharpening on Saudi Arabia’s Red Sea pipeline route to Yanbu.  This was the very bypass the kingdom built specifically because Hormuz is no longer reliable. If that route gets disrupted too, Saudi Arabia loses both of its export pathways at once.  On the macro side, oil could rally to over $120 a barrel in the fourth quarter if the Strait of Hormuz remains disrupted. That is not base case, but it is a possibility based on the pace of the past two weeks.

Wednesday pushed WTI above $87 and the week’s most consequential new development arrived in the Red Sea. Three Saudi crude tankers were loaded with oil bound for China and India when they reversed course and turned back rather than sail past Yemen. The Houthi naval blockade was no longer just a threat. It was real enough to make fully loaded supertankers change course. Asian refiners who had been counting on Saudi crude for August delivery are now scrambling. Meanwhile, the EIA inventory report had a somewhat surprising result.  All U.S. petroleum stocks built for the week. Commercial crude rose 2 million barrels. Gasoline gained 0.8 million. Distillates added 1.4 million. Propane surged 6.3 million barrels to a level now 34% above the five-year average. These builds reflect two things.  One, domestic refineries are running at near-maximum capacity pulling in imports from wherever they can get them.  And second, U.S. production is continuing to creep higher. But the underlying tightness has not disappeared.  Distillate stocks are still 10% below average and gasoline is 7% below normal.

Thursday was the day this week became historic. Oil surged for a fifth straight session, pushing over $90, on news that the Houthis had followed through and struck a Saudi crude tanker near the Bab el-Mandeb strait in the Red Sea. Saudi confirmed at least one ship was hit. Nearly 9 million barrels a day of oil flowed through that strait over the past month. Estimates are that roughly 4 million barrels of that would be extremely difficult to reroute if both Hormuz and Bab el-Mandeb are effectively closed simultaneously. The Strait of Hormuz was running at just three  crossings per day on Thursday, down from 18 per day one week earlier. And then Kazakhstan arrived as an entirely new storyline. Ukrainian drone attacks on the Caspian Pipeline Consortium’s Black Sea export terminal forced Kazakhstan to cut production to just over 400,000 barrels a day, less than half of its normal 925,000 barrel daily average. The CPC pipeline handles almost 2% of global oil supply and is the main artery for reaching European refiners.  On the other side of the world, international buyers flooded back to U.S. crude purchases as Gulf supply dried up again.

Friday brought the pullback of the week. Oil fell more than 3% after briefly touching past $90, partly on profit-taking after the dramatic Thursday move.  Also, Trump’s announcement of new tariffs on 60 trading partners added a layer of possible economic slowdown on top of everything else. When traders think the global economy is about to slow down they sell oil even in a supply crisis. But the weekly gains are very real, and the supply picture that drove prices to $90 has not changed. The Red Sea picture today is more nuanced than a clean blockade. Chinese and Russian-linked tankers have been passing through the Bab el-Mandeb without incident.  The Houthis appear to be letting allied nation ships through unharmed.  Some Saudi crude is still moving. But the economics of using the alternative routes is much more expensive.  India’s refiners are already racing to find alternative supply.  OPEC is set to meet August 2 and is expected to raise its output target, but these quota increases are essentially meaningless right now. OPEC is signaling market recovery but its members physically cannot deliver what they are promising.

The Chicago spot market moved higher with crude oil this week. Diesel jumped over 30 cents a gallon and gasoline followed crude upward while staying more contained thanks to healthy inventories during peak summer demand. I expect retail prices to move higher at the pump, with diesel rising at a steeper rate than gasoline. One thing I am watching closely is that Chicago diesel is still trading at roughly a 50 cent per gallon discount to the NYMEX heating oil contract.  This is an unusually wide gap. With refiners booking extraordinary margins on diesel right now, if Chicago gets at all tight on supply that basis could close fast. Monday is important to watch.  The August prompt contract expires and a rebalancing of that basis could take place around the rollover. Early next week will tell us a lot about the trajectory of diesel prices heading into August.

Propane continued to trade in a very narrow range, and Wednesday’s inventory report showed a massive build.  Many in the market attributed the build to a rebalancing of volumes that had been moving around over the past month, rather than a genuine demand event. Propane summer fundamentals remain in play through end of September, which means you still have time to capture some attractive summer fill pricing before the heating season dynamics start pulling prices higher. That said, in an environment this volatile, I strongly recommend ordering your summer fill sooner rather than later. Next heating season contracts are available.  Please give us a call and we will walk you through your options.

As always, if you have any questions please feel free to give us a call. Have a great weekend!

Best regards,
Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal

No Break In The War

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Happy Friday!

Oil is ending the week around $85 a barrel, up more than 20% from where it started Monday.  This was one of the most alarming weeks of the entire Iran conflict. The brief peace deal that looked promising three weeks ago has completely unraveled. Six straight nights of U.S. airstrikes, Iranian missile attacks on American bases across the Gulf, cruise missile strikes on UAE tankers, Iran’s first direct attack on U.S. facilities in Syria, and now a credible threat to close both the Strait of Hormuz and the Red Sea simultaneously. The market spent all week trying to catch up to events that nobody expected to happen this fast.

Monday started badly. Over the weekend, Iran had targeted U.S. military facilities across the Gulf and declared the Strait of Hormuz closed again. Monday morning brought fresh news that Iran’s Revolutionary Guard had attacked U.S. bases in Kuwait and Bahrain. Ship-tracking data showed only six vessels transited the strait on Sunday.  That was the lowest single-day count in five weeks. Oil surged more than 3% on the open. The Iranian oil that briefly flooded the market during the ceasefire window is now sitting idle at sea, floating in limbo. Iran’s oil is stuck not because of sanctions alone but because the buyers it was counting on found better deals elsewhere. Another interesting report was that the DOE officials announced that the Strategic Petroleum Reserve’s aging infrastructure is being held together with Band-Aids. The 60 Gulf Coast salt caverns were built in 1975, and investment in maintaining them has not kept pace with the demands being placed on them.  At current levels, pumping oil out of the caverns is becoming difficult and there are potential dangers of refilling them at these lower levels.

Tuesday was the heaviest single day of military exchange since the war began. Iran struck two UAE tankers with cruise missiles in the Strait. The UAE has been running record production of over 4 million barrels a day in large part because of this improvised system moving shadow tankers. One Indian crew member was killed and eight others wounded. Iran also fired ballistic missiles at a U.S. air base in Jordan, and the U.S. struck back with five hours of attacks on Iranian targets. Yemen’s Houthi movement fired missiles at Saudi Arabia, adding another thread. Trump reinstated the full U.S. naval blockade of Iranian shipping. Asian refiners responded by actively looking to replace Middle Eastern crude with American oil. Japan, South Korea, and India are all in the market for U.S. barrels. The June Consumer Price Index came in at 3.5% year-over-year, better than the 3.8% economists expected and down sharply from 4.2% in May. But I would not read too much into that. Most of that improvement reflects the drop in gasoline prices during the brief ceasefire window in June.

Wednesday pushed WTI above $80 a barrel for the first time in weeks. The U.S. launched another wave of strikes. Iran struck back at U.S. bases in Bahrain, Kuwait, and Jordan.  Iran then threatened directing its Houthi allies in Yemen to close the Bab el-Mandeb narrow gateway at the southern end of the Red Sea. The Strait of Hormuz carries roughly a fifth of the world’s oil. The Bab el-Mandeb is how that oil gets to Europe and the Atlantic. Threatening both points simultaneously is not something the market has ever had to price in before. The EIA weekly report showed crude stocks fell 1.7 million barrels to 409 million barrels, which is still 6% below the five-year average. Gasoline dropped another 1.5 million barrels and is 8% below average. Diesel stocks rose 4.6 million barrels, which is good news. An interesting data point out of China noted that crude oil imports fell 41% in June compared to a year ago.  And China drew down its strategic reserves at a pace 85% faster than in May just to keep refineries running. When that restocking demand eventually arrives, it will add significant pressure to an already stressed global market.

Thursday brought oil to its highest level in about a month, holding near $83 after surging roughly 12% over the prior three sessions. The fifth consecutive night of U.S. airstrikes on Iran kept pressure on prices. Only seven ships crossed the Strait of Hormuz on Wednesday, down from thirteen the prior day. Iran declared Hormuz an inviolable “red line” and warned that if Trump carries out his threat to bomb Iranian power plants and bridges, it will retaliate against all energy infrastructure across the Gulf.  Houthi forces in Yemen have already completed preparations to close the Bab el-Mandeb, deploying missiles and drones in Yemen. Saudi Arabia has been rerouting roughly 7% of global energy supplies through its East-West pipeline to the Red Sea port since the Hormuz closure began. If that bypass gets cut simultaneously, the supply shock would be historic. A drone also struck a tanker at Iraq’s Basra export terminal on Thursday, briefly forcing a suspension of all crude loadings.  The U.S. reportedly struck a supertanker near Iran’s main export terminal in the Persian Gulf. Both sides are now targeting energy infrastructure directly, not just military assets. I do not expect prices to stay calm if Iran follows through on either the power plant threat or the Red Sea order. I am watching both very closely.

Friday confirmed the direction of the week. Oil rose more than 2% as the U.S. and Iran traded strikes for a sixth straight night. Only three commercial vessels crossed the Strait on Thursday.  This was the fewest single-day crossings since May.  And for the second straight day not a single large crude carrier or fuel tanker made it through. Some crews are simply refusing to make the trip regardless of pay. Iran expanded the conflict overnight to Syria.  This was the first direct attack on U.S. facilities there.  And they struck a Kuwaiti power generation and water desalination station. That signals Iran is willing to threaten the stability of its neighbors beyond shipping. On the domestic supply side, U.S. refiner margins hit a fresh record high for the third straight session. Demand for American refined products from overseas buyers has pushed U.S. fuel exports to record levels. That is welcome for producers, but it means domestic fuel stockpiles are being drawn down to supply the world, which pushes gasoline and diesel prices higher for everyone here at home. Midwest farmers are feeling this right now during the height of summer operations.

The Chicago spot market moved sharply higher with crude prices this week. Gasoline jumped over 20 cents a gallon and diesel over 40 cents. I expect prices at the pump to move meaningfully higher heading into next week. One thing I am watching closely is that Chicago diesel is currently trading about 60 cents a gallon cheaper than NYMEX heating oil, which is an unusually wide gap. With refiners running highest possible capacity on diesel, if Chicago gets tight on supply at all, that basis could explode another 30 to 40 cents in a hurry. The Group spot market is also showing weak diesel basis right now, which tells me supplies are currently healthy.  But it would not take much of a disruption to change the situation quickly. Gasoline basis is a little soft but nothing that has me worried at this point.

Propane prices appear to have found a floor and have been stable this week. Given everything going on, I only see potential upside for propane heading into the winter heating season. I do not think the upside is as dramatic as it has been in some past years, but that can change quickly during periods of high demand when logistics get strained. Even with fundamentals looking somewhat comfortable right now, I still recommend locking in some heating gallons for next season while you can. And if you are able to top off your tank this summer, it will lower your cost average for the year.

As always, if you have any questions please feel free to give us a call. Have a great weekend!

Best regards,
Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal

No One Knows

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This was a week that started with oil looking like it was finally settling down and ended with analysts questioning whether the Strait of Hormuz will ever be reliably open again. A lot happened this week!

Monday opened quietly. WTI slipped to around $68/barrel, down about half a percent, after OPEC and its allies agreed over the weekend to pump another 188,000 barrels a day starting in August. On the surface that sounded like a lot of new supply hitting an already recovering market, but the reality was more nuanced. Those barrels were not new production.  They were countries slowly climbing back toward levels they had pledged before the war. Gulf exports had already jumped more than 3 million barrels a day in June compared to May, topping 10 million barrels a day for the first time since the conflict began. The last tankers trapped inside the Strait during the war were finally starting to make it out. Chinese refiners were buying discounted Middle Eastern crude as fast as it arrived. Monday felt like crude oil was finally finding balance.

Tuesday was the first warning of the situation changing. Iran’s Revolutionary Guard fired missiles at ships in the Strait of Hormuz, striking a Saudi crude oil tanker and another vessel. Iran’s foreign minister said peace talks were off the table as long as Trump kept threatening strikes. The fragile ceasefire looked like it was on its last leg.  In addition, Saudi Arabia announced it was studying an expansion of its East-West crude pipeline to the Red Sea.  The project would let it move up to 7 million barrels a day to export markets without ever crossing the Strait. Clearly Gulf countries are starting to plan for permanent Strait issues.

Wednesday was the pivotal day. The chain of events moved fast.  Iran struck commercial vessels, the U.S. launched airstrikes on Iran’, Iran retaliated against U.S. military sites in Bahrain and Kuwait, and then Trump declared at the NATO summit that the interim peace deal was over.  WTI jumped more than 5% to $74.44 in a single session. Tankers turned back from the Strait rather than risk the crossing. Washington reinstated full sanctions on Iranian oil starting July 17.  The EIA’s weekly data that afternoon added more color to the picture. Crude inventories actually built by 3 million barrels.  This was the first build since mid-April.  But distillate stocks dropped 5 million barrels, landing 12% below their five-year average.

On Thursday traders seemed to take a breath and reassess the situation. Shipping through Hormuz had nearly stopped. Only about 20 commodity carriers crossed in either direction on Wednesday, the lowest daily count since before the June deal.  And Thursday even that number had decreased. Country representatives were urging shipping companies to pause movement. The concern is not just this week’s fighting. As long as the U.S. and Iran are fighting for control of the Strait, every ceasefire is just a pause between confrontations.

The diesel story also came into sharper focus Thursday. Russia announced a ban on diesel exports through July 31st as a direct result of Ukraine’s drone campaign against Russian refineries. Moscow’s domestic fuel situation had deteriorated enough that it needed to keep supply at home. Combined with Gulf refineries still running at less than half of prewar capacity, the global diesel market was left without its two biggest emergency supplies at the same moment. The crack spread, the gap between what crude costs and what a barrel of gasoline or diesel sells for, had climbed to roughly $57 a barrel, near its highest level since 2022. Crude prices still have come down a lot from their war peaks. But diesel prices were not following due to tight world supplies.

Friday brought a slight pullback, but oil was still on track to finish the week well above where it started Monday. Trump said he did not think the war would restart. The U.S. and Iran were reportedly still talking through back channels despite the fighting. The IEA confirmed what the market had been feeling all week.  Crude is becoming well supplied, but refined products remain exceptionally tight. Gulf refineries are still offline, and product exports from the region are running below half of prewar levels. That gap will not close until those facilities restart.  And that takes months, not days, regardless of what happens with Iran. On a more positive note, governments around the world are lining up to rebuild the emergency reserves they drew down during the war. Analysts estimate that strategic petroleum reserve purchases could add up to roughly 664,000 barrels a day of demand through the middle of 2027.  This demand increase will help absorb some of the supply OPEC is putting back into the market and give prices a floor. I do not expect oil to collapse, even if the Iran conflict ends.

The Chicago market tracked crude oil closely through the week’s volatility. Prices climbed sharply on Wednesday alongside WTI, then retreated somewhat on Thursday and Friday. Even with those pullbacks, I expect to see retail prices on gasoline and especially diesel move higher in the days ahead. Crack spreads here in the U.S. are at their highest level since 2022, which means refiners are being rewarded handsomely for every gallon of gasoline and diesel they produce. The export arbitrage right now is extraordinary, and if domestic refineries are running at the limit to serve overseas markets, that will eventually show up as tighter supply closer to home. I am watching the Gulf situation closely this weekend.

Propane prices stabilized this week after falling the week before. Summer fills are in full swing, and we are currently at the lowest price of the year so far. I continue to strongly recommend topping off your tank this month or in August and locking in some heating gallons for next winter now. The geopolitical situation can shift quickly, and when it does, prices move fast. Right now you have an excellent opportunity to secure supply at favorable levels before the fall heating season.

As always, if you have any questions please feel free to give us a call. Have a great weekend!

Best regards,
Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal

Happy 4th Of July!

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Happy Friday and 4th of July weekend!

Oil finished the week around $69 a barrel and this was a week where the price kept drifting lower even as the news got more complicated. The Strait is still open and tankers are still moving, but the talks between the US and Iran are going nowhere fast, and both sides are starting to look pretty far apart on the most important questions. Here is what drove the market this week.

Monday started with oil bouncing back to about $70 a barrel after a rough weekend. Over the prior few days, Iran struck an oil tanker inside the Strait, the US fired back with fresh airstrikes, and several big ships that were planning to cross turned around and went home. But Monday brought an agreement from both sides to stop the reciprocal strikes and get back to the table.  And that was enough to push prices back up about 1%. The ceasefire is still fragile, but it held. Saudi Aramco kept loading oil after the strikes, so some optimism remained in the market. A fourth supertanker was spotted loading there on Monday, adding to the three that moved the week before.  Venezuela had a rough weekend too.  A power outage from the earthquakes knocked out its biggest refinery. The good news is it came back online, and the country confirmed its oil production and exports were not affected.

Tuesday brought a diplomatic disappointment. US envoys flew to Qatar to restart talks with Iran. Iran didn’t show up. A Qatari official confirmed no high-level meeting happened, and mediators were basically just trying to keep things from getting worse. This matters because the 60-day window for turning the signed agreement into a permanent deal is ticking.  Oil barely moved on Tuesday, holding near $71, which tells you the market had largely expected this. The bigger picture on Tuesday was that banks were cutting their oil price outlooks for the rest of the year for the first time since the war started.  Gulf oil is coming back to market faster than the peace negotiations are moving forward, and analysts now expect there to be more oil than the world needs next year. Iraq started offering massive discounts to any buyer willing to send a tanker through the Strait.  When a country is pretty much selling oil at cost, that tells you the supply picture has shifted from a few months ago.

Wednesday was quiet on the diplomatic front but busy on the data side. The government’s weekly oil report showed US crude stocks fell another 3.8 million barrels, leaving inventories about 7% below where they normally are this time of year. Gasoline also dropped 2.3 million barrels and is 7% below seasonal average. On the flip side, diesel stocks rose 2.5 million barrels, which continues to be a surprise. Refineries were running at 96.6% of capacity which is essentially full speed. There was an interesting data point discussed in the report.  Americans are actually using less gasoline and diesel than they did a year ago. High prices from this spring left seem to have finally hit pocket books and people are cutting back. US crude oil production hit a record high in April of almost 14 million barrels a day.  The extra supply is going to add to the global surplus that analysts are worried about in 2027. Russia’s fuel problems got even worse on Wednesday.  Russia is now buying gasoline from India by ship. Ukraine has shut down so many Russian refineries with drone strikes that Russia is no longer able to produce enough finished product to meet the country’s demand.

On Thursday, oil prices fell again, dropping close to 2%, as the US-Iran talks in Doha wrapped up with what the US called “positive progress” but news outlets in Doha countered with publishing no actual breakthroughs. The 60-day clock keeps running with no deal on the horizon. Iran has somewhere between 58-68 million barrels sitting on tankers with no clear buyers. More than 90% of those ships show no destination. Iran has until mid-August under the US sanctions waiver to find buyers for that oil. Ukraine struck another Russian oil refinery Thursday adding to the continued growing list of Russian refineries driven offline.

Chicago spot prices did not move that much this week, and the market moved pretty much in line with crude oil. Diesel made some big up-and-down swings during the week but ended up right about where it started. Gasoline was flat all week. I expect to see prices at the pump stay about the same heading through the holiday weekend.

The big news on propane is that prices dropped heading into July. Demand has been weak, production has been strong, and even though exports are running at record levels, inventories remain at high levels. Combined with lower crude prices, propane prices moved down to its lowest price of the year. This is the best time we have seen all summer to fill your tank. I still strongly recommend topping off now and locking in some gallons for next heating season while prices are this low.

As always, if you have any questions please feel free to give us a call. Have a great weekend and Happy Fourth of July!

Best regards,
Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal

Hanging On By A Thread, Or Is This For Real?

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Happy Friday!

WTI crude oil ended the week around $69 a barrel.  The current price is below where prices were before the Iran war began.  And this was the week the market made clear it believes the supply is actually coming back. From Monday’s peace talk optimism to Thursday’s record flows through the Strait, prices fell nearly $7 in five trading sessions. And yet, by Friday, a vessel attack near Oman, Iran turning back tankers it deemed unauthorized, a revealing of unreported damage to the U.S. naval base in Bahrain reminded everyone that $69 is a trading level, not necessarily a reality.

The week opened Monday with encouraging signals out of Switzerland. The first formal round of U.S.-Iran peace talks wrapped up with both sides calling it “major progress,” and Vice President Vance publicly confirmed the Strait of Hormuz is open for business. Iran’s Foreign Minister confirmed that Iran had secured waivers allowing oil exports to begin, frozen assets would be released, and that the reconstruction fund has been formally launched. Oil fell on the news.  Physical proof supported the announcements on Monday. More than 25 million barrels of Iranian crude passed through the blockade, and the US reported that 55 ships crossed the Strait on Saturday carrying roughly 17 million barrels. Even though the day before Iran’s Revolutionary Guard briefly declared the Strait closed again, citing Israeli strikes in Lebanon, Iran kept the oil flowing.

Tuesday brought the week’s biggest policy shift. The U.S. officially waived Iran’s oil sanctions for the first time in nearly a decade, authorizing the sale of Iranian crude through August 21. It is a dramatic reversal after years of maximum pressure designed specifically to keep Iranian barrels off global markets. Although selling that oil is harder than it sounds. About 68 million barrels of Iranian crude are sitting on the water and most are available for purchase.  But the market is full. EU and UK restrictions remain in place even with the U.S. waiver.  Some ports may refuse Iran’s shadow tanker fleet entirely. And buyers are wary that Trump could reverse the waiver at any moment, leaving them committed to a cargo that becomes sanctioned again mid-deal. China, Iran’s traditional anchor buyer, is not rushing to purchase.  China’s domestic demand is flatlining and private refiners there are running at a nine-year low utilization rate.

Wednesday was when prices really broke. WTI fell to about $72 a barrel as tanker traffic through the Strait kept building and Middle Eastern supply rushed back onto a market that had been short of barrels for months. Physical crude cargoes started selling at discounts in multiple markets, a clear sign that supply was outpacing near-term demand. The war premium in oil had not just unwound, it started to reverse. But a serious crack appeared on Wednesday. Trump stated publicly that Iran had agreed to nuclear inspections “into infinity” as part of peace negotiations. Iran’s side flatly denied ever making that concession. That is not a small disagreement over wording.  Nuclear inspections are the core issue the 60-day ceasefire window was supposed to resolve. On the domestic supply front, the weekly EIA inventory report confirmed crude stocks fell another 6.1 million barrels last week and are still about 7% below the five-year average.  The massive draw was even more defined because gasoline stocks rose 2.1 million barrels and distillates climbed 3.1 million barrels.

Thursday brought WTI below $70 a barrel for the first time, closing at $69 and fully erasing all the price gains from the four-month Iran war. Th U.S. confirmed at least 20 million barrels of oil exited the Strait in the previous 24 hours.  But Iran made clear it intends to keep managing traffic on its own terms.  Whether the Strait truly returns to an open or remains under Iran’s effective management is one of the most important unresolved questions hanging over the long-term stability of global oil supply. Trump addressed Iran’s desire for tolling by stating he will not accept any peace deal that includes tolls on ships transiting Hormuz.  Iraq complicated the OPEC picture Thursday as well, signaling it is considering leaving the organization if it does not get a significant quota increase. Iraq is OPEC’s second-largest producer and one of its five founding members.  Losing Iraq two months after losing the UAE would be a serious blow to OPEC’s ability to manage global supply. China added to the bearish pressure by raising its refined fuel export allowance for state refiners in July with no restrictions on destination countries.

Friday closed the week with WTI near $69, but not without drama. Saudi Aramco resumed oil loading after nearly a four-month halt.  There were two very large crude carriers actively taking on crude, with a third waiting nearby. But a cargo vessel reported being struck by Iran near Oman on Thursday.  The UN’s Maritime Organization responded by pausing its escort operation through the Strait. Iran doubled down on the attack. Iran reasserted its right to control all shipping through the waterway, warned Gulf states against siding with the U.S., and the Revolutionary Guard turned back three tankers attempting what it called unauthorized passages. Iran made its position explicit: ships using routes not designated by Tehran do so at their own legal and financial risk. Iran is reacting to that united front between Gulf Nations and the US, and Friday’s events make clear the standoff over who actually controls the Strait is far from resolved.

Chicago spot market was very wonky this week as the July prompt spot contract expired and moved to August.  There was a frenzy of gasoline trades placed at the expiration causing pricing frustration.  Gasoline prices whipsawed in opposite directions of predicated price indicators.  Hopefully by the start of next week we will see some balance in the gasoline market.  For now, retail prices should still stay in the current range.  Diesel prices did not experience the same volatility as gasoline at month end.  Diesel prices continue to drop, and I expect to see retail prices continue their slow and steady decline.  Also, a massive refinery in Pennsylvania went down with a fire and traders are waiting patiently to see if some Chicago supply might be moved east.  Time will tell.

Propane spot prices surprisingly dropped this week after months of stability.  Retail prices dropped but nothing majorly significant compared to the last two months.  I still believe that filling up your tank now is a good buy and I recommend locking in some heating gallons for next season.

As always, if you have any questions, please feel free to give us a call. Have a great weekend!

Best regards,

 

Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal

Lots To Discuss Even Though Markets Were Closed Friday

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Happy Friday!

Oil is ending the week right around $77 a barrel.  This was the week the world actually saw a peace deal get signed, watched the first supertankers move through the Strait of Hormuz in months, and celebrated gasoline dropping below $4 a gallon for the first time since March. And then Friday morning brought a fresh complication that reminded everyone how fragile this whole thing still is.

The week started Monday with oil already down sharply after Trump announced over the weekend that the U.S. and Iran had agreed to an interim peace deal. Pakistan’s prime minister confirmed that both sides would sign a formal memorandum of understanding in Switzerland on Friday. The terms were significant: the Strait of Hormuz would reopen toll-free, the U.S. naval blockade of Iranian ports would end, and Iran would get the right to resume oil exports immediately. The E4 nations said they were prepared to lift sanctions on Iran in exchange for steps toward nuclear disarmament. Iran agreed in principle to not produce or acquire nuclear weapons and to dramatically reduce its enriched uranium stockpile.

The market priced all of this in with cautious optimism rather than outright celebration, and I think that was the right call. Oil traders have watched Trump announce imminent deals on the Strait many times since February only to see fighting resume. The full text of the agreement still had not been released Monday, and major shippers said they would not restart Hormuz transit until the waterway was confirmed safe, including mine clearance.

What most people did not know until Tuesday was that the U.S. military had been quietly running a covert ship-to-ship oil transfer operation since early May to keep Gulf energy moving during the war. At least 92 ships were involved with handoff points near Fujairah in the UAE and Oman’s port of Sohar. Here is what I find remarkable about that.  This is the exact same technique Iran has used for years to evade U.S. sanctions. Washington borrowed Iran’s own playbook to keep oil flowing during the war with Iran. Oil fell further on Tuesday, extending the two-day slide.

Wednesday brought more detail on the deal itself. Further details explained that Iran would be allowed to resume oil sales immediately upon signing, and the agreement included access to a $300 billion fund to help rebuild Iran’s economy.  The IEA also weighed in Wednesday with its first look ahead at 2027.  They believe global oil supply is on track to surge roughly 8 million barrels a day next year while demand grows by only 2 million. On the domestic supply side, the weekly inventory report showed crude stocks fell another 8.3 million barrels, leaving U.S. inventories about 6% below the five-year average. Gasoline is also 6% below normal and distillates are 13% below.  These inventory deficits are occurring all while refineries are running at 96.7% utilization.

Thursday was the big day of the week. Trump and Iran’s President both signed the memorandum of understanding.  Within hours of signing, three Saudi-flagged supertankers carrying a combined 6 million barrels of crude crossed the Strait. Ship-tracking data showed at least 12 million barrels of crude in motion out of the Persian Gulf by midday. Shippers are still moving carefully.  In addition, Ukraine also struck another Moscow main oil refinery on Thursday in a major drone attack, the second strike on the facility that week.  The strikes were a reminder that Russian energy infrastructure remains under continued pressure.

And then Friday arrived. Switzerland announced that the formal U.S.-Iran peace talks scheduled for today in Geneva will not take place.  The postponement does not cancel the signed agreement.  On top of that, Iran’s Revolutionary Guard Corps has quietly set up new covert cells in Iraq with the aim of carrying out attacks on Gulf countries that host American forces.  That kind of activity is exactly the type of thing that could unravel this deal if it escalates.

The dollar had its biggest two-day rally in three months.  The Fed held rates steady Wednesday under new chairman Kevin Warsh, as expected. But Warsh made clear the Fed will not tolerate a resurgence of inflation, and half of the rate-setting committee is now projecting a rate hike by year-end. Two-year Treasury yields jumped 13 basis points in a single day.  This was the biggest single-day move in more than a year.  These economic decisions affect the strength of the dollar which puts pressure on oil prices.  Regardless, national average for gasoline at the pump dipped below $4 a gallon for the first time since March.

One of the more lasting takeaways from this week is how permanently the Hormuz closure has changed the way the oil world thinks about risk. Japan sourced roughly 90% of its crude from the Persian Gulf before the war. It now maintains a steady base of U.S. oil purchases every month and is not going back. Saudi Arabia and the UAE are accelerating pipeline expansion plans to bypass the strait entirely. That infrastructure buildout will reshape the region’s energy geography for decades.  And it means the next disruption of the Strait will hit a market that has already started rewiring itself, therefore, taking some leverage out of the hands of Iran.

Chicago had a quiet week, and after the past two weeks of volatility, I will take it. The spot market traded in lock-step with crude oil, inventories are healthy, and basis movements were stable. Diesel prices at the pump should continue to drift lower as inventories replenish with cheaper cost product. Gasoline was mostly stable and I do not expect much change there heading into next week.

Propane continues to trade in a very narrow range and I do not expect to see any meaningful price drop unless crude oil prices collapse further.  And given everything that is still unresolved, I would not count on that. The situation looks a bit rosy right now, but we are definitely not out of the woods yet. I still strongly recommend topping off your tank this summer and locking in some heating gallons for next winter before any surprises push prices higher. We have prepay, budget, and price-lock options available.  Give us a call and we will get your summer fill scheduled and walk you through your contract choices.

As always, if you have any questions please feel free to give us a call. Have a great weekend!

Best regards,
Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal

Let’s Make A Deal!

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Happy Friday!

Oil ended the week at its lowest price in nearly two months, settling around $84/barrel, after Trump called off threatened new military strikes on Iran and a Western a ceasefire deal could be signed as soon as Sunday. That is the biggest piece of good news the oil market has seen since this war began. Here is what is driving the market.

This was a week where the fighting and the diplomacy happened at the same time, which made it impossible to know which way things were heading on any given day. It started with a surprise on Monday when Israel struck Hezbollah positions and an Iranian petrochemical complex over the weekend, and Iran fired missiles back at Israel.  This was the first direct exchange between the two countries since the April ceasefire. The fragile two-month truce seemed to be collapsing. WTI shot up more than 4% at the open. Then Tuesday brought some relief after Trump called on both sides to stop shooting and Iran and Israel stopped attacks.  But both made clear they’d resume if the other acted first, so it was more of a pause than a truce. Wednesday brought another escalation. A US Apache helicopter was shot down near the Strait, Trump ordered retaliatory strikes, Iran hit US bases in Jordan and the Gulf, and Trump began threatening to strike Iranian power plants and bridges. By Thursday the strikes were near-daily, Iran formally declared the Strait of Hormuz closed, and Trump posted on social media that the US would take control of Kharg Island.  Remember, Rharg Island is the terminal handling roughly 90% of Iran’s oil exports. Oil briefly spiked to $95/barrel on that news. And then Friday morning, the tone flipped completely. Trump reversed course, said a deal would be done in days, Iran confirmed active negotiations, and the US military posted that commercial ships continued to move through the Strait. Prices dropped sharply. Nothing is done until it’s signed, but this is the clearest path to a deal we have seen in months.

Beneath all the daily drama, the underlying supply story got a little worse this week. US crude inventories fell another 7.2M barrels, now about 5% below where we would normally be at this time of year. That marks nine straight weeks of declines. Gasoline is 6% below its five-year seasonal average, and diesel is 13% below. Refineries are running at 95% of capacity just trying to keep up. Kuwait did make the first offer to sell refined products from the Gulf since the war began by structuring cargoes to bypass the Strait entirely.  Kuwait is going to use ship-to-ship transfers off India’s west coast and storage terminals in Oman. It is a small amount compared to normal traffic, but it signals that Gulf producers are finding creative ways to move oil even in the middle of active conflict. On the global supply front, Russia is cutting crude exports from its western ports from 2.5M barrels per day in May down to 1.7M in June, adding another layer of pressure to an already tight market.

Stateside, the US quietly became the world’s largest oil exporter for the third month in a row, with American crude and fuel exports running about 10.5M barrels per day in May.  There is one longer-term concern worth keeping an eye on.  When the Strait eventually reopens, every Gulf country will be desperate to pump as much as possible to make up for months of lost revenue. That flood of returning supply all hitting the market at once could push prices sharply lower, and OPEC will have limited ability to coordinate a response. The UAE has already left the cartel and others may follow after the Strait reopens.

Summer is here and American drivers are heading into peak travel season with pump prices still running about 40% higher than before the war started.  Gasoline retail is still overing above $4/gallon. Refineries have been running hard but have been prioritizing diesel and jet fuel production to cover global shortfalls and book incredible margin.  The move to distillates has left gasoline inventories lean. Also worth noting, the government held a federal lease sale in Alaska’s Arctic National Wildlife Refuge this week. Not a single major oil company bid on the lease. The political risk of investing billions in a project that a future administration could shut down was too great. Trump’s administration is feeling pressure on multiple fronts including inflation topping 4% in May.  Inflation has now surpassed increased earnings due to energy starting to drive up the cost of goods.

The weekend could be one of the most important in months for fuel prices. If a peace deal is signed and the process of reopening the Strait begins, prices would likely fall further and quickly. The physical market would still take months to fully recover, but a signed deal would give the world a credible timeline for relief.  However, I’m still in the “believe it when I see it” camp.  Even if a deal is signed, the deal hinges on all proxies to Iran not violating the deal.  The past four months have shown us that stability is far from being reached. Stay tuned.

The Chicago spot market was fairly quiet this week.  No major basis moves occurred.  There as a bit of basis in gasoline, but the price collapse on the NYMEX won’t affect retail prices too much.  I expect to see gasoline retail prices hold below $4/gallon in Central Wisconsin.  Diesel prices have stabilized.  I do expect to see diesel retail prices slowly move lower as inventories replenish post May diesel basis-blowout.

Propane continues to hold.  Propane prices did not drop with the hefty drop in crude oil price this week.  Propane inventories did not build as much as expected.  Propane seems to be approaching price discovery.  I’m not sure we will see prices go lower, even with another $5/barrel coming off crude oil prices.  I highly recommend topping off your tank and locking in your price for the 2027 heating season.

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

Best regards,

Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal

Lots Of Info, Not A Lot Of Action

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Happy Friday!

Oil is ending the week right around $92 a barrel, roughly where it started. It was one of those weeks where everything went back and forth: good news, then bad news, then good news again. Every time it looked like a deal might be coming together, something happened to push it off.

The back-and-forth on peace talks was the story all week. Monday started with the US and Iran exchanging new strikes over the weekend, which erased the optimism from the prior Friday. Tuesday things brightened up when Iran said it was actively reviewing a proposed ceasefire deal and Trump told the public he expected an agreement to reopen the Strait within about a week. Then Wednesday, Iran fired ballistic missiles at Kuwait and Bahrain.  Both Gulf countries that had not been directly targeted in months. The US struck back near the entrance to the Strait, and the whole diplomatic process collapsed again. Thursday, the Trump administration announced a ceasefire between Israel and Lebanon, which is a big deal because Iran has said all along that Lebanon has to stop fighting before it will agree to anything with the US. Oil prices dropped sharply. Then Friday morning, Hezbollah said it never agreed to the ceasefire terms and rejected it, Israel said it wasn’t leaving Lebanon, and we were essentially back to square one. The market held steady rather than crashing, which tells you traders are cautious but not panicking. Nobody is ready to bet big that this gets resolved soon.

The oil supply situation around the world keeps getting tighter. Last week’s government inventory report showed US crude stockpiles fell 8 million barrels in a single week.  Again, one of the biggest one-week drops since this whole crisis started. We are now sitting about 3% below where inventories normally are this time of year. Gasoline is 5% below normal, diesel is 3% below, and refineries are already running near full speed trying to keep up. The total amount of oil stored in the US, including the Strategic Petroleum Reserve, has dropped for ten weeks in a row and is now at its lowest level since 2004. The head of the IEA’s oil markets division warned this week that global inventories could hit critical levels just as summer demand picks up. That is not a minor concern. The IEA is the world’s top energy agency telling us the cushion is nearly gone.  Therefore, we might not be able to keep kicking this can down the road.

Iran’s oil exports have all but collapsed. New data this week showed Iran was only exporting about 200k barrels per day in May.  This is a six-year low, down from 1.3 million in April, and nearly 1.9 million back in March. The US naval blockade is working. There are currently about 145 million barrels of Iranian crude sitting on tankers at sea with nowhere to go, roughly 65 million of those trapped inside the Gulf. Even at these low export volumes, Iran is having to discount its oil just to get Chinese buyers interested, because Chinese refineries are cutting back amid weak demand at home.

Russia is in the same boat in China. Russia’s oil is also getting discounted. Russia also admitted this week for the first time that its overall oil production has dropped this year. The prime minister blamed routine maintenance issues, but Ukraine’s ongoing drone strikes on Russian oil infrastructure, including a terminal in St. Petersburg hit this week while Putin was hosting his annual economic forum in the same city, are widely seen as the real reason.

Looking into the future, Saudi Arabia and the UAE are spending billions to build new pipelines and export routes that bypass the Strait entirely. They learned from this crisis that relying on one waterway is too dangerous. These new routes will stay in place long after this conflict ends. Meanwhile, India raised fuel prices again.  India has raised fuel prices four times since mid-May, and it is already starting to slow down diesel demand in the trucking industry. When Indian truck drivers start cutting back, that matters globally.

Back home, the May jobs report came in much stronger than expected.  The US added 172,000 new jobs, more than double what economists were forecasting, with unemployment holding at 4.3%. Good news for workers, but it complicates things for the oil market. Strong job numbers mean the Federal Reserve has less reason to cut interest rates, which keeps borrowing costs high, which eventually slows economic growth and reduces fuel demand. In addition, higher interest rates inflated oil prices due to oil being traded on the US Dollar.  The 10-year Treasury yield moved higher to 4.47% heading into the weekend with no rate cuts anywhere in sight.

Chicago finally had a calmer week. The spot market continues to balance with the Group Spot market, and both gasoline and diesel prices moved normally alongside crude oil. Both products have now settled at lower average prices than we saw earlier in the crisis. This is a good time to be buying fuel. Gasoline retail prices should hold roughly steady. There was some volatility this week that may take a few days to fully shake out. But diesel pump prices should keep coming down heading into next week.

Propane prices have not come down despite crude oil pulling back, despite an inventory build this week after export volumes dropped. Inventories had been stubbornly flat during what should be the normal build season, so any increase is positive news. However, traders are still bullish propane exports long-term. Right now is a very good time to lock in your heating gallons for next winter before any surprises push prices higher. We have prepay, budget, and price-lock options available. Give us a call and we will get your summer fill scheduled and talk through your contract choices!

As always, if you have any questions please feel free to give us a call. Have a great weekend!

Best regards,

Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal

Are We Finally Seeing SOME Light?..

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Happy Friday!

This was one of the most volatile weeks of the entire three-month Hormuz crisis. WTI crude touched $100 a barrel early in the week, collapsed to $90 on deal optimism midweek, snapped back above $90 when airstrikes resumed, and is ending the week right back near $90 as a potential ceasefire extension waits for President Trump’s signature. Oil moved as much as six dollars in a single session on multiple days. The one certainty heading into the weekend is that nothing is solid until a deal is signed and the first tanker moves freely through the Strait.

The week started with cautious optimism coming out of the Memorial Day weekend.  Iran’s foreign ministry said agreements had been reached on many topics in negotiations.  That hope collapsed quickly on Tuesday when the US launched new strikes on Iran. Iran called the strikes a violation of the ceasefire that had been in place. Then on Wednesday, reports began noting progress toward ending the crisis, with an increasing number of ships starting to move through the Straight.  Prices dropped sharply on renewed optimism. Thursday brought another reversal.  Iran’s Revolutionary Guard struck a US airbase in retaliation for another US strike and prices jumped again. By Friday morning, the two sides appear to have pulled back from the brink of military escalation. Treasury Secretary Bessent confirmed the US and Iran are within reach of a ceasefire extension agreement, but said Trump has not yet approved it. The statement from Bessent sent oil down nearly 2%. If Trump signs, analysts believe prices will fall sharply next week. If he doesn’t sign, prices will rebound higher.  I don’t believe that prices will collapse if Trump signs the deal.  I believe that the signing is already priced into the current trade.  However, if ships start flowing at full capacity with 100% freedom, I do believe prices will fall further.

This week marks exactly three months since the crisis began.  A handful of tankers did exit the strait this week — two supertankers and an LNG vessel moved through, appearing to head for India and China.  Any movement is being watched closely.  Jet fuel trade continues to be completely disrupted globally. Some smaller producers like Argentina, Brunei, and Gabon have quietly picked up market share that Gulf producers can no longer fill. Europe is increasingly worried that the problem is shifting from price to physical availability, specifically calling out jet fuel as the most vulnerable product.

On the domestic supply front, the weekly inventory data was clear. Commercial crude stockpiles fell another 3.3 million barrels, putting them about 2% below the five-year seasonal average. Gasoline is 6% below average. Diesel is 11% below average.  These numbers are important when heading into summer. Refineries are running hard at 94.5% of capacity, and crude imports are running 7% below year-ago levels as the effects of the Strait closure continue to affect the global supply chain.  We have enough supply, but the world market is bidding a higher price, hence extra supply leaving the US.

Meanwhile, the Wall Street Journal reported this morning that Americans are falling behind on their $1.25 trillion credit card bill. Middle-class families are starting to slip into what is called “survival debt”.  This is borrowing just to cover basic expenses. High gas prices are a direct contributor, and the longer the Strait stays closed the worse debt piles on.  And another interesting economic nugget this week.  About one million potential new car buyers have also exited the market entirely due to high fuel costs, rising interest rates, and sticky inflation.  Cracks in the greater US economy are starting to take shape as we roll into summer.

Finally, some genuinely good news on the Chicago Spot Market front! Chicago finally sold off as refineries came back online this week. Diesel took a dramatic drop and gasoline fell in tandem with crude oil. We are going into June with much better pricing than we have seen in weeks. I expect lower prices at the pump next week for both gasoline and diesel, and as long as crude price holds steady, I expect those lower prices to hold.

Propane is a different story. Prices have not budged at all, even with crude oil dropping sharply this week. The EIA reported a surprise inventory draw as record exports continue. Inventories are skipping along near-record levels, but they are declining during the time of year when they should be building for winter. I do not expect to see propane prices move much lower for summer fills.  Also, next season’s heating contract numbers have been released.  Please call the office to lock-in your pricing for the upcoming season!

As always, if you have any questions, please feel free to give us a call. Have a great weekend!

Best regards,

Jon CrawfordSources: Bloomberg, Reuters, Wall Street Journal

A Lot Going Into Memorial Day Weekend

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Happy Friday!

This was a week that had everything: drone strikes, a near-restart of the war in Iran, a record SPR draw, cautiously optimistic peace signals, and a Chicago market that continued to swing in record numbers.  WTI is looking to close below $100/barrel for a weekly loss.

The week started with a surprise on Monday when drones struck a UAE nuclear facility over the weekend and Saudi Arabia intercepted three more headed its way. Oil climbed to its highest level in two weeks as Trump warned Iran the that the clock is ticking.  Pakistan shared a revised Iranian peace proposal that Trump immediately dismissed. The IEA delivered a very strong message, saying oil inventories worldwide are declining so rapidly that only a few weeks of supply buffers remain. Iraq confirmed some of the report saying that the country exported only 10 million barrels through the Strait in April compared to about 93 million in a normal month.

Tuesday brought the week’s biggest whipsaw. Trump posted overnight that he had called off a strike scheduled on Iran for that morning, saying Gulf allies asked for more time.  WTI price took off. The pause was clearly temporary.  Trump reiterated that the US is ready to resume attacks if a deal isn’t reached.  Both sides released their positions again.  Iran wants an end to all attacks, a full US military withdrawal, and war reparations. The US wants Hormuz reopened, the nuclear program stopped, and proxy attacks halted, with no reparations and no withdrawal. Three months in, and still neither side is bending.  And the US  reversed course and extended the Russian oil sanctions waiver for another 30 days for poor countries that literally cannot access Gulf oil right now.  The waiver is meant to try and help nurse the world oil supply condition while a deal with Iran hopefully gets done.

Wednesday brought more of the same. Trump posted the war would end very quickly.  WTI slipped more than 2 percent on the news. Although three super tankers made it through the Straight, but there is no immediate relief in the future.  Iran established a designated transit route running about 10 vessels a day — a fraction of normal, but better than near zero. Saudi Arabia’s data showed crude exports hit a record low going back to 2002, and the IEA calculated that supply losses caused a 246 million barrel drawdown in global inventories in March and April combined. Back at home on the supply front, EIA report firmed up any major price drop.  Crude inventories fell 9.1 million barrels, the single largest weekly draw of this entire crisis, with gasoline dropping another 5.8 million on top of that.

On Thursday, oil climbed more than 1 percent as Pakistan pushed hard to get both sides back to the table, Iran said it was reviewing Washington’s latest responses, and Trump said he was willing to wait a few days for the right answers. But then Iran’s Supreme Leader has ordered that the country’s near-weapons-grade uranium stockpile cannot be sent abroad. This is a deal breaker.  And even if a deal were signed tomorrow, leaders have said full Hormuz flows won’t return until at least early 2027. The IEA continues to call this the largest energy crisis in history. Pump prices are now about 45 percent higher than they were in late February. AAA expects a record 39 million Americans to hit the road this Memorial Day weekend, but a GasBuddy survey found 35% say rising costs are already causing them to take fewer road trips.

Today, the US and a senior Iranian source said that gaps have narrowed, but the two sides remain stuck on Iran’s uranium stockpile and long-term control of the strait.  As the UAE continues to beat the drum that once the Straight opens, they will pump at full speed, they made another surprising announcement this week.  They are close to completing an alternative pipeline to export crude oil outside of the Straight.  The pipeline will help secure UAE access to the world market regardless of what happens in Iran.  One piece of good news was that forecasters are calling for a below-normal hurricane season, which takes some pressure off Gulf Coast production and refinery infrastructure during the busy summer months.

In Chicago, the spot market continued to be a volatile nightmare this week. Even with crude losing almost ten dollars a barrel, Chicago did not follow. Diesel differentials swung over 80 cents a gallon again. Refiners are keeping their cards close to the chest as month-end approaches, which makes retail pricing very difficult. I am hoping we are out of the woods in early June. Chicago basis still has up to 50 more cents to give back versus the Group Spot market, and I do expect lower diesel prices next week if crude and NYMEX hold steady. Gasoline is a different story.  It continues to run much weaker than diesel, and I expect flat or lower gasoline prices for the holiday weekend.

Propane is not following crude lower. Inventories are staying essentially flat during what should be the normal seasonal build period. I continue to recommend filling your tank over the summer. I do not expect a blowout price drop this season.  And next season’s heating contracts should be out next week.

As always, if you have any questions, please feel free to give us a call. Have a great weekend!

Best regards,

Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal