Where To Start

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Happy Friday!

Wow, it’s a cold one out there this week and next week!  I hope everyone stays safe and warm.  It’s been awhile since we’ve had this amount of cold weather for a couple of weeks.  Thankfully, February is looking to be more normal temperatures.  This past week was a head spin of data.  As I began to write, for the first time in a while I didn’t know where to start. LOL! On to the update!

Geopolitical developments were active on several fronts. Crude oil prices rebounded late in the week, moving back above $60 per barrel after President Trump renewed the risk of potential strikes on Iran. The U.S. continues to build a military presence in the region, and that escalation briefly restored a geopolitical premium to the market. Revised estimates now suggest protest-related deaths in Iran are significantly higher than initially reported, keeping the situation fluid.  Even so, the rally has been uneven, as traders continue to weigh headline risk against a still-heavy global supply outlook.  France intercepted a Russian shadow-fleet tanker in the Mediterranean on Thursday, marking a further escalation in Europe’s enforcement of sanctions on Russian oil. While India continues to buy Russian crude despite sanctions on major Russian producers, much of that flow is now moving through smaller Indian refiners without consequence, allowing Russian barrels to remain legally active in the market.  In addition, shipping routes in the Red Sea are again under pressure.  Attacks in the Red Sea and Suez Canal region have forced tankers to reroute around Africa, increasing transit times and costs. While most affected cargoes are Russian, the added expense and delays are pressuring Russia’s ability to reliably move oil to China, which remains critical for sustaining war-time revenues. Russia is still reporting record diesel exports from Primorsk as winter demand declines domestically, with buyers like Brazil stepping in.

On the macro and trade front, Europe temporarily called off trade talks with the U.S. amid ongoing discussions around Greenland, increasing volatility across broader markets. Britain and China reached an agreement for China to build its largest embassy in London, signaling Britain’s intent to deepen trade ties with China as it looks to replace exports lost to the U.S. A broader trade war with Europe would likely hurt U.S. exports and could push Europe closer to China, which still has excess manufacturing capacity.  Midweek comments from President Trump at Davos added volatility. He reversed course on tariffs against Europe, stated that he hopes there will be no strikes on Iran but emphasized the U.S. remains prepared, and reiterated that he believes a deal to end the war in Ukraine is close. Those comments initially pressured crude prices as geopolitical risk appeared to ease, but sentiment shifted again as military assets were redeployed into the Middle East and unrest in Iran intensified. Russia and U.S. delegates also met on Friday to discuss a potential peace framework for Ukraine, though Russia made it clear that without territorial concessions and clear border restructuring, no deal is likely in the near term.

Venezuela remains a growing factor in the global supply picture. The first cargoes under the new framework were purchased by Phillips 66 and Valero, with revenues shared between the U.S. and Venezuela to help rebuild oil infrastructure. Venezuelan crude is also beginning to flow back into Europe after nearly a year of halted shipments, and additional barrels are expected to reach the Gulf Coast. While this crude will help refiners, it adds pressure to U.S. shale producers, particularly in the Permian. Halliburton announced it is shifting some production assets overseas as rising costs and lower prices make U.S. drilling economics less attractive. Incentives to expand drilling in the Permian appear to be approaching a plateau.  Outside the Americas, Libya announced it is opening its oil sector to foreign investment for the first time in 20 years, another potential source of incremental supply. Mexico continues expanding offshore production and remains committed to high output regardless of current price levels. The only bullish news on global oil supplies is still with Kazakhstan. Kazakhstan’s Tengiz oilfield continues to have problems and declared force majeure, with two production sites now offline for an additional 7–10 days. The outage removes roughly 1 percent of global supply in the near term, offering some short-term support to prices.  However, again, this supply issue is temporary.

The International Energy Agency has begun trimming its forecast for a large crude surplus this year, now suggesting demand may begin to balance supply at some point in 2026. I remain skeptical of these revisions, as supply growth from Venezuela, Libya, Mexico, and OPEC continues to build.  However, the U.S. dollar has also been weakening, which is helping to put upward pressure on crude prices, even as the administration continues to signal a preference for lower energy costs.  In addition, EIA reported large builds in crude oil, distillate, and gasoline inventories this week.  I still remain cautious that the current run-up in crude price is temporary.  Many of the supply issues will be resolved and a lot of new crude sources will be coming online in 2026.  I would not hedge too far into the future at this time and place.

The Chicago spot market experienced significant volatility this week, driven almost entirely by diesel. Diesel prices jumped more than 30 cents as crack spreads widened sharply, fueled by a polar vortex impacting the Midwest and Northeast along with ice storms in the South. Heating demand in the Northeast surged, tightening supply and pulling barrels away from the Midwest. Cold weather also raises the risk of refinery issues. I expect diesel prices to remain elevated at least until the February futures contract rolls off. Gasoline prices, by contrast, remained relatively stable, and I do not expect meaningful movement at the pump in the near term.

Propane prices continued to climb as demand spiked with the extended cold snap. Wisconsin is experiencing one of its longest stretches of cold in the past three years. With the pipeline into Wisconsin still operating at reduced capacity and under allocation, keeping retail storage filled has remained challenging. Logistics have become the primary issue, with freight rates rising sharply and pushing retail prices higher. If temperatures moderate after next week, propane prices may ease somewhat. Even at current levels, retail prices remain under $2.00 per gallon, and compared to fuel oil and natural gas, propane continues to offer strong value during these extreme cold conditions.

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

Best regards,

Jon Crawford

Crude Prices Rise On Geopolitical Issues

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Happy Friday!

Crude oil prices are set to finish the week lower, falling back below $60 per barrel after a short-lived rally earlier in the week. The move lower came after President Trump announced that violence in Iran is easing and that U.S. intervention is not necessary at this time. That statement removed much of the geopolitical risk premium that had supported crude for several days and marked the first daily decline in six sessions. Even with occasional rebounds, the broader trend remains fluid as markets continue to focus on oversupply heading into 2026.

On Friday, Bakken producer Continental Resources announced it is shutting in production due to low prices. While this is notable for U.S. shale, it has done little to change the broader narrative. Global supply growth, particularly from OPEC and potential increases from Venezuela, continues to outweigh any near-term U.S. production cuts. The White House has made it clear that lower fuel prices remain a priority, even if that comes at the expense of domestic shale producers.  Chevron is expected to receive an expanded license to export crude from Venezuela, a move that will benefit Gulf Coast refiners but add pressure to U.S. shale basins, especially the Permian. Venezuelan crude will likely displace some barrels that would otherwise head to China, but with the world already awash in oil and the possibility of progress toward ending the war in Ukraine, China has plenty of alternative supply options.  Canada also appears to be gaining ground in trade discussions with China, including potential crude shipments from Canada’s West Coast export terminal. If those barrels flow, they could further reduce U.S. access to cheap Canadian crude and add competition for Venezuelan supply.

Geopolitically, Ukraine confirmed it struck two Russian oil tankers earlier in the week, contributing to the midweek rally. Russia responded with its largest attack on Ukraine so far this year, continuing to damage Ukraine’s energy infrastructure and increasing pressure for a negotiated settlement. However, markets remain convinced that even if sanctions remain in place, global oversupply will dominate once any peace framework emerges.  India has begun shifting more crude purchases back toward OPEC producers and away from Russia, which could force Russia to send additional barrels to China. Despite high storage levels, China imported more crude in December than a year ago, likely taking advantage of low prices. In addition, January imports are expected to slow as Chinese storage remains near capacity and discounted Iranian and Russian barrels remain readily available.  Trump also announced 25 percent tariffs on anyone doing business with Iran, briefly pushing crude higher on concerns about Iranian exports. However, the rally faded as traders refocused on surplus supply and the broader implications for U.S.–China trade, given China’s ties to Iran.

On the economic front, the U.S. revised GDP higher for November, and some forecasts now point toward growth exceeding 5 percent in 2026. While stronger growth would support oil demand, most believe it will still not be enough to absorb the supply surplus expected in the coming year. The latest EIA report showed builds across crude, gasoline, and distillate inventories, reinforcing the view that U.S. supply remains ample.  Trump also stated he does not plan to remove Fed Chair Powell, which helped stabilize the dollar. A firmer dollar continues to weigh on crude prices. Earlier in the week, renewed questions around Fed independence briefly weakened the dollar and gave oil a temporary lift, but that support faded quickly.  Major banks continue to trade the same direction: surplus supply and lower prices. Many are calling for WTI to fall below $55 per barrel, with some suggesting $50 as a potential floor. I agree that prices may stabilize in the high $50s for now, but a true recovery likely won’t materialize until 2027, when potential sustained production cuts and economic growth begin to meaningfully rebalance the market. If global economies weaken further, that recovery could be delayed.

The Chicago spot market moved higher this week in tandem with crude’s geopolitical bounce. Even with crude price settling back below $60, finished products in Chicago are ending the week higher than last week. Diesel prices surged sharply before correcting on Thursday, but they remain elevated compared to last week, and I expect higher diesel prices at the pump. Gasoline prices also jumped and should cause higher prices at the pump. Until geopolitical risk fully clears the market, I expect prices to hold at current rates.

Propane prices remain relatively stable, but shipping logistics continue to be a major challenge. An official report confirmed that the pipeline running from Kansas to Janesville will operate at only 80 percent capacity throughout the winter for safety reasons from a leak back at Thanksgiving. That 20 percent loss has shifted more demand onto rail, which is already strained after Edmonton declared force majeure on contracted railcars due to extreme cold. Trucking companies are now traveling out of state to supplement supply from Janesville, which serves much of Wisconsin. Freight rates for propane have nearly doubled, and with colder weather arriving, I expect higher retail propane prices. Unfortunately, this situation is unlikely to improve for at least the next one to two weeks, and if cold snaps persist, tight conditions could last into March.

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, Wall Street Journal, Reuters

A Whole New World

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Happy Friday!

Crude oil prices ripped higher on Thursday and Friday as unrest in Iran intensified, raising concerns that protests could eventually disrupt production. That said, the rally looks more geopolitical than fundamental. The sharp selloff below $55 per barrel earlier in the week triggered technical and headline-driven buying, but broader economic data continues to point toward demand weakness.

The biggest headline of the week was the capture of Maduro, which only pushed oil prices up about $1. Markets quickly recognized that oil flows are unlikely to be disrupted and could actually increase. Venezuela’s new president, Delcy Rodríguez, signaled a willingness to work with the U.S. to keep oil flowing. Venezuela has the capacity to produce up to 3 million barrels per day, up from roughly 1 million today, but reaching that level would take years and massive investment.   If Venezuelan crude starts flowing to the Gulf Coast, gasoline and diesel prices could fall. Gulf Coast refiners are well-equipped to process heavy Venezuelan crude, similar to how Midwest refiners handle Canadian heavy oil, often yielding higher gasoline and diesel output per barrel. Trump stated he wants to push oil prices down to $50 per barrel using Venezuelan crude. That would come at a cost to U.S. producers, particularly in Texas and North Dakota, where production and investment would likely fall. While lower global prices could reduce gasoline and diesel costs, any meaningful pullback in U.S. production or new OPEC+ cuts could quickly swing the market back the other way.

It’s also worth noting that fully ramping Venezuelan production could cost well over $100 billion in investment. Trump announced plans to seize 30–50 million barrels of Venezuelan crude and sell it on the open market. In reality, the impact is minimal. For example, the U.S. consumes roughly 20 million barrels per day, so the volumes involved are a drop in the bucket. Even though much of the crude was originally headed to China, China’s storage levels are already near capacity, limiting any real effect. Chevron, which remains exempt from sanctions, is already looking to ramp up exports as quickly as possible.  Talks between the U.S. and Venezuela are gaining traction, with discussions underway on how Venezuelan oil could be handled going forward. While some view this as bearish, traders remain skeptical that the U.S. can effectively manage or rapidly rebuild Venezuela’s oil infrastructure. Oil companies are already jockeying for access, though Chevron appears best positioned given its long-standing presence in the country.  The U.S. is even discussing subsidizing oil investments in Venezuela to speed up exports, using incentives to attract more international oil companies.

The war in Ukraine remains to affect Russian exports. Ukraine struck another Russian oil tanker, while Russia retaliated with a hypersonic missile strike—one of the few times this weapon has been used during the conflict. The missile is believed to be impossible to intercept and capable of carrying nuclear warheads, reiterating the escalation risk. At the same time, Ukraine’s continued targeting of Russian energy infrastructure is further straining exports.  The U.S. seized a possible Russian-flagged oil tanker in the North Atlantic between Iceland and the U.K., marking another escalation. Russian naval and submarine presence in the region adds another layer of risk. Oil prices also found some support as Congress moved closer to passing a new Russian sanctions bill aimed at countries purchasing Russian crude. However, countries like India are actively negotiating trade deals with the U.S., and easing some Russian sanctions could be part of those discussions.

At the same time, Pakistan and Saudi Arabia are close to a fighter-jet deal, which could strain relations between Saudi Arabia and India and add to regional instability.  Trump also threatened additional tariffs on India if it continues buying Russian crude. This time, India appears serious about compliance and is preparing audits of its refiners as it pursues a broader trade deal with the U.S.  India is also reopening trade channels with China, allowing Chinese firms to bid on government contracts for the first time in five years. While this could lower costs for India, it risks complicating relations with the U.S., particularly around data security and future trade negotiations.  China has imposed new export controls on Japan, raising tensions as Japan continues supporting Taiwan. For now, traders view the moves as posturing, with the risk of military conflict still low. That said, China was vocal in condemning recent U.S. actions, calling them a potential blueprint for future moves against Taiwan.

OPEC+ reported a drop in December production, driven by declines in Venezuela, Iran, and Russia. Sanctions, ship seizures, and Ukraine’s attacks on Russian oil assets were blamed as the main culprit. Even so, OPEC+ met after the capture of Maduro and chose to keep pumping at current levels, a decision that in my view continues to push the market toward oversupply in 2026.  Iraq announced that its government has taken control of the country’s largest oil field as sanctions continue to pressure output. Officials say they plan to work around sanctions and maintain production, but traders are concerned the intervention could lead to operational disruptions and eventually to possible tanker seizures.  Middle Eastern crude continues to trade at deep discounts, the weakest levels of the year, reinforcing expectations that supply will exceed demand in 2026.  Chevron is also emerging as the likely winner in the bidding for Lukoil’s (Russian’s major oil company and Russia is part of OPEC+) foreign assets. Combined with a potential expansion in Venezuela, this would move Chevron closer to being one of the largest oil producers globally.

Despite the recent rally, I believe the oil market is overbought in the short term. U.S. jobs data and other economic indicators continue to soften, and the latest EIA report showed major builds in gasoline and diesel inventories—clear signs that demand is struggling to keep up.

The Chicago spot market followed crude prices higher, with differentials ticking up modestly. Forward contracts are trading at a premium, signaling continued weakness and encouraging buyers to purchase spot barrels and store them. I would expect gasoline prices to maybe tick up slightly next week. Diesel prices are likely to remain relatively flat after falling sharply and rebounding just as quickly.

Propane prices eased modestly with warmer weather in the forecast. Rack prices came down slightly to start the week, and pipeline and rail logistics appear manageable for now. National inventories remain at high levels. A sudden cold snap could quickly stress logistics again.  But other than possible supply logistics, there is no clear predictor for major propane price spikes at this time.

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

Best regards,

Jon Crawford

Sources: Wall Street Journal, Bloomberg, and Reuters

Low Liquidity, Many Shrug

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Happy Friday!

I hope everyone had a safe and enjoyable Christmas!

Crude oil prices are set to close the holiday week near the lowest levels seen since 2020. While prices managed a small weekly gain, the move should be taken lightly given extremely low liquidity due to the Christmas holiday. NYMEX had a shortened session on Christmas Eve and was closed on Christmas Day, leaving most price discovery to GLOBEX trading. With limited participation, current price action will likely rebalance once full liquidity returns in the start of 2026.  The EIA’s weekly inventory report, normally released on Wednesday, will be delayed until Monday due to the holiday. The lack of fresh inventory data has kept many futures traders sidelined, further reducing liquidity and conviction in price moves.  From a macro perspective, the U.S. economy posted a strong GDP print of 4.3 percent, beating expectations. Growth continues to outpace inflation, which was the intended outcome of monetary easing. Even so, crude prices remain under pressure, reinforcing that supply dynamics are overwhelming macro support.

Geopolitically, the U.S. launched a surprise military strike on Christmas Day in Nigeria targeting Islamic State militants in retaliation for attacks on Christians. The strike was carried out in coordination with African governments. Despite the escalation, crude markets barely reacted, again highlighting how dominant oversupply has become in driving prices.

Venezuela remains another flashpoint. While President Maduro initially said he would defy U.S. threats to seize oil cargoes, several ships turned around midweek. The U.S. also began restricting inbound airline traffic to Venezuela, increasing pressure and leaving many citizens unable to return home. Over the weekend, Trump announced the U.S. would target a third Venezuelan tanker and did not rule out conflict. Maduro responded by saying shipments would continue regardless, with most cargoes heading to China, which has openly offered support.  On the sanctions front, the U.S. Coast Guard and military are preparing to seize another oil tanker linked to Iran.

Attention remains focused on Ukraine and Russia. Over the past weekend, U.S. negotiators met with EU leaders, Ukraine, and Russia. The U.S. stated progress was made, while Russia publicly disputed that claim. Tensions remain elevated after a Russian general was killed by a car bomb in Moscow, underscoring the fragility of any diplomatic progress.  Separately, the U.S. quietly granted India another month to continue purchasing discounted Russian crude from Rosneft, reinforcing the long-standing narrative that Russia continues to find buyers. Russia’s natural gas exports to China rose 25 percent in 2025, further demonstrating its ability to maintain revenue streams despite sanctions.

President Zelensky is planning to meet directly with U.S. officials to continue discussions around a 20-point peace framework. For the first time, Russia acknowledged it may be open to a territory swap, though major disagreements remain. Zelensky has indicated a willingness to consider the Donbas region as an independent, demilitarized zone, while Russia is not currently supportive. Ukraine continues striking Russian energy infrastructure, including gas-processing facilities, and has reportedly used drones sourced from the EU, pushing the limits of European involvement.  Despite these headlines, crude prices continue to hold steady. Many traders believe Russia’s strategy of flooding the market with discounted barrels is unsustainable beyond 2026, but as long as Asian demand persists and sanctions are selectively enforced, those barrels are likely to keep moving. Direct U.S. action against Russian cargoes is viewed as highly unlikely due to the risk of direct military confrontation.

Given current levels, crude is trading at what many would consider long-term value. For those with a longer-term view, layering in small futures positions for next year may be worth consideration considering current low prices and potential for global military conflict.

The Chicago spot market moved higher heading into the holiday travel week, tracking crude’s modest bounce. However, with liquidity so thin, this move may prove temporary. I do expect gasoline and diesel prices at the pump to potentially move higher over the weekend and into next week as holiday travel demand continues.

Propane prices remain relatively steady on the surface, but index prices have blown out higher. Logistics remain the main issue, with congestion on the Enterprise and ONEOK pipelines and reduced rail activity during the holiday week. Warmer weather has limited demand, keeping most retail storage levels comfortable. That said, any propane volumes purchased outside of locked-in index or fixed pricing are coming at a steep premium, as haulers are traveling much longer distances to secure supply. This has pushed retail propane prices higher. I expect retail prices to remain elevated until logistics improve.  The big test will be whether logistics will improve prior to the next wave of cold weather.

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

Best regards,

Jon Crawford

Knife Might Be Close To Falling On The Floor

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Happy Friday!

Crude oil prices are on track to decline for a second straight week, holding below $60 per barrel. While prices briefly bounced on news of a U.S. blockade tied to Venezuelan oil, the move faded quickly. Venezuela represents roughly 1 percent of global oil supply, and the current oversupply is more than enough to absorb any disruptions. Chevron continues to be exempt from the Venezuelan blockade, running exports openly from Venezuelan ports.  The market continues to make it clear that supply and demand fundamentals, not headlines, are driving prices.  The U.S. imposed another round of sanctions on Iran’s shadow oil fleet, but traders remain skeptical that the measures will materially impact flows. Iran has repeatedly found ways around sanctions in the past, and the market is largely betting on the same outcome this time.

Saudi Arabia continues to increase exports while cutting official selling prices. That combination is reinforcing the oversupply narrative heading into 2026. While OPEC maintains that it wants to avoid a price war, Saudi actions suggest market share is becoming a priority. Middle Eastern crude prices have also softened into year-end as producers work to keep barrels moving in an increasingly crowded market.  Western Africa continues to add barrels to an already oversupplied market, and traders are questioning where incremental demand will come from as most major buyers have supply locked up. Venezuelan crude floating storage has climbed above 20 million barrels, the highest level since 2022. These barrels serve as a buffer for China, but China’s weak economic growth limits urgency to take delivery.  India increased Russian crude imports by 3.4 percent in November compared to October. While India continues to source oil from non-sanctioned producers when pricing makes sense, Russia remains part of the supply mix despite sanctions.  China remains a major headwind for oil demand. Factory output growth slowed to a 15-month low, and retail sales posted their weakest performance since Covid. China has already filled much of its strategic reserves and is set to reduce fossil-fuel power generation for the first time in a decade. Without meaningful stimulus, weak Chinese demand will continue to pressure crude prices.

Geopolitical tensions remain elevated. European leaders committed $105 billion in additional funding to support Ukraine, both to limit Russia’s ability to expand westward and to maintain leverage in peace negotiations. Ukraine struck another Russian oil cargo ship this week, causing a fire and marking further escalation in attacks on Russian energy infrastructure. President Zelensky is scheduled to meet with a U.S. envoy in Berlin as talks continue around a potential framework for peace.  The U.S. announced its largest-ever arms sale to Taiwan, an $11.1 billion package aimed at reinforcing U.S. support. The move adds tension with China at a time when both sides are still trying to manage trade relations. China, meanwhile, has voiced support for Venezuela against the U.S. oil blockade, further complicating trade negotiations.  While the headlines initially pushed crude prices higher, the impact is limited.

On the US macro side, inflation rose less than expected, coming in at 2.7 percent. The softer print supports the idea that the Federal Reserve may slow the pace of rate cuts, keeping the dollar relatively strong. Even with the dollar sitting near two-month lows, crude prices continue to slide, underscoring how dominant the supply overhang has become.  The U.S. jobs report showed payrolls increasing by 84,000 after a decline in October, but the unemployment rate rose to 4.6 percent. The data suggests the economy is cooling more than many expected. Tariff uncertainty heading into 2026 continues to weigh on business planning and capital spending.  U.S. oil and gas companies are increasingly looking north to Canada’s Montney Basin for mergers and acquisitions. With low production costs and a large shale resource, U.S. producers see an opportunity to expand their footprint by acquiring companies already operating in the region.

The Chicago spot market remains very weak relative to NYMEX. Diesel differentials are extremely low, making spot purchases highly attractive. While limited production of #1 diesel has kept winter blending spreads elevated near $1 per gallon, #2 diesel prices are at the lowest levels seen in years and offer excellent value compared to NYMEX. Gasoline differentials are also very low, making both products strong buying opportunities heading into year-end.  If you see unusually cheap diesel at retail pumps, be sure to ask whether the fuel is being blended with #1. In my view, additives alone are not sufficient protection during sudden cold snaps. I expect diesel prices to continue easing into next week, while gasoline prices should remain stable and attractive for the holiday travel season.

Propane prices moved higher again as logistics across Wisconsin remain challenging. There is no supply shortage, but moving product to the right terminals continues to be difficult and driving prices higher. We are hopeful the distribution network begins returning to normal by year-end and prices will retreat accordingly. I believe we are nearing the top of the current propane price move. As always, please make sure driveways are clear of snow and ice and that there is a safe, clear path to your tank to ensure safe and efficient deliveries.

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

Best regards,

Jon Crawford

Knife Hasn’t Landed Yet

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Happy Friday!

Crude oil prices are set to close lower again this week, holding near the lowest levels seen in the past year. Despite a steady flow of geopolitical headlines, the market continues to shrug them off as oversupply remains the dominant force shaping price action.  The U.S. plans to seize additional oil tankers tied to Venezuela, and Marines recently landed on nearby islands as tensions escalate. Even so, the market reaction has been muted. Venezuela exports less than one million barrels per day, and with global supply already heavy, traders see little reason to bid prices higher.

Russia is facing mounting pressure as revenues from refined products may fall to their lowest level since August 2020. Sanctions are starting to bite more than they have in the past, limiting Russia’s ability to reroute barrels. That revenue squeeze could give Ukraine additional leverage at the negotiating table, especially as Ukraine continues targeting Russia’s shadow fleet. Another shadow tanker was attacked this week, bringing the total to five over the past few weeks. Ukraine is clearly using energy infrastructure and oil assets as leverage, even discussing the use of Russian oil assets to help fund Ukraine’s reconstruction.  Ukraine is also weighing a referendum on the Donbas region as part of a potential peace framework. The proposal would require the region to become a demilitarized zone, though there is no guarantee such a vote would permanently resolve the conflict. Meanwhile, Russia appears close to capturing Pokrovsk, a major logistics hub for Ukraine. Losing the city could weaken Ukraine’s negotiating position and likely prolong the conflict.

Global tensions continue to rise in Asia. After China reportedly aimed radar systems at Japanese aircraft, the U.S. responded by flying nuclear-capable bombers alongside Japanese fighters over the Sea of Japan. China has also conducted additional air missions near Japan, further escalating tensions. Any disruption in the region would have major implications for global trade and energy markets, though for now prices remain anchored by fundamentals.  Again, the IEA trimmed its forecast for oversupply next year, citing the possibility of stronger demand, but the market has largely dismissed the revision. With forecasts swinging back and forth so frequently, traders remain focused on what is visible today: large volumes of oil still floating at sea.

On the demand side, India continues to shift its energy mix. While still one of the world’s largest crude importers, India is now producing record levels of wind energy, weighing on long-term demand expectations. China’s consumer prices rose at the fastest pace in more than a year, driven by food costs, but broader economic growth remains sluggish, limiting oil consumption.  Weak Chinese economic growth and already-high inventories are limiting additional imports, even though China just posted its largest crude purchases since late 2023. India and Russia met again this week, with India continuing to buy discounted Russian barrels, though volumes have dropped sharply from roughly 1.7 million barrels per day to around 600,000.  Some market participants are even debating whether Russian and Iranian crude should be excluded from official global inventory counts, as floating storage surpassed one billion barrels. Ultimately, though, supply and demand still rule the market.  Russia cannot fully rely on China as a buyer.  There is also renewed discussion among the EU and G7 about potentially lifting the Russian crude price cap while aggressively targeting the shadow tanker fleet instead. Any easing of sanctions would unleash a large amount of discounted crude onto the market, though many traders believe this scenario is already reflected in prices.

The Federal Reserve cut interest rates as expected, sending equities and metals higher. Crude, however, sold off—an unusual reaction given the weaker dollar. The move reinforces just how heavy the supply outlook has become heading into 2026. Liquidity remains thin, speculative interest is low, and most market participants are firmly in wait-and-see mode.

Chicago spot prices continue to track crude lower. Diesel prices are near the lowest levels of the year, but winter blending is distorting retail pricing. The cost of #1 diesel used for cold-weather blending has surged, keeping pump prices flatter than expected. As a reminder, unusually cheap diesel at the pump may not be properly blended for extreme cold, especially sub-zero temperatures. Gasoline prices remain steady, and I expect retail gasoline to stay near the lows for the year.

Propane retail prices moved higher again this week due to allocation issues across the Midwest. There is no shortage of propane supply—this is strictly a logistics issue as product struggles to reach the right terminals. Prices are unlikely to ease until allocations improve and terminals can rebuild inventory. Warmer temperatures in the coming week’s forecast may help alleviate some of the pressure. With recent snowfall, please remember to keep driveways clear and maintain safe access to propane tanks to ensure efficient and safe deliveries.

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

Best regards,

Jon Crawford

Sources: Wall Street Journal, Bloomberg, and Reuters

Don’t Try And Catch A Falling Knife

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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

Finally Fell Off The Cliff

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Happy Saturday!

Tensions continue to build overseas. Ukraine and Russia exchanged fire again, resulting in more casualties. Ukraine also signed a deal with France for 100 warplanes as the conflict shows no signs of slowing. Trump floated another proposal to end the war, but it appears dead on arrival since it would require Ukraine to give up land.  Russian oil exports resumed after being temporarily disrupted by Ukraine’s attack earlier this month. In Asia, China is increasing pressure on Taiwan through propaganda at home and heightened naval activity. Taiwan is boosting its own preparations in response to the growing threat of a potential invasion.

Japan and China are also escalating. China is limiting Japanese imports, and both sides have intensified rhetoric over Taiwan. For the first time in 50 years, Japan issued a formal warning about threats from another country, even suspending communication. Still, Japan sent a coalition to China this week in an attempt to calm tensions. Meanwhile, Israel resumed heavy bombing in Gaza and Lebanon, putting the ceasefire in jeopardy. Germany lifted its suspension on arms sales to Israel as the situation intensifies.

The IEA continues to forecast that OPEC will not cut production in 2026, which could create a record surplus of up to 4 million barrels per day. In the near term, 7.7 million barrels of sanctioned Russian crude are trying to reach India before November 21. A sanctioned Russian tanker even made a U-turn near Venezuela after a U.S. warship intercepted nearby raising tensions with Venezuela as well as targeting sanctioned Russian crude.  However, Russia is still finding buyers for its sanctioned oil—roughly 2 percent of global supply. China continues to take some volumes, and Iranian oil is also making its way to China through Indonesia. Chevron and Exxon have also entered the bidding for Russia’s Lukoil’s foreign assets, a move that would significantly expand Chevron or Exxon’s global footprint if completed.

WTI closed below $60 per barrel for the second week in a row. Despite low prices, the Permian Basin remains optimistic, especially with new technologies emerging that could unlock large additional reserves from existing wells.  The latest EIA report showed a draw in U.S. crude inventories, but global refining margins remain strong, easing any concerns about crude shortages. Diesel prices collapsed this week as oversupply finally hit the U.S. market following months of high refining margins on crack spreads. Gasoline also followed crude lower as demand concerns and oversupply weighed on prices.  The Federal Reserve offered little clarity again on whether a December rate cut is coming. Trump is lowering hundreds of tariffs on goods and foods to help cool inflation, and he continues to unwind several sanctions—both actions that could support a stronger dollar, which typically keeps crude cheaper. Fed officials signaled Thursday they are inclined to hold rates steady. October payrolls came in at 119,000 jobs, well above expectations, adding more doubt to the idea of a rate cut next month.

The Chicago spot market is finally running smoothly. All regional refineries are back online and ramping up output. Strong refining economics for diesel have triggered a major selloff in diesel prices, and gasoline has followed crude lower as oversupply builds and demand shows some seasonal jitters.  If crude price holds steady, I expect to see a significant drop in diesel retail prices at the pump over the coming week. However, winter blending with #1 fuel will start adding some additional cost at the pump. Gasoline retail prices should also move lower based on this past week’s crude price activity.

Propane continues to trade sideways, as it has for months. The EIA reported a draw on national propane inventories, and a strong cold snap has pushed through nearly three-quarters of the country, increasing demand. With forecasts still calling for a colder-than-normal winter, I don’t expect retail propane prices to move much in the near term.

If you have any questions or need anything, feel free to reach out.  Thank you and have a great weekend!

Best regards,

Jon Crawford

Bit Of A Pogo Stick This Week

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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

Back Beneath The Floor

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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