Good morning,

Happy Friday! Oil prices reached their lowest levels of the year this week, effectively erasing all gains in WTI pricing for 2024. China’s ongoing reduction in oil imports, coupled with lackluster economic data from both Europe and the U.S., has fueled concerns of a potential oil surplus. As summer demand in the U.S. fades, the possibility of an overall oil surplus is gaining traction. Both the U.S. and Canada continue to produce oil at record levels, while Libya has resumed production and started exporting once again.

Despite some bullish data, the sentiment remains overwhelmingly bearish as news of a potential crude oil surplus in Q4 of 2024 continues to dominate the market. The EIA reported a significant drawdown in U.S. crude oil inventories, and many refiners are entering maintenance in Q4, leading to reduced refining runs. However, even these bullish reports couldn’t significantly alter the market’s course. The Federal Reserve is expected to cut rates, which could make crude oil more expensive. OPEC+ made a surprise announcement that production increases may not occur until December, and Kazakhstan is experiencing production slowdowns due to technical issues and maintenance. But these bullish developments provided only brief support for prices.

Geopolitical factors are also beginning to contribute to the bearish outlook. Russian President Vladimir Putin announced his willingness to discuss peace under specific terms. If a peace deal or ceasefire is reached between Ukraine and Russia, the unrestricted flow of Russian oil could further heighten the risk of a global oil surplus. As a result, the economics of crude oil are increasingly pointing toward a bearish trend. WTI prices have fallen below $70 per barrel, and while speculative, based on current fundamentals, a drop below $60 per barrel is possible in Q4 of 2024 or Q1 of 2025.

On the local front, the Chicago spot market basis has collapsed alongside the decline in crude oil prices. Gasoline and diesel prices have fallen to their lowest levels of the year, with retail gasoline prices dipping below $3 per gallon in some local markets. Diesel prices are also approaching sub-$3.29 per gallon levels for the first time this year. While demand is decreasing as children return to school, motorists can expect to enjoy lower prices at the pump for at least the coming weeks.

Propane prices, once again, did not follow the downward trend of crude oil. As previously mentioned, the propane price percentage relative to crude oil still has room to increase before we see a significant rise in spot prices. The propane-to-crude price percentage has climbed from 34% to 44%, moving closer to historical averages. There remains some room for further percentage increases, which supports the stability of propane prices even as crude oil declines. I continue to recommend that customers contract a portion of their heating needs for the upcoming winter. The Farmer’s Almanac is forecasting a colder-than-average winter, and it’s worth noting that the past three winters have been some of the warmest on record. Topping off tanks at current prices is a prudent move.

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

Best regards,

Jon Crawford

Happy Friday!

Markets are always a bit wonky going into a long holiday weekend. I’ll pick back up on market updates next week. I hope everyone has a safe and enjoyable Labor Day weekend!

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

Best regards,

Jon Crawford

Good morning!

Happy Friday! This past week was another eventful one in the markets. WTI crude oil experienced a significant sell-off, nearly breaching a critical support level at $70 per barrel. The primary driver continues to be global economic conditions, particularly in China. Recent data points to China’s economy losing momentum, with declines in new home prices, a slowdown in industrial output, and rising unemployment. Additionally, China’s exports of refined products and other commodities have plummeted. Meanwhile, Russia has maintained record levels of crude and refined product output, with India officially becoming Russia’s largest customer. The increased output from Russia and Iraq has added downward pressure on crude prices.

Looking ahead, OPEC+ is expected to begin unwinding its disciplined production cuts next month. If this plan proceeds, the global crude oil market could shift to a surplus, potentially triggering a “flash crash” in prices. Although the U.S. reported unexpected draws in crude oil and refined product inventories this week, the impact was offset by poor economic data and the Federal Reserve’s minutes, which suggest that rate hikes may occur in September. Additionally, the U.S. revised its job creation numbers from March, reducing them by over 800,000—a significant adjustment not seen since 2009. As summer ends and gasoline demand declines, there are concerns that overall demand for refined products may diminish. However, U.S. shale oil producers are continuing to ramp up production, raising fears of an oversupply in the domestic market.

Geopolitical tensions in Israel and Gaza took a backseat this week as discussions of a cease-fire resumed. Iran is withholding any retaliatory actions against Israel pending the outcome of these negotiations. Meanwhile, the conflict between Ukraine and Russia persists, with Ukraine advancing into the Kursk region and Russia reorganizing to target vulnerable areas in Ukraine. Despite these geopolitical risks, economic data was the dominant influence on the crude oil market this week.

We now await the Federal Reserve’s remarks at Jackson Hole regarding potential rate cuts in September, as well as the upcoming OPEC+ meeting, which will address the continuation of production cuts through the end of the year. September will be a crucial month for determining the future trajectory of crude oil prices for the remainder of 2024.

In local markets, weakening gasoline demand and the return of the Joliet refinery to full operations have led to a significant drop in gasoline prices. I expect retail gasoline prices to decrease slightly next week if current trends continue. However, diesel prices seem to have stabilized due to the onset of refinery maintenance and the approaching harvest season. Consequently, I do not anticipate a decline in diesel retail prices next week.

Propane prices did not follow crude oil prices lower. The ratio of propane prices to crude oil prices remains low. With winter pricing dynamics and a potentially high-volume corn drying season approaching, suppliers have little incentive to reduce prices for retailers. If you haven’t yet topped off your propane tank this summer, we strongly recommend doing so before winter pricing takes effect on October 1st. Additionally, consider locking in prices for at least a portion of your upcoming winter propane usage.

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

Best regards,

Jon Crawford

Good morning!

Happy Friday! Crude oil prices continued to trade in a narrow range. WTI price has been unable to break through the $80/barrel ceiling. The push-and-pull is between supply/demand and geo-political tensions continued to play out this week. Even though Israel is waiting on a military response from Iran and Ukraine invaded Russian territory, the supply/demand fundamentals with crude oil won over the market’s attention this week. The crude oil trade continues to remain volatile.

China reported a lot of bearish data this week. Oil prices dropped by more than 1% when weak economic indicators from China, including poor manufacturing data and low refinery runs, overshadowed geopolitical risks. China’s oil refinery output in July dropped to its lowest level since October 2022, primarily due to thin processing margins and weak fuel demand. This marks the fourth consecutive month of declining refinery output. Brent crude fell below $80 per barrel on the data. However, the U.S. retail sales data provided some economic support, suggesting stronger economic growth in the U.S. and kept a floor on crude oil prices

There were also many data points discussed on the world supply of crude oil. China and Saudi Arabia continued to lead in Russian crude oil imports. In July, China and Saudi Arabia were the largest importers of Russian products. Imports to China and Saudi Arabia increased significantly, with China using the imports for refining and Saudi Arabia for power generation. In addition, Chinese diesel consumption declined this week. Diesel consumption in China fell by 11% in June 2024 compared to the previous year, the largest decline since July 2021. The reduction is attributed to slower economic activity and the substitution of diesel with liquefied natural gas (LNG) in heavy-duty trucks. At home, North Dakota oil production continued to decline. North Dakota’s oil production fell for the second consecutive month in June, marking a decrease of 22,500 barrels per day. The state has struggled to maintain production levels since hitting a peak in September 2023. Also, the EIA reported a surprise build in crude oil inventories. U.S. crude oil stockpiles unexpectedly increased last week after six consecutive weeks of drawdowns. Gasoline and distillate inventories also fell more than expected, reflecting fluctuating supply and demand dynamics. In addition, the International Energy Agency (IEA) continued to pour cold water on crude oil prices. The IEA reduced its forecast for global refining activity growth for this year and next, citing weaker-than-expected performance in the first half of 2024.

In the local Chicago market, gasoline prices plummeted from their highs over the past month. The Joliet refinery is coming back online. Distillate prices continue to remain flat based on a supply tightness. I do expect gasoline prices at the pump to fall next week. Diesel prices will probably remain steady.

Propane prices again remain steady. We are getting closer to winter pricing dynamics and suppliers are allowing percentage to crude ratios to increase rather than cutting prices. There is still room for propane future prices to run higher even with WTI crude oil price holding below $80/barrel. I still suggest that everyone top of their propane tank by end of September and contract some propane for the upcoming winter.

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

Best regards,

Jon Crawford

Happy Friday!

This past week has been one of the most volatile trading periods in recent years. The U.S. stock market entered correction territory, and crude oil prices fell to one-year lows. A significant factor in this turmoil was the unwinding of a “yen carry trade” with the Bank of Japan. The resulting cascade of options liquidations triggered a massive selloff in the Japanese stock market, which subsequently impacted the U.S. market. Additionally, weaker economic data from both China and the U.S. exacerbated the situation, leading to a dramatic collapse on Monday. However, this downturn created one of the best buying opportunities for long crude oil positions, with many traders stepping in and preventing WTI from falling below $70 per barrel.

By Tuesday, markets began to recover as investors recognized that the selloff was overdone and that economic data was not as dire as initially feared. On the supply and demand front, the U.S. reported another substantial draw in crude oil inventories, while geopolitical risks reached an all-time high. These factors contributed to a significant rally throughout the remainder of the week, pushing WTI crude prices to close higher than the previous week, along with major stock indexes.

Geopolitical tensions escalated further as Ukraine received F-16s from the U.S., leading to increased bombings between Ukraine and Russia, as Ukraine launched a major offensive. Meanwhile, Hamas selected Yahya Sinwar as their new leader, a figure involved in planning the October 7th attack on Israel. This development makes the possibility of a ceasefire with Israel highly unlikely. Iran has yet to retaliate for the assassination of Haniyeh but has indicated that they will. In response, the U.S. has deployed a new aircraft carrier to the region, along with additional missile defense systems in Israel. The potential for an escalation of conflict in the Middle East remains extremely high.

Moreover, the world has been on edge with reports of a planned assassination attempt against Donald Trump and a terror plot at a Taylor Swift concert this week, adding to the global unrest. The heightened geopolitical energy is placing additional upward pressure on oil prices. Any significant disruption could push global crude oil supplies into deficit. U.S. producers continue their disciplined approach to maintaining production levels, which supports higher prices. Given these factors, I do not foresee another significant collapse in crude oil prices in the near future.

In local markets, the Mobil refinery in Joliet continues to face challenges, leading to tight supplies in the Chicago area. This tightness has now extended to the Group market as well. Volatility remains high, with diesel prices still elevated, although gasoline prices have started to ease. I anticipate that gasoline prices at the pump will begin to decrease in the coming days.

Despite the collapse in crude prices, propane prices did not decline as expected. Propane futures remain strong, with no significant inventory builds last week and early indications of a colder winter emerging. Once again, we strongly recommend that everyone fill their propane tanks now and consider contracting propane for the upcoming heating season.

As always, if you have any questions, comments, or concerns, please do not hesitate to contact us.

Best regards,

Jon Crawford

Good Morning!

Happy Friday! This week, crude oil prices followed a bell curve, ending where they began after a mid-week spike. Economic news from around the globe overshadowed any geopolitical risk premium. Despite some complexities in the details, crude oil prices are struggling to find support. China reported weak manufacturing data and low imports. The Federal Reserve announced that a rate cut is possible in September. Additionally, the U.S. unemployment rate rose to 4.1%, with only 175,000 jobs added in July, signaling economic weakness and lower demand for crude oil. OPEC+ decided to continue unwinding their supply cuts, contributing to a bearish sentiment.

However, some details suggest a different outlook. This week, Israel assassinated Ismail Haniyeh, the political leader of Hamas, in Iran. This action halted ceasefire negotiations and almost guarantees a military response from Iran, causing crude prices to spike. Traders adjusted their futures positions to long on crude oil. OPEC+ also indicated that cutting production is still an option if crude prices drop in August, and Russia is pumping crude at its lowest level in years. Producers are disciplined in avoiding oversupply, leading to an oversold market with potential buying opportunities. I do not expect crude prices to drop below $70 per barrel.

The Mobil Joliet refinery in Illinois is facing issues restarting after a tornado-induced shutdown a few weeks ago. This delay has caused a spike in regular gasoline prices and a significant increase in reformulated gasoline prices. The shortage prompted the Federal EPA to issue a waiver allowing counties designated for reformulated gasoline to purchase regular gasoline until inventories are replenished. Gasoline and diesel prices are expected to remain higher until the Joliet refinery is fully operational.

Propane spot prices have slightly decreased from their peak but remain strong compared to crude oil prices. Propane futures are robust based on inventory levels and predictions of a polar vortex this winter. Home heating customers are advised to fill their propane tanks this summer and contract for the upcoming heating season.

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

Best regards,

Jon Crawford

Happy Friday! This week, crude oil prices experienced significant fluctuations, with WTI crude dropping below $80 per barrel for the first time in several weeks. The $80 per barrel mark has been considered a psychological support level. The decline in crude prices was primarily influenced by expectations of the Federal Reserve cutting rates in September, weaker-than-expected economic data from China, and the potential for another ceasefire agreement between Israel and Hamas. Although these factors were interpreted as bearish, there are inconsistencies in the details.

The anticipated Federal Reserve rate cut has already been factored into the market for over a month. Consequently, the recent sell-off based on Federal Reserve data appears to be an overreaction. The economic data from China was indeed weak, prompting China to lower its borrowing rates. However, China has a history of manipulating its currency to remain competitive globally. As the United States approaches a presidential election, China is prepared to engage in trade disputes with a lower yuan valuation. Despite President Biden’s announcement of a potential ceasefire deal between Israel and Hamas, Benjamin Netanyahu, in his speech to the US Congress this week, did not mention any such deal.

A closer examination of these three points suggests that the recent drop in crude prices is a temporary anomaly. Similar patterns were observed last month, with prices quickly rebounding. Once WTI prices fall to around $78 per barrel, traders tend to clear positions and buy back in. Therefore, I believe crude oil is once again oversold. The bullish data for crude oil prices this week was robust. The US economy grew at a 2.8% rate, exceeding expectations. The consumer economy in the US shows no signs of slowing down. The EIA reported another drawdown in crude oil inventories nationwide, and the Federal Reserve’s PCE number aligned with expectations. Without any significant contraction in the US economy, I do not foresee a path to lower oil prices. Oil companies continue to reduce oil rig counts to maintain steady production levels. I firmly believe that $80 per barrel is the floor for WTI crude oil prices, and recent events are likely a temporary anomaly.

In the local Chicago market, Mobil announced plans to restart their Joliet refinery this weekend, with refined products expected to start flowing in early August. This news caused gasoline and diesel spot basis prices to drop. While gasoline spot prices dipped, diesel spot prices did not fall as much as anticipated due to tight diesel inventories going into the turnaround season. Additionally, the Midwest is predicting a large harvest this season, which will increase diesel demand and pressure supplies this fall.

Propane prices remained stable despite the dip in crude oil prices. The EIA reported a small build in inventory this week, which offset the previous week’s large build caused by Hurricane Beryl closing exports rather than increased production. I expect propane prices to continue trading within a narrow range. Propane still offers excellent value compared to crude oil prices. I recommend filling your tank this summer and locking in prices for the upcoming heating season.

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

Best regards,

Jon Crawford

Happy Friday!

This week, crude oil prices continued to trade within a narrow range, with WTI holding above $80 per barrel. Geopolitical news was relatively quiet. Ukraine is grappling with a severely damaged electrical grid, potentially increasing diesel consumption for generators. Russia shows no signs of de-escalating, and tensions are rising in Palestine as Israel killed a Hamas commander in Rafah. Additionally, the Philippines constructed an aircraft landing strip near Manila in contested waters with China, potentially escalating tensions regarding Taiwan. The Shanghai Cooperation Organization (SCO), which includes China, Russia, and several other nations, met and pledged mutual military and economic support, posing a potential challenge to NATO. These developments underscore a possible economic conflict and a cold war-like military structure emerging globally.

Crude oil supplies remain tight worldwide as producers exercise disciplined production. The U.S. is recovering from Hurricane Beryl, which temporarily halted exports and refinery operations. Normal operations are expected to resume in a few weeks. The Federal Reserve’s anticipated rate cut in September could weaken the dollar, putting downward pressure on crude oil prices. However, producers have signaled continued production cuts if rates decrease. Former President Trump announced plans to make the U.S. the leading global producer and exporter of crude oil, though U.S. producers remain focused on maintaining higher prices through disciplined production. OPEC agrees that reducing production during a recession is essential to sustaining higher prices. The consensus among global oil companies is “less barrels for more money,” suggesting no imminent price reductions despite a potential landscape for higher U.S. production under a Trump administration.

Severe thunderstorms forced an emergency shutdown of Mobil’s Joliet refinery in Illinois, causing significant price increases for gasoline and diesel. The refinery, producing about 300,000 barrels per day, will be down for at least a few weeks, impacting supply during the refinery maintenance season. Consequently, gasoline prices increased by nearly 30 cents per gallon and diesel by 20 cents per gallon, with prices expected to remain high into August.

Propane prices remained stable, trading in a narrow range alongside crude oil. Propane continues to offer excellent value, and we strongly recommend filling your tanks and locking in prices for the upcoming winter.

As always, please feel free to contact us with any questions, comments, or concerns.

Best regards,

Jon Crawford

Happy Friday!

This week, crude oil prices closely tracked economic data, with WTI trading within a narrow range but maintaining a level above $80 per barrel. The early-week sell-off was driven by weak economic data, including reports of cooling U.S. inflation and Saudi Arabia’s decision to delay future infrastructure investments. Additionally, Federal Reserve data suggested a potential rate cut in the near future. Although these economic indicators slightly depressed crude oil prices, supply concerns prevented prices from falling below $80 per barrel. The EIA reported a significant draw in crude oil inventories, and the U.S. oil rig count continued to decline. This data supports the thesis that American oil producers are exercising discipline by reducing production in response to weak demand to sustain higher prices.

Geopolitical factors also contributed to bullish sentiment. The U.S. announced plans to send larger bombs to Israel as it continues its conflict with Hamas in Rafah. In Ukraine, reports emerged of a children’s hospital bombing, and President Zelensky spoke at the NATO summit, where continued military support for Ukraine was pledged. These geopolitical issues supported oil prices, but economic data was the primary driver this week.

In local news, the Chicago spot market experienced a significant drop in diesel basis, leading to expected lower diesel prices at the pump. The gasoline basis in Chicago continued to lengthen slightly against rising crude prices, keeping gasoline prices stable despite the increase in crude oil prices. Chicago is expected to remain long on basis until the next refinery turnaround, projected for late August or early September. Motorists in Wisconsin should benefit from the competitive pricing of refined products throughout the summer.

Propane prices have continued to rise in line with crude oil prices, with futures prices now exceeding the six-month average. Customers are strongly encouraged to fill their propane tanks and lock in their propane gallons for the upcoming winter. For more information, please contact our office.

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

Best regards,

Jon Crawford

Good afternoon!

I would like to wish everyone a safe and happy 4th of July! Crude oil prices have risen throughout the week, along with finished products, ahead of the busiest travel weekend of the year. Additionally, the Federal Reserve holding rates steady and the approach of hurricanes in the south have continued to support higher crude prices. Consequently, I expect pump prices to increase. All finished product prices, including propane, ended the week higher. With many traders out of the office, trading volumes are light, which can lead to price volatility. Enjoy the rest of the holiday week!

Best regards,

Jon Crawford