Happy Friday!

WTI crude spent the week climbing off jitters near $100 a barrel, pushing through $102 midweek, and closing back above $100 on Friday as Middle East tensions escalated sharply.  And Chicago did another record basis dance.

Monday, oil slipped early but recovered as WTI held near $100. Attacks in the Strait of Hormuz picked up significantly, and while exports have dropped, ships are still managing to move through. Supply is holding up overall, which is helping keep a lid on prices for now. Election season is adding to the jitters, with Iran and the Houthis continuing to signal they’ll do whatever it takes to try to swing the outcome. Freight costs keep climbing, and a lack of diesel production remains a major concern heading into 2027. Trump’s proposed easing of sanctions on Russia in exchange for diesel is also setting up a possible summit with Xi and Putin.  Trump’s lean toward Putin is putting real pressure on Republican midterm races. The 10-year Treasury pulled back from recent highs, though plenty of volatility still remains.

Tuesday, oil pushed above $100 to start the day, then eased sharply on news that Iran and the US may have struck a nuclear inspection deal through Qatari negotiations. However, we’ve been down this road before, so the news didn’t keep prices down for long. The Houthis claimed attacks on a Saudi oil facility, an oil field, Riyadh’s main airport, and the airport in Abha.  In addition, Saudi Arabia announced it would no longer hold its investor conference in person. The IEA said it’s prepared to release more barrels if global supply tightness carries into winter, and Trump announced an $8 billion fuel relief plan for farmers.  But details were not discussed. Russia and Ukraine kept trading fire on each other’s energy infrastructure which continues to be the norm.

Wednesday, oil rose again along with gasoline and diesel. Crack spreads have dropped sharply, but the possible price relief still hasn’t made it to the pump as local spot markets remain high. Iran took a hard line saying the US needs to lift the blockade before negotiations can start, and attacks in Hormuz kept ticking higher. Even with crude exports out of Saudi Arabia reported as strong, a risk premium is back in the crude trade. The EIA reported more draws in oil and gasoline, but a surprise build in distillate. Refiners are still running at a solid pace, but strong harvest-season diesel demand at home, combined with the worldwide shortage, is keeping prices elevated. Russia claimed its first diesel shipment to the US would leave Thursday, though the volume is so small that it won’t meaningfully affect the broader shortage. Putin hosted the US to discuss Ukraine.  And the US separately discussed with India buying more Venezuelan crude to help supply more diesel to the region.

Thursday, oil kept climbing along with gasoline and diesel. Houthi attacks on Saudi Arabia continued into the morning, forcing an evacuation of employees from the state oil company’s headquarters.  Saudi Arabia doesn’t appear to have the situation under control, and there’s growing concern the conflict with keep escalating with real supply loss on the line. The US is building up more ships and troops in the region near Iran, and Trump again said he’s prepared to “finish the job” if Iran doesn’t start negotiating. Iran has also run out of oil supplies in Asia.  Their entire floating fleet that was in the market before the blockade is gone and can’t be resupplied. Food and energy costs keep pushing on inflation at home, though the economy seems to be holding up after a better-than-expected jobs report. Trump announced a release of heating oil reserves to help with winter heating bills, but again, the volume isn’t enough to really move market economics.

Friday, oil pushed higher again and looks to close above $100 for the week as Middle East tensions keep building. The Houthis continue attacking Saudi Arabia, and the US has now started evacuating citizens from the country. Iran continued attacking ships in Hormuz, sinking two late Thursday, and laid out an attack plan targeting American bases, assets, oil infrastructure, and citizens across the entire Middle East. Intelligence suggests Iran has rebuilt a large portion of its missile stockpile and is capable of serious damage. The US keeps building up military presence in the Gulf, and without a breakthrough in negotiations, further attacks look all but guaranteed. At home, Trump invoked the Defense Production Act to fast-track projects aimed at boosting fuel supply during wartime.  Although so far, only one Texas refiner has announced plans to expand capacity, so the move does little to change the US production trajectory for now. On a brighter note, crack spreads finished the week more than 40% lower from recent highs and are approaching normal levels relative to crude price. Refining utilization dropped to 93% as refineries head into maintenance after running flat-out all year. That said, I don’t expect refiners to ramp production back up once maintenance wraps up.  With crack spreads lower and demand decline in the winter, they’re better off keeping supply a bit tight to put a floor under prices.

Chicago sport market went absolutely bonkers this week. Chicago basis blew out almost a dollar a gallon on both gasoline and diesel. Midwest harvest is running full speed, creating logistical headaches getting fuel to the right terminals.  And on top of that, the Mobil Joliet refinery shut down unexpectedly. I’ve been saying for weeks that a refinery outage during harvest could send a shockwave through the market.  Well, it did. Prices moved as much as 50 cents a gallon in a single day. Depending on when Mobil gives a reopening timeline, there’s a chance gasoline eases off current levels, but diesel at the pump is headed well over $6 a gallon in the near term. But be mid-day Friday, basis seems to be sharply selling off, so maybe the extreme high pricing will ease by the weekend and not hit the pump price too hard.  There is just so much volatility until harvest is completed.  We’re still hoping for some correction after the election, but if Chicago keeps seeing supply disruptions, any relief from the broader world market could get wiped out by local basis dynamics. In other words, I think we’re looking at higher prices for longer heading into the holidays. And unfortunately, that’s before even factoring in the Iran war flaring back up.

Propane prices climbed again this week, and we ended up raising our retail price again.  We’re now at the highest retail propane price in a year, and we’re not even into winter yet. Corn drying is likely driving some of this, but supply remains in good shape. Right now propane looks to be hitching its wagon to crude oil pricing again.  Propane had decoupled from crude prices for most of the year, but now looks to be trading in tandem.

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 Friday!

This week was the realization that the world is dealing with three major wars all affecting world supply of oil and refined products.  Instead of conflicts easing, we are moving into the end of year with escalating conflicts rather than resolutions.

Monday, the biggest story was an attack on Riyadh International Airport in Saudi Arabia. Houthi militants struck Terminals 1 and 2, killing 12 people and injuring over 300, forcing an immediate shutdown.  And then they hit the airport again the following day, canceling more than 1,000 flights combined. Attacks on ships in the Strait of Hormuz also continued, overshadowing Saudi Arabia’s announcement that it’s expanding its East-West pipeline to 10 million barrels a day. On the supply side, Trump claimed he’d struck a diesel supply deal with Russia, along with a truce between Russia and Ukraine on attacking each other’s energy infrastructure. The deal is an odd one, since Trump signed a new sanctions law against Russian imports just three weeks ago, and it’s still unclear how the diesel barrels would actually enter the market. As for the ceasefire, neither Russia nor Ukraine confirmed any such deal by end of day Monday.

Tuesday, oil held flat as traders weighed the Russian diesel deal against the attacks in Saudi Arabia. Lawmakers questioned whether the Russia deal violates US sanctions law, and regardless, it won’t do anything to bring prices down before the election. The bigger story on Tuesday was that Iran appears to be gearing up for war, with some predicting it could escalate further alongside the Houthi attacks on Saudi Arabia.  Iran also stepped up its own attacks on ships in the Strait. The market took a breather after WTI hit its highest price in a month around $95.

Wednesday, oil started climbing again as more signs pointed to Iran building toward a bigger strike on Saudi Arabia and the Strait. A ship crossing the Strait hit a mine Wednesday morning, and another was hit by a projectile. Iran stated publicly that it plans to close the Strait entirely before the US election to influence the outcome. The IEA finished analyzing Trump’s diesel deal with Putin, and based on current Russian output, the proposed barrel release would only cover about two weeks of US diesel demand.  And the additional releases Trump mentioned aren’t even possible given the damage to Russian refineries. Russia also struck 30 energy sites in Ukraine, undercutting any ceasefire Trump claimed earlier in the week. At home, inflation rose 0.6% in September, well above expectations.  Half the increase came from higher food and energy costs. The Fed is still planning one more rate hike this year, and at this pace, recession odds keep climbing in prediction markets.

Thursday, oil again rose further. Attacks on ships in the Strait kept climbing, and Ukraine announced more strikes on Russian refineries. Even as the Trump administration discussed easing sanctions on “shadow fleet” tankers moving Russian and Iranian crude, traders believe continued strikes on energy infrastructure in both the Gulf and Russia will keep weighing on the market. The Houthis struck Saudi Arabia again, this time hitting Saudi Aramco’s headquarters.  Iran has now struck energy infrastructure more than 135 times since the war began, and countries are growing concerned about the level of intelligence Iran has to strike with that kind of precision. The EIA reported a large draw in crude and diesel inventories, adding further pressure to prices. Even with inflation running hot, gasoline and distillate demand remains average. Traders are now starting to believe crude prices could stay elevated well into 2028.  And while Europe and others are releasing product stockpiles, until demand actually cools we’re looking at higher for longer. That said, if the 10-year Treasury yield stays elevated alongside high inflation, a US recession is a real possibility.

Friday, oil looked to close roughly flat on the day but up over $5 a barrel for the week. The good news is crack spreads fell sharply from record highs, offering some relief on gasoline and diesel prices.  Even with crude still elevated, the drop in crack spread will help keep a lid on things. The White House pressured Ukraine Thursday evening by limiting its satellite communications access, aiming to diminish further strikes on Russian refineries. Friday morning brought a reminder of how broadly high energy costs are spreading.  Freight costs are now up over 19%, the most in four years, and that’s working its way into the price of nearly everything. Investors are nearly certain another rate hike from the Fed lands by year-end. Without cooling inflation and a real pullback in demand, I don’t see a path to cheaper gasoline and diesel by year-end.  Realistically, it will take all three current wars ending and a drop in world demand for a true recovery in the oil market, especially diesel.

Chicago had quite a ride this week. The spot market pushed diesel costs up over 50 cents in three days, only to come back down just as fast.  Gasoline took a similar but smaller swing. I expect gasoline prices at the pump to hold and diesel to ease a bit.  Although we’re still deep in high diesel demand for harvest, so anything can happen.  Any supply disruption would send diesel prices right back up. For now, harvest is moving along well and supply is keeping pace. Let’s hope that holds for another four weeks.

Propane prices kept climbing again this week. There was a large draw in inventories reported Thursday, but we’re in the middle of corn drying season.  And the country is still sitting on healthy inventory levels with shipments from Canada moving along just fine. Even with exports running at full capacity, we should have more than enough supply to handle a cold winter. Production should stay strong as long as crude prices and crack spreads remain elevated.  Propane seems to now be trading in tandem with crude oil prices.  So until crude oil prices come down, we will probably experience higher propane prices.

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

Best regards,
Jon Crawford

Happy Friday!

WTI crude started the week near $90 a barrel and spent the week pulled back and forth by Middle East escalation, a Gulf hurricane threat, and international reserve releases before settling back just above $90/barrel on Friday.

Monday, crude opened around $90 and closed even lower. The G7 met and committed to releasing another 100 million barrels of diesel and crude stocks, and agreed not to limit their own exports.  Trump followed suit, saying the US wouldn’t limit diesel exports either. Middle East Gulf supply remains healthy, and even with the Strait technically still closed, flows are strong enough to keep prices from blowing out. The real issue keeping prices elevated is low global inventory.  The world has lost about 3 billion gallons of crude since the war began and only 1 billion made replaced using reserve releases.  This means it could take up to two years to refill global reserves even at an extra 2 million barrels a day of production. Just as producers started discussing that process, the Middle East Gulf instability returned with renewed fighting between Saudi Arabia and the Houthis in Yemen. Saudi Arabia is now fighting back, and the risk of a strike on refineries or ports being attacked is on the table.

Tuesday, the big news was Trump announcing a vague executive order allowing dyed diesel which doesn’t pay federal road taxes to be used on highways.  The order stated that penalties would be waived and taxes deferred until January 1, 2027. There are a lot of problems with this order. It’s a tax deferral, not a cancellation, and only Congress has the authority to cancel taxes.  It’s unclear Trump even has the power to defer them. Treasury and the IRS haven’t issued any guidance yet, and state road taxes and sales tax still apply regardless of what the federal order says. In my opinion, the order has caused nothing but confusion and probably won’t amount to much. Right now, using dyed diesel on-road still exposes you to state fines, and if dyed fuel is still in your tank after January 1, your vehicle won’t be road-legal.  The red dye lingers in filters and tanks for a long period of time. While crude flows are back near pre-war levels, diesel and jet fuel supply are still running at only 60%.  I don’t expect diesel prices to come down quickly. There was some good news on Tuesday regarding the fighting in Yemen.  The Saudis helped the Yemenis retake the entire coast where the Red Sea export facility sits.  The announcement calmed the market a bit and kept WTI below $90.

Wednesday, oil rose again on Middle East attacks and a hurricane forming in the Gulf of Mexico.  The hurricane currently is on track to possibly knock out 15% of US crude production. With refiners already running at near-breaking capacity, any damage to refining units could cause another diesel spike. Iran and the Houthis ramped up attacks including hitting ships and a Saudi airport.  The US said no deal would happen without major changes to Iran’s nuclear program.  The US naval blockade has indeed kept all Iranian crude stuck in the Gulf. With supply tightness becoming a real concern heading into winter, the IEA is working out how to release its promised 100 million barrels.  Although the news held prices steady due to lack of clarity. Ukraine struck another Russian oil depot and refinery, and Russia retaliated with major strikes. The Iran and Ukraine conflicts are once again driving most of crude price action. At home, the EIA reported crude inventory draws, adding further support under the price floor.

Thursday, oil jumped nearly 4% on reports that Washington was drawing up plans for a major strike on Iran before the midterms. Attacks on ships in the Strait are picking up, and only seven ships crossed on Wednesday.  That was the lowest since late July.  Oil from Oman and the Red Sea is flowing at higher rates helping to keep somewhat of a lid on prices. At home, a day after the hurricane warning, US producers shut down 25% of Gulf oil production.  And the Saudi-Houthi fighting escalated further while Syria said it might send troops to help Saudi Arabia.

Friday, crude held steady after Trump announced Thursday night he would not attack Iran before the midterms. Iran has received a proposal from the US and plans to review it within seven days. The Gulf hurricane threat kept accelerating shutdowns.  In a single day, production cuts jumped from 25% to 46%. Refineries and chemical plants aren’t included in the shutdowns yet, but up to 500,000 barrels a day of diesel refining capacity is at risk.  If we lose 500,000 barrels per day of diesel production, this would add real stress to an already tight diesel market. Crack spreads for US refiners fell Friday after China said it would resume fuel exports in October.  The news was very positive for a world market that’s extremely tight on refined products. The Saudi-Houthi conflict and the Russia-Ukraine strikes both continued strong into Friday and neither shows signs of slowing down.

In the Chicago spot market, we’re still seeing gasoline outages at terminals as out-of-state buyers cross into Wisconsin for cheaper gasoline than what’s available in Iowa and Minnesota. Those outages are putting pressure on trucking, with wild price swings. Diesel spot prices have unfortunately rocketed higher alongside crude and heavy harvest demand. I expect gasoline prices at the pump to hold while diesel price will climb over the weekend and into next week.  Until harvest wraps up, I think diesel prices will stay a bit inflated.

Propane prices surprisingly keep climbing. Crop-drying demand has been strong, and propane continues to track crude oil higher. Retail prices are on pace to surpass winter contract pricing possibly by the end of October.  Contract price surpassing usually doesn’t hit until January or February, so this early move is a bit concerning heading into peak winter demand. Anyone who locked in a contract is protected from this current unusually volatile propane market.

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

Best regards,

Jon Crawford

Happy Friday!

WTI whipsawed all week, spiking early and again midweek before falling back hard on Friday from surprise reserve releases out of Europe and the IEA.

Monday, oil opened 3% higher after Trump rejected a weekend peace proposal from Iran that would have fully reopened the Strait with no restrictions in exchange for ending the US naval blockade. Trump responded by saying that until Iran’s nuclear program is dismantled, he plans to resume bombing after the midterms. By midmorning, though, prices had slipped back to flat. Saudi Arabia resumed loading in the Red Sea now that its East-West pipeline is fully back online, and more Gulf oil has been flowing than previously reported. At home, the 10-year Treasury hit its highest rate in over 20 years.  If the 10-year drops below short-term rates, a recession is a real possibility. Trump also brought diesel export limits back into the conversation causing some market confusion.

Tuesday, oil eased as traders kept digesting the extra supply coming out of the Middle East. Diplomatic relations with Iran remained strained, and Iran was openly pessimistic about any deal before the midterms.  Adding to Middle East uncertainty, the US is pulling its remaining troops out of Iraq after more than two decades.  Iran called it a victory, and there are real unknowns about how this affects security for Big Oil’s investments in Iraq. On the diesel export front, there was an interesting twist.  The administration is looking at allowing off-road diesel to be used in some on-road applications, which would remove the 55-cent-a-gallon federal diesel tax and offer some real price relief.

Wednesday, crude recovered a bit from Tuesday’s selloff, but gasoline and diesel futures rose as spot markets started tightening with harvest underway and diesel demand holding firm. Russia reiterated it won’t export diesel in October, and Qatar confirmed that Iran-US diplomacy isn’t going well. In a surprise, though, global crude flows look to be back near 2025 volumes.  But prices are staying high simply because countries are bidding aggressively for any open barrels to refine into diesel at home. The US released its final batch of crude from the SPR.  So basically, there’s no more “magic wand” left for excess US supply. The EIA reported draws in crude and refined products as refinery utilization dropped from its record highs, which tracks with what we saw in Chicago earlier this month.  Refineries are either breaking down or being forced into maintenance after being run flat-out all year. That domino effect could keep diesel prices elevated into year-end.

Thursday, oil took off for a number of reasons. China again suspended all oil product exports, pulling away the supply cushion that had just started to form. Strait exports continued to freely flow, but diesel exports specifically are still way down. Iran said it would reciprocate any US military strikes and is demanding diplomacy to end the standoff. Then, in a surprise move, Trump demanded Europe release its diesel stockpile to help bring global prices down or face reduced diesel export sales from the US.  It is worth remembering that Russia is still withholding all 12 million barrels a day of diesel exports that normally go to Europe, and Europe has been reluctant to tap its own cushion without knowing when Russian diesel comes back. Trump again floated a partial diesel export ban, though he now believes it would actually push gasoline prices higher.  And industry experts keep reminding everyone that if diesel exports are capped, refiners will simply make less diesel to stay competitive on the world market. One piece of news got buried that could matter.  India started hiring ships to grab oil in the Strait, and the US warned that any ship-to-ship transfers from Iranian vessels would trigger sanctions.

Friday, oil collapsed after Europe agreed to release 50 million barrels of diesel from its reserves and the IEA added another 50 million barrels of crude. Russia even said it might release some open diesel barrels in October if it has the capacity. Even with diesel prices falling on the news, the WTI-Brent spread didn’t narrow, which was a bit surprising. Meanwhile, a third aircraft carrier and 10,000 troops showed up in the Gulf.  The action was a sign Trump may be preparing for a larger military operation.  On the longer-term front, Canada approved a financial package to speed up expansion of its coastal pipeline export system, which would let it move more barrels away from the US toward higher-bidding global buyers.

The Chicago spot market went on a wild ride this week. Gasoline differentials jumped to start the week, but collapsed while the Group shot up to record highs. The arbitrage move was severe enough that companies from neighboring states came into Wisconsin to buy cheaper gas, draining terminals in Madison and other cities and causing outages at some gas stations. Diesel differentials, meanwhile, collapsed to near-month lows.  With Chicago diesel spot price now running more than 30 cents under the Group, including gasoline, I expect long lines and tight supply at Wisconsin terminals right as harvest demand peaks. I expect gasoline prices at the pump to hold steady, while diesel should keep declining.  The timing will provide some price relief as farmers hit the fields.

Even with crude trading in a narrow range this week, propane price kept slowly climbing.  Our retail price is now five cents under our prepay contract price. The moves higher have been a bit of a head-scratcher given how plentiful inventories are, but the leading theory is that producers are pushing price ahead of a potentially strong corn drying season, trying to capture profit now before a predicted warm winter with lighter demand sets in.

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

Best regards,

Jon Crawford

Happy Friday!

WTI crude fell below $100/barrel this week and look to close beneath $95.  We are starting to see technical levels in the crude trade, so any major event will push prices quickly back above $100 or below $90.

On Monday, oil collapsed below $100, dropping as far as $95 at one point in a sharp selloff. The UN met in New York this week, and Iran sent a delegation with the green light from both the president and the Supreme Leader to make a deal. The continued threat of Houthi attacks on Saudi Arabia remained real, but the Saudis have managed to keep cargo shipments moving. Diesel prices fell too, even after Ukraine struck another refinery near Moscow early Monday and knocking out half its capacity. US diesel prices remained at a record high above $6.50 a gallon, and all eyes are were the UN meetings this week.

On Tuesday, oil fell further and hit a two-week low. Ahead of Wednesday’s UN session, Iran said the Strait could fully reopen within seven days if the US Navy ends its blockade.  Saudi Arabia announced its East-West pipeline was fully loading cargoes.  The news was much-needed relief as crude oil prices were looking at firming back higher.

On Wednesday, oil bounced off the week’s low after Trump said late Tuesday at the UN that he wanted a deal with Iran or he would consider complete annihilation.  The intensity of the statement spooked traders and repurchasing started to firm up the market.  The US and Iran met for three hours.  After steep overnight losses, crude and diesel rebounded at the open. In addition, Iraq announced that they are continuing to ramp up exports. By noon, though, gasoline and diesel prices completely collapsed. Even with the EIA reporting draws across crude and all refined products, the market is starting to believe the crude and diesel crunch could ease by year-end. Zelensky announced that he wants a winter arms deal with the US.  And he understands that the US will likely ask Ukraine to stop bombing Russian refineries in exchange for the funding. However, the biggest news of the day sent markets into a tailspin.  Reports surfaced that Trump was going to announce a 90-day diesel export ban. The announcement caused a knee-jerk reaction as traders heads spun in circles.  The ban would put the US in uncharted territory. Refiners can sell diesel at the equivalent of $200 a barrel on the open world market.  Europe is already cutting December flights over its diesel shortage and reliance on what little the US can spare  Refiners are not going to lose money because of a ban. So while the knee-jerk reaction might be a pullback, I could see diesel prices eventually rebounding even higher.

On Thursday, crude and diesel screamed higher, then eased around midday on news that the US and Iran are continuing to work on a deal to reopen the Strait and end the naval blockade. I was surprised the market bought into the headline given these same announcements have come and gone for six months now. Diesel stayed the hot topic of the day, both in the news and at the UN. The US denied wanting a diesel export ban, but Energy Secretary Chris Wright said he’s in talks with oil companies about a partial pan. Diesel prices worldwide rocketed higher on that news again, because any ban would further tighten world supply.  Although there was some good supply news.  Saudi Arabia sold almost 100 million barrels to Asia for October and November delivery and plans to move some through the Strait despite the risk.

On Friday, oil drifted lower again as hopes for an Iran deal continued to take the lead.  Strangely, crude oil prices did not move higher on the news that Saudi Arabia is preparing troops for strikes on the Houthis in Yemen.  Saudi is backed by its newly formed alliance with Turkey and Pakistan. Ukraine struck yet another refinery Thursday evening, but traders are holding onto hope that an arms deal with Ukraine gets done in exchange for it ceasing refinery attacks.

The Chicago spot market collapsed exactly as I expected. Once Mobil Joliet and BP Whiting both came back online at full strength, basis differentials fell through the floor. The prompt trading month in Chicago rolled to November on Friday. There’s a bit of support for diesel prices on the November contract, but I expect diesel prices at the pump to keep declining through the weekend and into next week as inventories rebuild. Gasoline prices came down too, just not as much. However, I do believe prices of gasoline will move a bit lower at the pump.

Propane prices continue to firm up, moving higher again this week.  There is a chance of another move higher in early October as winter demand and corn drying season east of the Rockies start drawing down inventories. I don’t see a chance of any major blowout in price.  But I do see a floor forming in the market. A $10 drop in crude could bring some relief on propane price. For now, though, I think we’re settling into the new price norm.

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

Best regards,
Jon Crawford

Happy Friday!

WTI crude touched four-month highs this week before pulling back a bit by Friday.  On Monday, crude opened up more than 3%, with gasoline up 15 cents a gallon and diesel up almost 25 cents. Over the past weekend, Saudi Arabia shut down its east-west pipeline, which normally moves 7 million barrels a day and had been covering half of the crude transport lost from the strait of Hormuz closure. The shutdown came after the Houthis, using Iranian intelligence and weapons, pulled off a fast occupation of an island in the Red Sea strait.  They effectively closed the strait and hit a Saudi export facility along the pipeline route. Saudi Arabia gave no timeline for reopening and said it has about a week of inventory left before exports stop entirely. Saudi Arabia struck back in Yemen, but the Houthi response was massive, destroying large parts of Saudi military bases, radar, and ammunition. Trump also said over the past weekend he wanted to broker a deal between Ukraine and Russia to stop them from attacking each other’s energy infrastructure, and by midmorning Monday he announced a deal was in place. The market whipsawed on the news, and diesel gave back its entire 25 cent gain.

On Tuesday, Saudi Arabia announced the east-west pipeline would be down 3 to 5 weeks, sending prices sharply higher to start the day. And the truce between Ukraine/Russia on attacking energy infrastructure didn’t even last a day.  Ukraine struck another Russian refinery early Tuesday morning, and Russia retaliated with a 200-drone attack on Kyiv. The attacks pushed prices, especially diesel, even higher. Ship traffic through the Strait of Hormuz slowed further as the regional escalation continued. All eyes turned to the Fed’s Wednesday meeting, with traders betting on a rate hike.  However, the big question was whether it’s been already priced into the crude oil market.

On Wednesday, oil prices fell after Saudi Arabia said it would reroute the pipeline’s canceled cargoes through its export facility in Oman. It was good news, but it doesn’t change the overall supply picture.  We may be near a ceiling on crude oil prices, but there still isn’t enough product to bring prices down meaningfully. Europe remains in bad shape on diesel, and Russia announced its diesel export ban will run at least through the end of October. Higher diesel prices are finally starting to hit European demand, and if that pace continues, a recession there by year-end isn’t out of the question. At home, the EIA reported only a small 600,000-barrel draw in crude, alongside builds of about 1.5 million barrels in gasoline and diesel.  The news was nothing dramatic enough to move the market. The Fed decided to raise rates a quarter basis point.  Although the stock market collapsed, the announcement did not move crude oil price, confirming that the rate hike was already priced into the market.

On Thursday, oil prices retreated further as traders saw the Saudi pipeline restart tracking ahead of schedule, and the Oman exports began flowing as expected. Ship traffic through both Hormuz and Bab el-Mandeb remains very light. Ukraine struck yet another Russian refinery.  This was the second in three days, continuing to squeeze world diesel prices. There was more positive talk of American oil companies investing in Venezuela, but any real production increase is still at least a year out. At home, there is growing talk of limiting US diesel exports as diesel prices push the economy closer to recession. However, a diesel export ban would maybe lower prices temporarily, but would eventually make prices move even higher due to the refiners need to capture the spread lost on the open world market.  With the Fed’s rate move higher, traders don’t see higher rates doing much to slow inflation at this time.  The only real fix is bringing energy costs down, and without a deal in the Gulf or with Russia, a recession may be the only path left to get there.

By Friday, crude prices eased back a bit after touching four-month highs. There’s cautious optimism heading into the weekend that Saudi Arabia will continue progress on the east-west, and Saudi announced higher cargo exports for October. China also started exporting diesel again.  Although the volume is not very high, every barrel helps in this tight market.  China reportedly reached out to the Houthis urging them to stop attacking Saudi oil infrastructure, since the disruption is also hitting the crude China buys from Saudi Arabia.

The Chicago spot market went absolutely wild this week. I’ve been saying for weeks how tight the market is heading into harvest, and that any refinery hiccup could send spot prices exploding.  Well, that’s exactly what happened. Two refineries went down: Mobil Joliet and BP Whiting. Diesel prices in our market spiked more than 50 cents a gallon in two days, and gasoline jumped close to 25 cents. I expect gasoline and diesel to move noticeably higher at the pump. With harvest demand hitting right as these refineries are down, prices are likely to stay elevated until the refineries are back to full capacity.  And if crude prices stay calm, we should avoid $7 diesel.

Propane price followed crude oil price higher again this week. I expected a small move as winter fundamentals set in, but this week’s jump was touch more than I anticipated. Although I don’t expect much more movement higher from here.  We’re likely at a ceiling until crude prices pick a clear direction. You can still lock in pricing for the coming winter to protect yourself from any price volatility.

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

Best regards,

Jon Crawford

Happy Friday!

Monday there was no market due to Labor Day, so everything took off on Tuesday. Over the holiday weekend, the US attacked three Iranian tankers, and Iran retaliated with attempted strikes on US warships. And in a surprise move, the Houthis attacked energy facilities and cities inside Saudi Arabia.  The attack is a major escalation in the Gulf. Saudi Arabia said any ceasefire with Yemen is now on hold.  Iran responded by announcing a new “exclusion zone” in the strait and warned that any attacks on Iran would be reciprocated with attacks on American assets. On the supply side, Nigeria announced it has reached 700,000 barrels a day of crude processing, with the majority going to diesel and jet fuel.  The almost 1 million barrels a day was much-needed good news at a time of continued tight world supply of distillate. This week, all eyes were on monetary policy, with the ECB looking to raise rates and the Fed possibly not far behind.

On Wednesday, the US and Iran exchanged heavy fire. The US sank five Iranian oil tankers, and Iran struck 10 random ships in the strait while also firing at American bases in Jordan. The US announced that any further attacks from Iran would result in another Iranian tanker being sunk. The US is continuing its path of economic pressure to end the war.  However, Iran keeps defying expectations. The escalation pushed WTI toward $100 a barrel, and gasoline and diesel prices climbed dramatically. At home, the US Treasury is trying to control the bond market sell-off, but the dollar didn’t gain any strength to help rein in oil prices. Adding to the pressure, Ukraine struck another oil refinery in Russia, further pressuring refined fuels in the world market. Diesel prices continue to sit at record highs and keep climbing. The only bearish news came from China, which said it expects oil demand in their country to fall 8% this year and keep declining into 2027. If the US slides toward recession and China keeps buying less oil, we could be looking at an oil shock collapse in 2027. By midweek the consensus was we’re stuck with current prices for longer.

On Thursday, the European Central Bank raised rates by a quarter point, putting more pressure on the Fed to possibly follow suit at its next meeting to tame inflation. Wholesale prices rose again in August as expected, but oil prices kept climbing anyway. The Houthis moved north along the Yemeni coast and now have the ability to control oil exports in the Red Sea coming from Saudi Arabia.  The quick move believed to have been carried out with Iranian weapons and intelligence. This new threat to crude shipping routes is putting several countries in a tight spot that may require military action. OPEC cut its 2026 demand forecast for the fifth time, though it still sees some demand growth by year-end.  In contrast the IEA, still believes overall demand will decline. The EIA report came out Thursday due to Monday’s holiday.  Refiners continued running hot at almost 98% capacity, crude stockpiles slipped again, and gasoline and diesel stockpiles rose slightly.  However, diesel inventories remain 13% below normal. That tightness isn’t helping the price situation. By the end of day Thursday, crude oil rose well over $100 a barrel, and diesel hit another record high.

Crude oil took a breather Friday but is still on pace for an 8% weekly gain. Diesel retail prices broke yet another record by week’s end, with the average retail price crossing $6 a gallon. Beyond the OPEC-IEA disagreement over whether demand will rise or fall at these prices, Saudi Arabia released an interesting statistic.  Saudi Arabia has now cut oil production to its lowest level since the Gulf War in 1990. The economic data at home wasn’t great either.  CPI rose 0.4% in August and is up 3.4% year-over-year, with core inflation also rising. That data was a big reason crude oil prices dipped Friday.  And the data is giving more weight to the idea that the Fed might raise rates, which would strengthen the dollar and weaken crude prices. Time will tell as we approach the next Fed meeting.

The Chicago Spot Market continues to be balanced and well supplied heading into harvest, with differentials still running at a favorable deficit to NYMEX. That said, both gasoline and diesel costs moved higher this week.  Gasoline went up just over 10 cents a gallon since Monday, and diesel on track to end the week over 35 cents a gallon higher. I expect gasoline and diesel prices to move higher at the pump. Hopefully, after today’s breather, we hold at these levels for a bit.

Propane prices, for the first time in months, followed crude oil higher.  Although not by much, but enough to nudge retail prices up slightly. National inventories remain very healthy, and I don’t expect propane to blow out the way gasoline and diesel have. Especially since rail cars from Canada will start showing up for winter.  I could see retail prices tick up a little more by the end of September before holding as winter economics fully set in. We’re still writing contracts for the upcoming winter, and you can still fill your tank at a lower price than contract.

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