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

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

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

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

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

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

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

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

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

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

Best regards,
Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal

Happy Friday!

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

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

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

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

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

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

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

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

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

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

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

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

Best regards,
Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal

Happy Friday!

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

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

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

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

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

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

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

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

Best regards,

Jon CrawfordSources: Bloomberg, Reuters, Wall Street Journal

Happy Friday!

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

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

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

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

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

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

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

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

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

Best regards,

Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal

Happy Friday!

What a week. Oil opened Monday near $105 a barrel on fears the US had been attacked in the strait, collapsed nearly 10 percent by Wednesday on peace talk hopes, and is finishing the week around $94 as fighting continues despite an active ceasefire. The market has been driven entirely by headlines, and every one of them contradicted the last. The underlying supply situation has not improved, and I do not believe a peace deal, if one comes together, solves the physical problem quickly. But the market is trading on hope right now, and hope is moving prices more than fundamentals.

Monday set the tone. Iran’s state media reported two missiles struck a US warship near the entrance to the Strait of Hormuz, pushing WTI sharply higher before the US denied any ships were hit. At the same time, Trump launched what he called “Project Freedom”, an effort to guide commercial ships stranded in the Persian Gulf out through the waterway. Iran immediately responded with missile and drone attacks, striking an oil terminal at the UAE’s Fujairah port and setting it ablaze.  The ceasefire that has been in place since early April is hanging by a thread. By Tuesday, the US and Iran seemed on the brink of a dangerous new phase of this war.

Then Wednesday flipped everything. A source from Pakistan said the two sides are working toward a one-page framework to end the fighting. The US expected to hear Iran’s response on key sticking points within 48 hours.  This is the closest to a deal since the war started in late February. WTI dropped to around $92. Trump also quietly pulled back “Project Freedom” sending a signal the administration may be clearing the path for diplomacy.

Thursday added more fuel to the optimism: Saudi Arabia reported than an understanding had been reached to ease the naval blockade in exchange for a gradual reopening of the Strait.  Israel also reported Iran agreed to transfer its stockpile of highly enriched uranium to a third country. Neither report was independently confirmed, but together they were enough to push oil prices lower.

Even with a deal in the works, the supply picture does not fix itself overnight. Even if the US and Iran sign something in the coming days, it will still take weeks for oil shipments to resume flowing out of the Persian Gulf. Ships need to move, ports need to reopen, and crews need to feel safe sailing through the strait again. The physical supply crunch does not end the moment a deal is announced. Some early signs of quiet movement are encouraging.  A handful of UAE tankers were reported sailing through the strait with their location tracking systems turned off.  But this is far from normal traffic.

US gasoline stockpiles are falling sharply and could reach the lowest level for this time of year in modern records by the end of August. US refiners are prioritizing diesel and jet fuel production over gasoline because margins are better, which is squeezing consumer supply even further. The EIA report this week included a 2.2M draw in crude inventories, a 2.5M draw in gasoline inventories, and a 1.3M draw in distillate inventories.

On the supply response front, US producers are finally starting to move. Diamondback Energy announced they will increase drilling, expecting as many as 30 additional rigs to be added in the Permian.  This is roughly a 10 percent jump. Continental Resources and Exxon have also committed to production increases. Trump also signed a presidential permit for the Bridger Pipeline expansion that would eventually carry about 1.1 million barrels per day of Canadian crude to Wyoming.  Libya’s Zawiya refinery near Tripoli was forced to shut down this week after attacks struck multiple locations inside the plant.  The closure removed 120,000 barrels of crude oil per day of global supply.  Adding to the supply picture, China slashed its April oil imports by roughly a quarter compared to pre-war levels, but its state-owned companies have been quietly reselling some of those cargoes to European and Asian buyers, which has helped ease some of the supply crunch overseas.

This morning’s April jobs report came in much stronger than expected. The US economy added 115,000 jobs, more than double the 55,000 analysts were forecasting.  The unemployment rate held steady at 4.3 percent. The report is a reminder that even with $4.50 gasoline and a war disrupting global energy markets, the US labor market is still holding up reasonably well. Hybrid vehicle sales jumped 37 percent in the two months since the war began, which tells you how consumers are adapting. But there are real cracks showing.  Consumers are starting to report cutting back on food and everyday purchases to cover fuel costs.

The Chicago spot market was a disaster this week and I need to address it directly. Gasoline and diesel prices collapsed last Friday and Monday after news broke that one major refinery was back online after a power outage and the refinery with the broken coker would return by end of May instead of June. That was great news and a sigh of relief. Then Thursday happened. A single refiner purchased every open diesel barrel in the Chicago market in one move, sending diesel prices up 60 cents as traders scrambled frantically to cover positions. Friday brought more of the same as traders continued covering barrels heading into planting season. Until the current three refineries that are in maintenance fully come back online, the Chicago market is going to be a volatile rollercoaster. Even though diesel prices pulled back at the pump recently, I expect diesel prices to climb back toward $6 a gallon unless something unexpected changes. Gasoline prices moved lower this week and I do not expect pump prices for gasoline to increase in the near-term.

Propane sold off a bit on the Iran deal news, but the drop was not substantial. Futures buying is picking up as next season’s heating contracts begin to develop. Prices firmed back up after the EIA reported another draw of over 1M barrels in propane inventories due to exports continuing at record levels. I am still not predicting prices for summer fills to go significantly lower. Next season’s heating contracts should be released near end of May or early June.

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!

What a week. Oil touched its highest price in four years on Thursday when WTI briefly spiked to $112 a barrel on fears the United States was preparing a new military strike against Iran, only to pull back sharply today after Iran sent a fresh peace proposal to Pakistani mediators. As of this afternoon, WTI has fallen back toward $102. That is still a large range for a single week, and it shows exactly what this market has been — volatile moves in both directions, driven entirely by geopolitical events and announcements.

The week started with a setback. Trump canceled his top envoys planned trip to Islamabad over the weekend after Iran’s Foreign Minister Araghchi left Pakistan before any direct talks could take place. Trump blamed the lack of structure in Tehran’s leadership. Monday brought a new Iranian proposal: reopen the Strait, end the war, nuclear issues set aside for now. Washington rejected it. Trump made clear the naval blockade stays in place until a full nuclear deal is reached, not just a strait deal. That gap between what Iran is offering and what the US is demanding has defined the entire week.

By Tuesday, the pressure on Iran’s side was becoming impossible to ignore. The US Navy blockade, in place since mid-April, has cut Iranian oil exports by roughly 70 percent.  Iran is running out of places to store what it cannot sell, with analysts estimating only 12 to 22 more days of available storage capacity. Once that runs out, Iran will likely have to slow or stop pumping entirely, potentially cutting another 1.5 million barrels a day by mid-May. The UAE added to the pressure by officially quitting OPEC on May 1, ending more than 50 years of membership. OPEC just lost its third-largest producer, and one with significant spare capacity. The UAE has made clear it plans to pump whatever it wants whenever the strait reopens, targeting 5 million barrels per day by 2027.  That is nearly double its recent OPEC quota! Some analysts are watching Kazakhstan closely as a possible next departure. A looser OPEC with less coordinated production control means more price swings ahead once this crisis ends, but there is a greater chance of lower prices than higher.

On Wednesday, an investigation found that Iran’s Revolutionary Guard Corps has quietly taken control of the country since the war began. When Supreme Leader Khamenei was killed on the first day, his son Mojtaba stepped in but largely approves decisions rather than drives them. The real power sits with a small group of IRGC generals who have their own financial resources and are far less concerned about Iran’s struggling economy. That matters a great deal for negotiations. The people now in charge of Iran are not the people most eager to make a deal, and every day of stalemate tightens the supply crunch further.

Thursday was the day the market came closest to breaking. A report that US Central Command was set to brief Trump on plans for a short, intense wave of airstrikes on Iranian infrastructure was released. WTI rocketed to $112, a level not seen since the months after Russia invaded Ukraine before pulling back to around $108 once no announcement followed. Jerome Powell’s final Fed meeting as chair also took place Thursday. The Fed held rates steady for the third straight meeting at 3.5 to 3.75 percent citing inflation from energy as the number one concern.

Today’s news out of Iran brought the first major market relief of the week. Iran’s new proposal reportedly includes more specific language around the strait than previous offers, along with a ceasefire and an offer to deal with nuclear issues separately at a later date. WTI dropped almost $4 on the news.  Trump responded by reiterating that the blockade stays until a full nuclear deal is in hand. The gap is still wide for a deal, but Iran sending a revised proposal after a week of escalating military pressure is at least a sign that both sides are still talking.

The Chicago spot market had an extraordinary week that I need to address directly, because it was driven by factors beyond just the Iran war. Diesel prices climbed almost $2 a gallon in a short period of time, setting a record for the fastest price increase we have seen in the Chicago market. Three refineries are currently in turnaround maintenance. One refinery lost a coker unit, which took out roughly 20 percent of its capacity and is likely to be offline for months. Another lost power. The combination of the Iran-driven crude price surge and these simultaneous local refinery outages created a short squeeze that pushed prices to levels I do not see coming down quickly. I expect gasoline to be near $4.50 a gallon and diesel near $5.50 a gallon to persist for some time, possibly through the end of May. One refinery is restarting and prices pulled back a bit today, so hopefully we have seen the peak, but I would not count on it just yet. Let’s keep our fingers crossed that the refineries in maintenance come back online without any additional hiccups.

Propane prices found their legs this week. Futures and spot prices all moved higher, and inventories experienced a surprising draw on Wednesday driven by a new record in exports. I do not expect exports to slow down any time soon, and that changes my summer fill outlook somewhat. I am no longer confident we will see significantly lower prices for summer fill compared to where we are for price today. That said, I still expect next season’s heating contracts to remain under $2 a gallon. The bigger picture on propane inventories remains very favorable.  Inventories are over 65 percent higher than this same time last year and over 35 percent higher than two years ago. Even with record exports, there is an extremely low scenario in my opinion where propane faces the kind of short squeeze we are seeing in diesel. Propane remains by far the most stable and affordable energy product in this environment, and that story has not changed.

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