As long as crude is strong, propane is unlikely to pull back. I have written than over and over this spring and into the early summer, all the while seeing…
Interesting news emanating from the Middle East.
First, we have Russian reports that Turkey has shot down one of their jets. Combine that with yesterday’s comments from Saudi Arabia that they are willing to work with oil producing nations to stabilize prices and you have a pause in the drop in oil prices…for the time being.
Crude prices are up nearly $2.00 off their early Monday lows as the black stuff appeared headed back below the $40/bbl mark.
Saudi Arabia’s comments come in advance of their meeting next week in Vienna, one of two regularly scheduled meetings per year. The comments didn’t exactly light the world on fire, either.
While the Saudi’s didn’t lay out specifics on what they meant by their statement, some folks took that to mean they would entertain the thought of cutting their production, which is really the best way to ‘stabilize supply’ for the world, since the Saudi’s are flooding the world markets with their oil. This has been their strategy since one year ago; to drive down oil prices and put many American shale oil companies out of business.
While one can argue the success of that plan, there has also been a boomerang effect; other OPEC nations and Russia have seen their petrodollar dependent economies take a hit since oil lost more than half it’s value from the summer of 2014. This article highlights some of the infighting that seems to be going on with OPEC nations and the Saudi Royal Family.
I don’t expect a great capitulation from the Saudi’s next week, but I no longer get the feeling from them of ‘strong leadership’. King Abdullah, the architect of Saudi’s current ‘flood the market’ strategy died in January of 2015. His heirs and new monarchs do not appear to be as hardened as he was an may be more open to capitulation.
As for the geopolitical risk in crude oil pricing, we may be seeing some of that creeping back into the market place, but I think it will take more than just one downed jet. Turkey has been consistent in expressing its right to protect its airspace.
That said, the proxy war taking place in Syria is a powder keg that would only take a few sparks to quickly escalate. If that happens, crude oil will rise quickly, and all energy prices will rise along with it.
Crude oil prices are in the midst of a large drop on Tuesday, fueled by OPEC production news and China’s devaluation of their currency.
As of this writing (10:40am central), Crude is off $1.93 at around $43.03. It has been as low as $42.98 on the day.
Here are some notes from an article (linked here) :
The Organization of Petroleum Exporting Countries said in its latest monthly market report production from its 12 members increased by a net 100,700 barrels to 31.5 million in July. Accounting for just under half of the world’s total supply, the disclosure in an already-oversupplied market pushed crude prices lower.
We are nearing the end of the peak gasoline demand season, and refineries will begin their annual fall ‘turnaround’ maintenance efforts…they typically do some of this in the spring but many postponed doing so this year to take advantage of netbacks which were there for the taking, so this round of maintenance might be prolonged. This could lead to more than usual builds in crude stocks which could also test the crude storage limits in the Gulf and at Cushing, OK.
I remain bearish on the trajectory of crude oil…and that certainly doesn’t engender a great deal of support for higher propane prices.