Spot propane prices are three to four cents stronger this morning than where they ended last week. Crude oil values closed at $66.32 last week and are trading near $69/bbl in early morning action today and propane is following. Optimism over continued recovery from COVID-19 seems to be the catalyst for the momentum today in crude, and oil futures have now risen to their highest levels in more than two years as OPEC+ is forecasting a 6M/bpd increase in world oil demand this year.
Against a rising demand backdrop we have less domestic production online right now than we did prior to the pandemic, as seen in the image on the right from The Daily Shot. While rig counts have recovered from their COVID lows, they are still off more than 50% from their pre-COVID levels. Gasoline and demand for other oil-derived products are increasing at a much faster rate than rigs counts are increasing, which is putting upward price pressure on crude oil.
Then we pivot to bullish propane fundamentals, with national inventories near seven-year lows for this juncture of the calendar, and many propane retailers still have a good deal of winter contract buying to do. It creates a bullish mixture and prices are getting pushed, both in the near months and the out-months. Bearish scenarios are seemingly more and more farfetched at the present time.
Propane prices are at levels where retailers feel uneasy, as they can see the downside risks looking them in the face, as propane prices were much, much cheaper one year ago. However, the bullish factors that are pushing propane prices (low propane inventories and rising oil demand) could move things higher…or even much higher.
Here at Flashpoint Energy Partners, we have risk mitigation programs that can protect you from upside risk as well as participate in downside price movements. Or programs that can provide some pricing relief for the winter of 2021-2022. Shoot me an email at jon@propanebuzz.com with a time that would work to discuss these options and how we can help you get positioned to tackle the unique challenges ahead for this coming years, as well as several winters into the future.
MASSIVE model changes from late last week…precipitation is disappearing for the June outlook. For those of you involved with agriculture, you will want to watch today’s video. ‘Things will get very hot, and very dry, very quickly for the northern tier of the country…in the next seven days’. See the updated Week’s two and three and week’s three and four below.