Let’s lead things off with some thoughts from Flashpoint’s Darius Lechtenberger:
“WTI crude oil and refined product prices are running higher in early trade this morning. The pricing yo-yo continues to go up and down without much reason. The energy markets are making massive moves headline to headline without much concern about typical supply and demand fundamentals. Yesterday, it was reported that U.S./Iran nuclear talks were put on hold because of new demands by Russia…at the end of last week it was expected that a deal would be done sometime this week. Petroleum inventories continue to lag the 5-year average across the board. Especially diesel fuel which is 20% below the 5-year average. Here is an excerpt from Phil Flynn talking about diesel fuel: “It is no secret that diesel fuel is extremely tight and the Russia oil ban will not help. Oil watcher Brynne Kelly tweeted that Saudi Arabia is seeking to purchase an unusually large amount of diesel in a surprise move for the net exporter, sources say. Adding to the Diesel strain with rare buy tender. Oh boy! John Kemp at Reuters points out that U.S. distillate fuel oil inventories fell by 5 million bbl to 114 million bbl last week- the lowest seasonal level for more than 15 years. Distillate stocks were already looking tight and are now on track to become exceptionally tight before mid-year. Distillate inventories are on course for an expected first-half low of 103 million barrels (with a range of 92-114 million). Stocks are on track to hit an even lower seasonal level than 2008, when distillate shortages helped propel crude oil prices to a record high at the middle of the year.” Propane prices have seemed to be following crude oil’s price movements, but at a slower pace. Expect continued high volatility and crazy price swings as global events surrounding Russia/Ukraine and global energy supplies unfold.”
That sums things up pretty well. Count on chaos, hope for calm…calm in Ukraine would be great on many fronts…but even if everyone shook hand and went home and sanctions were lifted, propane and oil fundamentals would still be bullish. Yes, I think prices would pull back some, but it wouldn’t take long before everyone was like, wait a second…inventories are still low…what are we gonna do now?