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Market Outlooks

Distillate pricing has soared throughout the month on the back of a weak Canadian dollar. Refinery and terminal maintenance have contributed to major drawdowns in supply earlier in the month. Whether this impact is further realized is yet to be determined. Demand remains strong as we enter furnace oil season.

Gasoline prices have reflected the price of Crude Oil, which has increased throughout the month amidst continuing developments in Eastern Europe. Inventories are receding consistent with demand.

There’s nothing impactful to report on propane. Prices and supply are stable for now.

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Fall has arrived! Turbulent weather down south has brought some cool weather to southern Ontario. Frost is expected throughout the first weekend in October. The Farmers’ Almanac projects a slightly colder winter than normal.

Our bulk propane plant in Stratford is close to fully operational. This will ensure we’re well supplied during the heating season. The market inventories continue to grow; exceeding last year’s pace for late September, but remaining below the five-year average for the time of year. Despite increasing inventories, prices remain heightened. We hope to see the prices fall if inventories continue to build into autumn. Of course, global events may continue to contribute to market volatility.

Crude oil prices retreated earlier in the month but rebounded over speculation that OPEC+ will reduce production in October. Fears of global recession, inflation and high interest rates may decrease demand. Somewhat surprisingly, inventories have been building of late, leading to a slight drop in price.

Gasoline inventories have fallen, which is to be expected for the time of year. We hope to see prices stabilize and retreat marginally in the coming weeks.

Distillate inventories are closing in on the 5 year average. Barring any extreme externalities, prices should stabilize headed into the fall.

Hurricane Ian and the Nord Stream 2 leaks will certainly impact market speculation. Other geopolitical events may even further exacerbate volatility. Consequently, it’s tough to predict the market heading into the end of the year.

As expected, market volatility has continued over the last month. Geopolitical influences are weighing heavily on the decisions of traders and producers appear to be struggling to build inventories.

There was a drawdown on crude oil in North America last week. Most of this volume has been exported to Europe to prepare for winter. There was also an additional drawdown from the US Strategic Reserve. These actions indicate global demand is strong and will continue to be strong heading into the cooler months. It seems NATO is projecting its independence from Russian energy. Whether this is authentic or not remains to be seen.

Gasoline inventories fell over the last week. The drawdown of gasoline was consistent with the 5 year average. As seasonal demand wanes, production is decreasing. Prices have fallen sharply over the last month. This may level out moving into the fall.

Distillate inventories have risen, as expected, but remain on the low end of the 5 year average for this time of year. The rise has been nullified by the anticipation of increased seasonal demand. The market volatility continues to put pressure on pricing. Like gasoline, distillate pricing could level out in the coming weeks.

Propane pricing has leveled out over the last month and the market appears to be at or near equilibrium. Inventories continue to build, which is consistent with this time of year. However, inventories remain below the 5 year average. If this gap doesn’t begin to tighten, we can expect the prices to rise heading into the fall. It will be difficult to build domestic supply if the export market remains strong. Crop drying demand and weather conditions will impact pricing as heating season approaches.

We have seen the price of Crude Oil retreat throughout July and into early August. It seems that North America is well supplied, but the uncertainty in Europe is keeping pressure on the price. OPEC+ is meeting in early August. The expectation is that they continue to pump oil at present levels or increase production slightly. Diesel prices have continued to fall from highs earlier this year. Refiners have increased production to respond to shortages. However, this came at the expense of gasoline production which has resulted in an increase to gas prices. Ongoing volatility is expected into the fall.

Propane inventories have been building throughout the summer but still remain below the 5 year average for this time of year. Expanded export options continue to impact the inventory levels and prices, in turn. However, somewhat surprisingly, prices have gradually dropped recently. It’s tough to determine if this will continue or not.

We’ve experienced a slight drop in propane prices throughout the spring as demand has cooled off. However, inventories remain well below the five year average. This is likely to mitigate any downward price movement, into the fall, if the gap isn’t reduced. Our brand new bulk loading facility in Stratford is projected to be operational this summer. This should ensure we are well supplied into the heating months.

Distillates and gasoline (to a lesser extent) prices have been extremely volatile throughout the spring. This surely correlated with low inventories and speculation on the geo-political climate. We saw prices reach all-time highs in May and have since retreated more than 20 cents. Demand will remain high through the summer driving months. Though, we hope to see prices cool off into the fall.

New regulations were announced by the government this week which will increase the ethanol content in gasoline. We are awaiting more details and will update accordingly. The provincial government has implemented a six-month gas tax holiday beginning on July 1. All road tax will be reduced to $0.09/litre.

Aided by a drop in demand, propane inventories have recouped throughout the month of April. In turn, the price of propane has dropped marginally and, aside from the carbon tax increase, appears to be about even with the price immediately prior to the invasion of Ukraine. Though the end of the month was chilly, expect May to warm up quickly and further alleviate demand. We hope to see the downward price trend continue, but time will tell.

After receding towards $100/barrel at the beginning of April, crude prices rose precipitously mid-month amid mounting NATO sanctions against Russia. Recent Covid-19 lockdowns in Shanghai and Beijing, along with speculation of increases to U.S. interest rates, have offset the increase in European demand and restabilized the prices. However, in response to the sanctions, Russia cut off gas supply to Poland and Bulgaria earlier this week. Expect more volatility to come.

Fickle propane prices continue into the spring, as we haven’t experienced any relief – which would be typical for the time of year. Inventory hasn’t quite rebounded and remains at a five-year low. However, It looks like there’s enough propane in the system to get us well into spring. Degree days continued to resurge in March and we can expect cooler temperatures into the early parts of April. Sadly, furnaces will have to stay on for the time being. Reduced demand in the coming weeks may help quell high prices towards the mean. Since the last update, fuel prices have endured the sharpest increase in decades. Sanctions and uncertainty around the war in Europe have drastically impacted the global market. Crude prices peaked in the second week of March. The increases retreated for a week, but then continued to climb into last week. The markets have cooled over the past weekend and we’ve seen a price decline heading into April. Where the prices go from here is anybody’s guess.

Earlier this month, freedom protests disrupted the propane supply-chain in Eastern Canada. Consequently, supply dropped and prices continued to climb.

Russia’s invasion of Ukraine further impacted the price of propane, as NATO economic sanctions, including the shutdown of the Nordstream 2 pipeline, have manipulated global markets.

February has been mild, overall, causing degree day gains to subside; though the next week expects to be cold in south-western Ontario.

Regarding fuels and distillates, we are experiencing record high prices at the pumps. Crude has exceeded $100/barrel. The conflict in eastern Europe will certainly further exacerbate prices. U.S. President Joe Biden has vowed to take corrective action to mitigate the price impact of the Ukraine invasion. However, as we continue to experience the economic impact of the Covid-19 lockdown measures, the market remains very much unpredictable.

Overall, the price of propane has risen another couple of cents. At this time, North American supply is considerably lower than the five-year average. However, the shortages are predominantly in the Gulf Coast, so we are well-supplied regionally. The omicron variant appears to be shifting towards an endemic stage, hopefully alleviating some burdensome restrictions on the economy. This will continue to fuel an increasing product demand as industries, such as travel, prepare to resume business. Colder temperatures, of late, also contribute to high demand. Degree day totals are still below average, but will likely catch-up; as we expect cold weather to extend through the end of the month.

In related news, the State of Michigan has withdrawn one of its Line 5 lawsuits. This may be a bellwether for the ongoing legal disputes.

Regarding fuels, crude oil prices continue to rise and now sit about even with the pricing prior to omicron and the BC floods. Like propane, demand will continue to climb as the economy opens up.

Due to unseasonably mild weather, the demand for propane has been reduced. We can expect a decline in prices if this continues into the winter months. Flood recovery in lower-mainland British Columbia is underway to restore the rail lines—meaning the refinery will soon return to full capacity.

The crude market has been volatile of late, with prices hovering around $70. Indicators suggest supply growth should outpace demand into 2022. However, uncertainty continues because of speculation on vaccine efficacy against the Covid-19 omicron variant.

For more information on fuel and propane, or to request a quote, please reach out to our team. From all of us at Core Fuels/Red Cap Propane: have a safe and merry Christmas and a happy New Year!