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.