I’d like to think spring has sprung. 80 degree temps last weekend...60’s and 70’s since. But lo and behold the forecast this morning says rain starting Friday night and possibly 1-3 inches of snow by mid-morning Saturday. When will it end?!?!

The new buzzword since last weekend is “Waivers."  My phone buzzed with an email last Sunday night about 10:30pm and of course I wonder what is so important at that point in time. It was an email from my FC Stone marketer warning of the impending market jump Monday because the word was out that President Trump was considering eliminating the waivers granted to 8 countries to purchase crude from Iran. Guess what…he was spot on. The markets opened up Monday morning and never looked back. Crude closed up in the $2 range, RBOB and HO were both up over a nickel at close. Diesel had been as high as .07 up at one point. The markets have dipped some the rest of the week thus far but only about $.025 total. The inventory increase of 5.4 mmb of crude seems to be limiting the markets ability to move much to the positive side.

A couple other tidbits: The Revolutionary Guards Navy, which is a separate entity from the regular Iranian military and is responsible for Iranian maritime operations has threatened once again to close The Strait of Hormuz if Iran is not allowed to use it.  For those that don’t know, the Strait is the only sea passage from the Persian Gulf to the open sea. Normally this is a who cares type thing but 20% of the worlds petroleum (35% of the sea trade) passes through it, in which case it is a highly important strategic location for international trade.

Also, the Russian Druzba Pipeline which is the worlds longest and one of the worlds largest has become contaminated with organic chlorine which is used to boost production. This pipeline supplies at least 5 refineries in Germany and Poland. These two countries have stopped buying crude off this pipeline and are going to have to go somewhere else until the issue is cleared up. I would hope the Russians would have this taken care of in short order.

Diesel is on the bottom side of the five year inventory, Washington is sticking to its guns as far as waivers for Iranian crude go, one of the major passages for ship bound crude has been threatened with closure, Saudi Arabia has not shown any real interest in increasing production unless crude hits $80, one of the largest pipelines in the world has issues, and we are on the verge of the spring planting season breaking wide open. This is painting a very bleak picture for the energy markets. The only things I see keeping the prices in check are this week’s inventory numbers and the occasional uptick in the value of the dollar.

If you have any questions about your energy needs, please call us and we will do the best we can to help.

Thanks for your patronage and have a safe and productive planting season!


Brian Beck

Energy Department Manager/Safety Coordinator
605-470-0622

 

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