THE PROPANE BUZZ --- JANUARY 2024 |
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Let's begin today with some thoughts from John Kemp from Reuters from his weekly write-up on hedge fund activity in the energy sector, linked here:
"In the premier NYMEX WTI contract, short positions were boosted to 121 million barrels, not far below the previous peak of 128 million on Dec. 12. Before the end of the calendar year, short covering provided only limited price support. With the start of a new year, renewed selling has put them under downward pressure again.
Most funds are focusing on the threat to consumption from slow global growth rather than to production from conflict in the Middle East. Increasing production from Brazil, Guyana and U.S. shale plays is expected to be enough to satisfy anaemic consumption growth in 2024. In addition, there is an assumption Saudi Arabia and its OPEC+ partners can't or won't cut output further to lift prices sustainably in the short term. Cutting production again would simply throw another lifeline to rival producers and concede even more market share."
Here are some market thoughts from Flashpoint's Darius Lechtenberger:
"WTI crude oil and refined product prices are quite strong this morning as escalating Middle East tensions are to blame. The recent selloff was partly triggered by Saudi Arabia lowering its official selling price for crude oil across all markets, sparking concerns about global demand. While some speculate that the price reduction aimed to preserve market share amid production cuts, the market interprets it as a clear signal of economic slowdown. As mentioned yesterday, Goldman Sachs highlighted hedge funds' lowest investment in energy stocks in the past five years.
Similarly, Bloomberg News reported a significant bearish shift in oil prices at the beginning of 2024, with money managers adding around 61K combined-short positions in Brent and WTI crude oil, the most since March and the second-largest increase since 2017, according to Intercontinental Exchange Inc. and Commodity Futures Trading Commission data.
With cold weather arriving as predicted, the potential shutdown of production due to plummeting temperatures might lead to a surge in demand. The market might not be adequately prepared for such weather conditions, potentially triggering price spikes...'
As it relates to the cold in the forecast, the last few days of monitoring the weather closely have felt like doom scrolling on a social media app; there is a great deal of severe and dangerous weather impacting the eastern half of the country right now, as a powerful system is making its way across the country. Let's jump into some weather discussions now.
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EXTENDED FORECAST FROM BAMWX.com |
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First, let's take a look at the next four days |
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The warmer than normal anomalies will be pushed east out ahead of a powerful Arctic blast and lobe of the Polar Vortex. Here are days five through eight: |
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This is where the crazy begins, and some of these temperature departures from normal are topping 20 and 30 degree variances. As we have mentioned before, this is one of the stronger blasts of cold air we have seen for a January in quite some time. Now, let's transition into the week two time period, which will the lower of the two images on the left side of this next slide: |
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Again, this type of cold that hits hard and deep, with as much power as this outbreak, that stays around for roughly ten days, is going to leave a mark. I am not saying that it's going to make up for lost fills in December, however, the GWHDD forecast from BAM, for January, is nearly 1000...or roughly 20% colder (or more demand) than January of 2023. As to how long it can stay beyond that is up for debate and will depend a great deal on MJO pulses, but here is what BAM's weeks three and four look like: |
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So on the whole, I don't know that we could have expected something that looks this 'good' for our industry on the heels of one of the warmest December's ever recorded, but here we are...and confidence is high for at least the next ten days. |
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As we have been saying and writing for a long time, pricing volatility is the new normal in the propane industry, whether we like it or not. This is different from our parent's or grandparent's propane industry...and in some cases, purchasing our propane the way we have always done it will not allow you to maximize the margin potential in your area.
That is not to say you need to scrap everything you are doing and look at doing everything differently. Still, you owe it to yourself, your employer, and your family to take a long, hard look at how you can add more margin to your business.
We consult and sell physical and financial propane products to companies nationwide. We help propane retailers mitigate the financial risks involved with their propane supply, even if we don't sell them a physical drop of gas.
The video above (also linked here), which is just three minutes long, asks you a few questions relative to your propane supply...and if some of the things I talk about in this short video are foreign to you, that may be a sign of additional profits you are leaving on the table...and we would love to set up a time to speak with you. THIS LINK takes you to a simple calendar sign up page, where you can reserve a time to speak with Jon Miller and Darius Lechtenberger, two of the partners at Flashpoint Energy Partners and industry veterans who have been involved in propane wholesale, consulting, and risk management since the 1990's. There is no cost for this consultation, and you have zero obligations. In other words, you have nothing to lose and everything to gain, and we will shoot you straight; the proof is always in the numbers.
So click on this link today and set an appointment to speak with us over Zoom, and let us show you how to add more profits back into your propane business as opposed to giving those profits away to others.
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WHO ARE FLASHPOINT ENERGY PARTNERS? |
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Some of you have received The Propane Buzz since its inception in 2013. Others have been here a few months or years. Regardless of your tenure here, I want to bring something to your attention.
The Propane Buzz is a part of Flashpoint Energy Partners, a full-service propane wholesale company. By full service, we sell physical propane at various locations nationwide. That is what we do, be it spot-load deals, traditional fixed-priced deposit contracts, or traditional index contracts.
In conjunction with our physical product offerings, we offer all traditional financial instruments (i.e., puts, calls, and swaps) to allow retailers to hedge their physical positions. Scores of propane retailers, just like you, are already working with us and protecting not only their physical supply but also their retail propane margins.
Our industry is only getting more competitive with each passing year, so every penny added to your bottom line counts and increases your business's value. We would love to discuss how we can help you maximize margins and use the numerous tools and instruments available, regardless of your business location.
If you want to learn more about how we can add value to what you do, please email us at jon@flashpointep.com. As always, thank you for your time and for reading The Propane Buzz. - Jon Miller
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Flashpoint sells propane and other NGL's across the United States, in addition to offering hedging and consulting services for propane retailers from coast to coast.
We are talking with dozens of propane retailers every day, helping them secure and manage their supply. If you are interested in learning about how we can help you, email us at sales@flashpointep.com.
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BAMWx.com are the official meteorological partners of The Propane Buzz and Flashpoint Energy Partners. BAM offers commercial weather services specifically tailored to several industries, including Ag and Energy.
BAM also has a very popular App Service, The Weather Porthole (www.weatherporthole.com) where there clients have access to current and long term forecasts unique to a specific location or locations.
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Trading carries a risk of loss and is not appropriate for everyone |
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