Blog > December 2020 > When is the Right Time to Buy?

When is the Right Time to Buy?

December 3, 2020


2020 has been a challenging year to say the least. Looking back over the last year many things have happened to get us where we are at today in the energy markets. Here are a few of the highlights that have affected the markets this year. First, we witnessed the repercussions of OPEC and Russia not being able to agree on a production cut which resulted in flooding the world market with oil.

At the same time, the COVID-19 pandemic was gaining strength which ultimately stopped the world in its tracks, destroying oil and fuel demand. Because of these events, we have seen historically low oil and fuel prices with oil trading negative for the first time ever at -37.63 in April. We have seen supply levels climb and major production cuts happen throughout the world this year. Through the summer and into the fall, we have seen the markets level off with crude oil trading in the mid $30-mid $40 per barrel range. Most recently, we had the presidential election along with several pharmaceutical companies declaring that they had COVID-19 vaccines that are 90% effective and above waiting for FDA approval.

That brings us to today’s headlines. The United Kingdom has formally approved Pfizer’s vaccine for use and will begin distributing as early as next week to the most vulnerable populations in the country. This has been the first county to approve a vaccine for use in the world and was done ahead of the United States and the European Union. Next, OPEC has decided to pause a decision on oil production in the first part of 2021. They desire to keep crude below $50/barrel in order to keep American crude producers out of the market. OPEC’s meeting is still planned for today. Lastly, the Department of Energy released their numbers yesterday and reported builds in both gas and distillate inventory.
What do we make of this brief trip down memory lane that was 2020?  I think there are two questions weighing heavily on the minds of producers and businesses alike regarding their fuel purchases for 2021.
  • Should I look at contracting fuel considering the volatility that occurred this year and if so, when is the best time to contract?
  • What other options do I have when purchasing fuel?
 
Question: Should I look at contracting fuel considering the volatility that occurred this year and if so, when is the best time to contract
Answer: This year has definitely been a bit of a roller coaster. Traditionally the best time to contract is somewhere between January and March, but this year has caused many to reconsider when the right time to buy is. With the COVID-19 vaccines coming onboard and hopefully the world regaining some sense of normalcy, it may be worth keeping an eye on the markets and contracting when the market allows a favorable price. Currently, diesel contract prices are running at values that are at or below the 5-year average price. The contract prices are still very attractive compared to past years. CVA has contract options for 2021 and 2022 diesel fuel and it may be worth looking into to manage your risk for the next few years.
 
 
Question: What other options do I have when purchasing fuel?
Answer: Other than our daily cash price or contracting options CVA offers a service called Automated Fuel Delivery. Automated Fuel Delivery offers you flexibility with your fuel purchases by keeping your bulk tank full and allows you to pay for only what you use out of the tank each month. This is achieved by adding a monitor to your tank which reads the fuel level daily. The price is then averaged which helps take the volatility out of the market and giving you the peace of mind that you’re not paying to much for your fuel. Other than the average monthly price, AFD can be paired with our contract options and used as a routed delivery service only, or it can give you the option to buy out the fuel in your tank when the market drops to a price you like.
 
As we have learned this year, no one knows what tomorrow is going to bring. We would love to take the opportunity to sit down with you to discuss your energy needs for the coming year and lay out a plan that is customized to your operation. To learn more about any of CVA’s services or contract options please reach to your local CVA Energy Office or Certified Energy Specialist in your area. We look forward to helping you with your energy needs in the coming year.

by Justin Fleming
Posted: 12/3/2020 8:33:55 PM by Kristin Petersen | with 0 comments


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