Blog > October 2021 > Energy Market Update

Energy Market Update

October 27, 2021
What a difference a year can make. No one would have thought the energy markets would soar to multi-year highs in 2021. We have seen prices climb at the fuel pumps and wonder when they will stop increasing. The question I get asked the most is where are these fuel prices going and when will price increases stop? I would like to try and bring some clarity to this issue.
October 27, 2020 October 27, 2021
WTI Crude Oil: $38.66 WTI Crude Oil: $83.61
USLD: $1.13 USLD: $2.54
RBOB Gas: $1.11 RBOB Gas: $2.48

If we look back to 2020, we notice that the year was filled with unforeseen circumstances. When the Covid-19 pandemic hit the world saw oil and fuel demand drop considerably from what the pre-covid levels were. In fact, crude oil dropped negative for the first time ever to -$37.63. The world at this time was in a tailspin trying to figure out how to manage the challenges with the pandemic while keeping the world open. Airline demand all but stopped, domestic travel was very weak, and there were reports that the US was running out of room to store crude oil. There was more supply than demand for 2020. Fast forwarding to 2021, OPEC has stayed the course with its oil production slowly adding 400,000 barrels per day, per month which has not been enough to keep up with demand causing a supply shortage in the world. A push for clean energy, supply chain issues, the permit for the Keystone pipeline being revoked, and most recently China having a coal supply shortage have been a few things that have affected the energy markets in 2021. We have seen this year that the demand for energy products has outpaced the supply. The Department of Energy inventory report that came out today shows a 4.3-million-barrel build on crude oil, a -2-million-barrel draw on gas, and -0.4-million-barrel draw on distillates. Reports indicate that we could potentially see $90 per barrel crude oil by the end of the year. Below are charts showing how much heating oil has gone up in recent months on the NYMEX and how much crude oil inventories have fallen in the US in recent months.   

As you can see on the charts above, the trend for the last few months has favored the bulls and moved prices higher. For the short term, we expect volatility in the markets and this trend to continue through the rest of the year barring any unforeseen circumstances. 

Central Valley Ag offers fuel contracting options all year long. Whether you are looking to cover some future risk or are wanting to know what the daily cash prices are, please give myself or one of the other energy specialists a call to discuss what works best for your operation.

You can find our contact information on the CVA website by clicking here.
by Justin Fleming

Posted: 10/27/2021 6:38:29 PM by Mallory Shoemaker | with 0 comments

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