Co-op News > May 2020 > Oil Crashes to Negative Values Due to Lockdowns

Oil Crashes to Negative Values Due to Lockdowns

May 10, 2020

May Energy Update

I was kind of hoping we wouldn’t be doing the Safer At Home thing this newsletter, but here we are.

I’m about ready for life to get back to normal, aren’t you? Although I normally keep my hair short for the army reserve, we’ve been having virtual drills, so I’ve been getting virtual haircuts. I’m looking a little shaggy but I’m unwilling to let an amateur have a go at my hair. I guess I shouldn’t be so picky because the only difference between a good haircut and a bad haircut is two weeks.

It’s been a busy month in the oil markets.

We saw oil crash into negative territory when the May contracts matured and the investors holding May contracts had no place to go with the physical product. It bounced back the next day when the market switched to June contracts but there is a chance this can happen again when the June contracts mature. We’ll have to wait and see what happens.

With COVID-19 we are experiencing the destruction of demand for diesel fuel and gasoline.

As I mentioned last month, US crude oil production is really taking a beating with the glut of crude oil in the world. With less crude oil being produced in the US because of so many wells shutting down, that means less propane is being produced.

Since we’re coming out of our highest propane consumption months, propane inventories have been depleted and we are just beginning to build inventories for next winter. Also, our export numbers remain high. While folks aren’t driving, they’re still heating their homes and water, cooking their food and drying their clothes with propane.

Decreased demand and limited storage has forced oil wells to shutdown.

Even with the need to build supplies for next winter and limited production, we will still most likely see prices a little lower than last year, at least for the immediate future. I’ve seen days in the market where the price of propane increases while crude prices are decreasing. It’s a strange new world.

Be sure to mark on your calendar that propane contracts will be mailed the middle of June.

If you've been home more than usual, please check your propane tank level.

If you don’t have a monitor on the propane tank and you’re a route customer, we use a degree day program to estimate the tank level based on consumption history and the average daily temperature. It’s a relatively accurate program but it doesn’t know that you’ve been cooped up in your house for the last month, consuming more propane. If you see your tank volume reach 20%, give us a call.

If you burn wood and we allow you to be a route customer as a courtesy, our degree day program has no way of calculating the size of your wood pile. So, if you’ve chucked that last piece of wood into your stove, please check the propane level in the tank often. Please call us when the tank gauge reaches 20%.

If you don’t have a charge account set up with us but you prepay for your propane, you will no longer be a route customer after the contracted gallons have been delivered. It’s imperative that you check the propane level in your tank often.

This time of year, you can call us if it gets to 20%. In the winter, please call when it gets below 30%. If you don’t want to open a charge account, we can continue to deliver to you after the contract has been completed if you set up ACH (Automated Clearing House) payments.

The Wisconsin Home Energy Assistance Program has extended this year's heating season through September 30, 2020.

If you are suffering financially from COVID-19, there may be relief for your heating and electricity costs. The Wisconsin Home Energy Assistance Program (WHEAP) has adjusted the eligibility requirements for Wisconsin residents. They’ve also extended this year’s heating season through September 30, 2020.

Call the Home Energy Plus Help Desk at (608) 267-3680 or visit them online at heat@wisconsin.gov if you have any questions or to see if you are eligible.

Memorial Day is coming up.

I was an infantry platoon sergeant in the Iraq War, and I think about the friends I lost in combat almost every day. Memorial Day is when we should all give a thought to the brave men and women who have died in service to our nation. They are true American heroes and we owe them our gratitude for their sacrifice.

Thank you for your business.

Tim Lease

Division Manager


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