Farm Fuels in Focus: Diesel and LP Unchanged on the Week

October 14, 2015 01:20 PM

 

  • LP is unchanged on the week to $0.99 per gallon.
  • November 2015 natural gas opened today at $2.45 -- 4 cents above our last Fuels in Focus.
  • Farm Diesel is unchanged on the week at an average of $2.00 per gallon.
  • November 2015 WTI crude oil opened the day at $46.69 -- 49 cents above our last report.
  • November 2015 Heating oil futures opened the day at $1.47 -- 7 cents lower than our last report.

10142015DieselFarm Diesel -- I almost regretted my statements last week which said farm diesel would run sideways and that there was little indication from crude or heating oil futures that the situation would change dramatically near-term. By the end of that day, crude had rallied sharply and heating oil had followed. The rally, however was short-lived and our spread analysis proved itself to be correct again. Heating oil futures topped out around $1.63 and our go zone is at $1.70. Today, heating oil opened at $1.47 leading us to believe that diesel will, once again track sideways near-term.

EIA has projected slightly lower per-day production volumes in the U.S. for 2016 -- down from 2015's 9.2 million barrels per day to 8.9. Not much of a drop, but enough of a drop to excite fund activity in crude futures. Offsetting lower production in the United States is forecast softer global demand for crude oil and refined fuels. We remain wary as harvest is well underway, but if we were going to see a harvest price response in diesel, as we have in some years past, we likely would have by now.

This week we are unchanged with South Dakota 7 cents per gallon higher and Kansas 2 cents per gallon lower. All other states were unchanged on the week. We still believe it is wise to book at least a portion of 2016 diesel for spring delivery. The crude oil market firmed last week on declining rig counts and EIA's lowered 2016 production forecast, but the global glut will remain in place for a while and demand prospects are softer based on global economic struggles. OPEC has yet to change course from its volume over price strategy and it is believed that Iran could bring 1 million barrels per day to global production.

We continue to monitor crude oil and heating oil futures price movements for a sustainable indication of higher diesel ahead.

  • Distillate inventories reported by EIA fell 2.5 million barrels to 149.2 mmbbl. Stocks are currently 23.0 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.81 in Missouri and the Midwest high is at $2.18 in Wisconsin.
Farm Diesel 10/14/15
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$2.02
$1.98
Unchanged
$1.98
Iowa
Illinois
$2.07
$2.12
Unchanged
$2.12
Illinois
Indiana
$2.08
$2.08
Unchanged
$2.08
Indiana
Wisconsin
$2.18
$2.18
Unchanged
$2.18
Wisconsin
Minnesota
$2.01
$2.02
Unchanged
$2.02
Minnesota
South Dakota
$1.95
$1.95
7 cents
$2.02
South Dakota
North Dakota
$1.95
$1.95
Unchanged
$1.95
North Dakota
Nebraska
$1.95
$1.90
Unchanged
$1.90
Nebraska
Missouri
$1.81
$1.81
Unchanged
$1.81
Missouri
Kansas
$2.18
$1.93
-2 cents
$1.91
Kansas
Ohio
$1.98
$1.98
Unchanged
$1.98
Ohio
Michigan
$2.05
$2.07
Unchanged
$2.07
Michigan
Midwest Average
$2.02
$2.00
Unchanged
$2.00
Midwest Average

10142015LP

 

Propane -- very little has changed in propane. National and Midwestern stocks remain very high, harvest demand has done little to support higher prices and temperatures have yet to drop. The first frost will likely light a fire under propane prices, but we do not expect prices to firm a whole lot near-term. As with diesel, global demand factors alongside robust U.S. Supplies will limit upside risk for the foreseeable future.

  • According to EIA, last week, national propane inventories firmed 1.601 million barrels -- now 19.697 million barrels above the same time last year at 100.342 million barrels.
  • The regionwide low is at $0.79 per gallon in South Dakota and the regionwide high is in Illinois at $1.25.
LP 10/14/15
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.97
$0.98
1 cent
$0.99
Iowa
Illinois
$1.25
$1.25
Unchanged
$1.25
Illinois
Indiana
$1.03
$1.03
Unchanged
$1.03
Indiana
Wisconsin
$1.10
$1.10
Unchanged
$1.10
Wisconsin
Minnesota
$0.96
$0.98
-2 cents
$0.96
Minnesota
South Dakota
$0.79
$0.79
Unchanged
$0.79
South Dakota
North Dakota
$0.83
$0.83
Unchanged
$0.83
North Dakota
Nebraska
$0.80
$0.89
Unchanged
$0.89
Nebraska
Missouri
$1.04
$1.04
Unchanged
$1.04
Missouri
Kansas
$0.94
$0.93
Unchanged
$0.93
Kansas
Ohio
$0.79
$0.79
5 cents
$0.84
Ohio
Michigan
$1.29
$1.22
1 cent
$1.23
Michigan
Midwest Average
$0.98
$0.99
Unchanged
$0.99
Midwest Average

10142015DieselSpread