Farm Fuels in Focus: Diesel and Propane Firmer on the Week

October 21, 2015 01:38 PM

 

  • LP is up 5 cents on the week to $1.04 per gallon.
  • November 2015 natural gas opened today at $2.49 -- up 4 cents from our last Fuels in Focus.
  • Farm Diesel is up a dime on the week at an average of $2.10 per gallon.
  • December 2015 WTI crude oil opened the day at $45.88 -- 88 cents below our last report.
  • November 2015 Heating oil futures opened the day at $1.44 -- 3 cents lower than our last report.

10212015RubyFarm Diesel -- This week's price hike was due to seasonal outages as refineries conduct seasonal maintenance. The result has been a drawdown in regional supplies, leading to a price increase. How long the outages will last is unknown, but once complete, prices should fall back to where they were just a week ago. But that does not mean we have seen the last of the higher diesel prices resulting from the refinery downtime. In fact, only three states of the twelve we survey really shot up with gusto -- Ohio was up 42 cents; Indiana firmed 33 cents and Michigan is up 32 cents per gallon.

In situations like this in the past, we have seen areas hit by a supply squeeze will pull refined petroleum from other areas. We do expect a ripple effect as other areas of the Midwest send supplies eastward to combat the shortage. That factor would prolong price support and will take awhile to even out. That was the case a few weeks ago when Indiana's Whiting facility experienced unexpected problems and had to draw from supplies in Kansas. Kansas prices firmed sharply in response but have since retreated to price levels more in line with the regional average.

Heating oil futures are very soft currently and are giving us no indication of long-term strength, suggesting the current regional average diesel price per gallon will come back down within a few weeks. Complicating matters, however, are heating oil seasonals. As home heating season takes off, demand for heating oil will firm and will likely support higher heating oil futures prices. Since farm diesel is a dime higher, that moves our heating oil target a dime higher as well to $1.80. That is the price point at which technical indicators will signal the potential for higher farm diesel prices.

For now, the best thing to do is sit tight and keep an eye on your local diesel prices. The price impacts of the current outages will retrace once Midwestern supply distribution resets, and many are looking for lower prices by Christmas on diesel -- both highway and farm diesel -- and on gasoline. If you find yourself running low on diesel, stay hand-to-mouth and be cautious not to over extend.

  • Distillate inventories reported by EIA fell 1.5 million barrels to 147.6 mmbbl. Stocks are currently 23.0 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.84 in Missouri and the Midwest high is at $2.43 in Ohio.
Farm Diesel 10/20/15
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.98
$1.98
1 cent
$1.99
Iowa
Illinois
$2.12
$2.12
1 cent
$2.13
Illinois
Indiana
$2.08
$2.08
33 cents
$2.41
Indiana
Wisconsin
$2.18
$2.18
Unchanged
$2.18
Wisconsin
Minnesota
$2.02
$2.02
5 cents
$2.07
Minnesota
South Dakota
$1.95
$2.02
-7 cents
$1.95
South Dakota
North Dakota
$1.95
$1.95
Unchanged
$1.95
North Dakota
Nebraska
$1.90
$1.90
1 cent
$1.91
Nebraska
Missouri
$1.81
$1.81
3 cents
$1.84
Missouri
Kansas
$1.93
$1.91
Unchanged
$1.91
Kansas
Ohio
$1.98
$1.98
45 cents
$2.43
Ohio
Michigan
$2.07
$2.07
32 cents
$2.39
Michigan
Midwest Average
$2.00
$2.00
10 cents
$2.10
Midwest Average

10212015LP

Propane -- Not much change in propane except increased demand based on cooler weather, especially in the north. Indiana led gains, adding 21 cents per gallon to the state average price. That is likely related to demand for agricultural purposes as well as home heat. There have been a rash of propane related explosions lately and we do tend to see this kind of thing around this time of year. A quick safety check of your dryer, heaters and home heat is in order. Check connections, hoses and your home furnace filter. If you smell gas call your preferred supplier immediately and turn the gas off until a service professional arrives.

Propane is intentionally scented so that users can smell it if there is a leak. That gives you an advantage that could save your life. Do yourself and your loved ones a favor and excursive extreme caution when dealing with propane.

  • According to EIA, last week, national propane inventories firmed 1.822 million barrels -- now 20.788 million barrels above the same time last year at 102.164 million barrels.
  • The regionwide low is at $0.84 per gallon in Ohio and the regionwide high is in Illinois at $1.29.
LP 10/20/15
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.98
$0.99
-1 cent
$0.98
Iowa
Illinois
$1.25
$1.25
4 cents
$1.29
Illinois
Indiana
$1.03
$1.03
21 cents
$1.24
Indiana
Wisconsin
$1.10
$1.10
Unchanged
$1.10
Wisconsin
Minnesota
$0.98
$0.96
3 cents
$0.99
Minnesota
South Dakota
$0.79
$0.79
10 cents
$0.89
South Dakota
North Dakota
$0.83
$0.83
10 cents
$0.93
North Dakota
Nebraska
$0.89
$0.89
5 cents
$0.94
Nebraska
Missouri
$1.04
$1.04
6 cents
$1.10
Missouri
Kansas
$0.93
$0.93
Unchanged
$0.93
Kansas
Ohio
$0.79
$0.84
Unchanged
$0.84
Ohio
Michigan
$1.22
$1.23
5 cents
$1.28
Michigan
Midwest Average
$0.99
$0.99
5 cents
$1.04
Midwest Average

 

10212015Spread