Farm Fuels in Focus: Diesel Drafts Higher on Heating Oil Strength

April 28, 2016 12:43 PM

 

  • LP is down a penny on the week at $1.05 per gallon.
  • June 2016 natural gas opened today at $2.14 -- up 7 cents from our last Fuels in Focus.
  • Farm Diesel is 2 cents higher on the week at an average of $1.61 per gallon.
  • June 2016 WTI crude oil opened the day at $45.30 -- higher $1.33 from our last report.
  • May 2016 Heating oil futures opened the day at $1.37 -- 4 cents higher than our last report.

DieselFarm Diesel -- Declines in distillate production alongside strong domestic demand has been supportive for distillate prices this week. According to EIA, U.S. distillate production fell in the week ended April 15 to 4.7 million barrels per day. That's 1.3% below the year ago pace and while stocks remain well above the five-year average range, rising weekly demand added support to farm diesel and heating oil futures prices.

Front-month heating oil futures are currently (midday Thursday April 28) testing resistance at $1.39. Next resistance beyond that is around $1.60, and if heating oil futures rise to a test of that level, diesel prices will follow sharply higher.

Crude oil futures are egging the petroleum sector higher on forecasts for better-than-expected crude oil demand growth. According to EIA, however, U.S. crude stockpiles firmed 2 million barrels in its April 27 Petroleum Report. Traders are more focused on forecasts than supplies which may be setting the market up for a surprise if demand forecasts are too optimistic and global production continues to hum at high levels.

Our heating oil/farm diesel spread indicates clearly that farm diesel prices will continue to rise. With front-month heating oil futures at $1.39, our spread analysis indicates a fair diesel value around $1.75. It will take softer heating oil futures to pressure farm diesel, and if crude oil stays above $40, the downside for the entire petroleum sector will be limited.

  • Distillate inventories reported by EIA fell 1.7 million barrels to 158.2 mmbbl. Stocks are currently 29.0 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.48 in Nebraska and the Midwest high is at $1.84 in Indiana.
Farm Diesel 4/28/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.58
$1.56
-2 cents
$1.54
Iowa
Illinois
$1.68
$1.67
13 cents
$1.80
Illinois
Indiana
$1.79
$1.79
5 cents
$1.84
Indiana
Wisconsin
$1.60
$1.60
Unchanged
$1.60
Wisconsin
Minnesota
$1.65
$1.67
3 cents
$1.70
Minnesota
South Dakota
$1.59
$1.59
Unchanged
$1.59
South Dakota
North Dakota
$1.48
$1.50
Unchanged
$1.50
North Dakota
Nebraska
$1.55
$1.49
-1 cent
$1.48
Nebraska
Missouri
$1.47
$1.47
12 cents
$1.59
Missouri
Kansas
$1.51
$1.52
Unchanged
$1.52
Kansas
Ohio
$1.64
$1.64
Unchanged
$1.64
Ohio
Michigan
$1.54
$1.53
Unchanged
$1.53
Michigan
Midwest Average
$1.59
$1.59
2 cents
$1.61
Midwest Average

LP

Propane -- With home heating season over, there isn't much to say about propane. As far as we can tell, infrastructure is still in solid shape and production continues at a pretty good clip. Supplies at present are ample seasonally which should keep prices in line with our expectations through the offseason and into winter 2016-17. We will be watching for the midsummer low to book for winter.

  • According to EIA, last week, national propane inventories firmed 2.259 million barrels -- now 6.532 million barrels above the same time last year at 71.199 million barrels.
  • The regionwide low is at $0.87 per gallon in Nebraska and the regionwide high is in Indiana at $1.50.
LP 4/28/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.95
$0.93
-1 cent
$0.92
Iowa
Illinois
$1.18
$1.18
Unchanged
$1.18
Illinois
Indiana
$1.54
$1.54
-4 cents
$1.50
Indiana
Wisconsin
$1.00
$1.00
10 cents
$1.10
Wisconsin
Minnesota
$0.97
$0.95
Unchanged
$0.95
Minnesota
South Dakota
$0.89
$0.89
Unchanged
$0.89
South Dakota
North Dakota
$0.93
$0.93
Unchanged
$0.93
North Dakota
Nebraska
$0.89
$0.87
Unchanged
$0.87
Nebraska
Missouri
$1.21
$1.21
-9 cents
$1.12
Missouri
Kansas
$1.10
$1.08
Unchanged
$1.08
Kansas
Ohio
$0.95
$0.95
-10 cents
$0.85
Ohio
Michigan
$1.23
$1.23
-2 cents
$1.21
Michigan
Midwest Average
$1.07
$1.06
-1 cent
$1.05
Midwest Average

 

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