Farm Fuels in Focus: Fuels Lower on Dry Harvest

September 29, 2015 01:38 PM

 

  • LP is down 4 cents on the week to $0.98 per gallon.
  • November 2015 natural gas opened today at $2.66 -- 9 cents above our last Fuels in Focus.
  • Farm Diesel is 2 cents lower on the week at an average of $2.02 per gallon.
  • November 2015 WTI crude oil opened the day at $44.50 -- 9 cents above our last report.
  • October 2015 Heating oil futures opened the day at $1.47 -- 3 cents lower than our last report.

9292015RubyFarm Diesel -- WTI crude oil has been narrowing its range since the last week of August. We find strong, persistent support at the September 24 daily low at $43.71. November futures have bounced off support frequently since the last week of August at $44.00. Chart watchers are eyeing technical signals which include an elongated chart triangle very near its end, suggesting lower crude prices ahead. Resistance is just above $47.00 and a violation of that level would suggest upside potential to $50.00. According to data from Baker Hughes, during the week ended September 25, the total North American Rotary Rig count fell by 10 rigs and is now 57% below the same time last year. EIA reported last week that crude supplies in the U.S. softened 1.9 million barrels, but remains 96 million barrels above the same time last year.

Distillate supplies took a hit during that same week according to EIA which reports a 2.1 million barrels decline in national distillate stocks, but, here again, stocks are well above the same time last year. Our heating oil spread analysis suggests sideways pricing ahead for farm diesel.

The global crude oil price may once again be driven by Saudi Arabia in the near future however as that country struggles to maintain spending amid dramatically lower oil prices. It would seem to make sense for swing producer Saudi Arabia to simply cut production to shrink the global oil glut, but it is believed producers there fear loosening their grip on marketshare. It has been noted by market watchers that Saudi Arabia has been making cash withdrawals from global assets, some believe as much as US$50 billion to US$70 billion. Oil revenues account for as much as 80% of the nation's income, and if the cash withdrawals are a sign Saudi is feeling the pinch from lower oil returns, they may take action to raise the global price of oil.

U.S. oil production is in decline, but as WTI prices tested lows, high cost producers were forced to either merge with lower cost producers or shutter completely. The result is a healthier landscape in American crude production, and a U.S. market which is better equipped to function in a global crude oil market that demands peak operational efficiency.

  • Distillate inventories reported by EIA fell 2.1 million barrels to 151.9 mmbbl. Stocks are currently 23.3 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 and Kansas.
Farm Diesel 9/29/15
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$2.01
$2.01
1 cent
$2.02
Iowa
Illinois
$2.07
$2.07
Unchanged
$2.07
Illinois
Indiana
$2.14
$1.99
9 cents
$2.08
Indiana
Wisconsin
$2.19
$2.18
Unchanged
$2.18
Wisconsin
Minnesota
$2.12
$2.12
-11 cents
$2.01
Minnesota
South Dakota
$2.12
$1.95
Unchanged
$1.95
South Dakota
North Dakota
$2.15
$1.97
-2 cents
$1.95
North Dakota
Nebraska
$1.96
$1.95
Unchanged
$1.95
Nebraska
Missouri
$2.09
$2.02
-21 cents
$1.81
Missouri
Kansas
$2.14
$2.14
4 cents
$2.18
Kansas
Ohio
$1.98
$1.98
Unchanged
$1.98
Ohio
Michigan
$2.06
$2.05
Unchanged
$2.05
Michigan
Midwest Average
$2.09
$2.04
-2 cents
$2.02
Midwest Average

9292015Propane

Propane -- We have noted over the past few weeks that crops are coming out of the field much drier than expected. That will lead to weaker demand for propane across the Midwest and is part of the reason we have yet to see propane prices rise seasonally. Of course, higher temperatures over the past week have played a role, and as temperatures drop, we expect to see propane prices respond higher. That upside risk is dramatically reduced by what is set to amount to weak demand for propane for harvest agriculture.

  • According to EIA, last week, national propane inventories fell 0.617 million barrels -- now 17.959 million barrels above the same time last year at 97.076 million barrels.
  • The regionwide low is at $0.79 per gallon in Ohio and South Dakota and the regionwide high is in Michigan at $1.29.
LP 9/29/15
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.95
$0.95
2 cents
$0.97
Iowa
Illinois
$1.25
$1.25
Unchanged
$1.25
Illinois
Indiana
$1.03
$1.67
-64 cents
$1.03
Indiana
Wisconsin
$1.10
$1.10
Unchanged
$1.10
Wisconsin
Minnesota
$0.93
$0.96
Unchanged
$0.96
Minnesota
South Dakota
$0.84
$0.79
Unchanged
$0.79
South Dakota
North Dakota
$0.85
$0.80
3 cents
$0.83
North Dakota
Nebraska
$0.80
$0.80
Unchanged
$0.80
Nebraska
Missouri
$1.04
$1.04
Unchanged
$1.04
Missouri
Kansas
$0.90
$0.90
4 cents
$0.94
Kansas
Ohio
$0.79
$0.79
Unchanged
$0.79
Ohio
Michigan
$1.29
$1.29
Unchanged
$1.29
Michigan
Midwest Average
$0.98
$1.02
-4 cents
$0.98
Midwest Average

9292015SpreadFuel