Farm Fuels in Focus: Fundamentals Suggest Higher Diesel

 

  • LP is down a penny on the week at $1.06 per gallon.
  • May 2016 natural gas opened today at $2.07 -- up 3 cents from our last Fuels in Focus.
  • Farm Diesel is unchanged on the week at an average of $1.59 per gallon.
  • June 2016 WTI crude oil opened the day at $43.97 -- higher $2.43 from our last report.
  • May 2016 Heating oil futures opened the day at $1.33 -- 7 cents higher than our last report.

DieselFarm Diesel -- Diesel prices held firm this week with very little movement from state to state. Crude production outages in a few Mideast countries have eclipsed the news from Sunday's Doha meeting where OPEC and non-OPEC producers report they refuse to cut production or even allow production to level off. A lot of that decision was led by Saudi Arabia who stated they will not cut or freeze production until Iran agrees to do the same.

I'm working on a blog post for Friday's inputsmonitor.com with more details on that, but the long and the short of it is, from Saudi Arabia to Venezuela, Angola and everywhere else, its still a volume-over-price game in global crude. That will keep the global glut in place and while demand prospects are improving, the fundamentals suggest excess supplies will remain a wet blanket on the crude oil market.

Heating oil futures breached resistance at the December high on the daily chart, but have since fallen back from session highs. Distillates are in good supply nationally and we expect prices to fall once farmer demand wanes, but if fund activity is going to flow to the long side of crude oil and heating oil futures the way it has in grains this week, the downside will be limited until some fresh, reliable news comes out of the petroleum markets.

I must also mention our diesel/heating oil spread which, as of late Thursday has narrowed enough to suggest higher near-term diesel prices.

  • Distillate inventories reported by EIA fell 3.6 million barrels to 159.9 mmbbl. Stocks are currently 30.6 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.47 in Missouri and the Midwest high is at $1.79 in Indiana.
Farm Diesel 4/21/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.61
$1.58
-2 cents
$1.56
Iowa
Illinois
$1.67
$1.68
-1 cent
$1.67
Illinois
Indiana
$1.79
$1.79
Unchanged
$1.79
Indiana
Wisconsin
$1.60
$1.60
Unchanged
$1.60
Wisconsin
Minnesota
$1.65
$1.65
2 cents
$1.67
Minnesota
South Dakota
$1.59
$1.59
Unchanged
$1.59
South Dakota
North Dakota
$1.27
$1.48
2 cents
$1.50
North Dakota
Nebraska
$1.55
$1.55
-6 cents
$1.49
Nebraska
Missouri
$1.48
$1.47
Unchanged
$1.47
Missouri
Kansas
$1.47
$1.51
1 cent
$1.52
Kansas
Ohio
$1.64
$1.64
Unchanged
$1.64
Ohio
Michigan
$1.64
$1.54
-1 cent
$1.53
Michigan
Midwest Average
$1.58
$1.59
Unchanged
$1.59
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 1.238 million barrels -- now 6.896 million barrels above the same time last year at 68.940 million barrels.
  • The regionwide low is at $0.87 per gallon in Nebraska and the regionwide high is in Indiana at $1.54.
LP 4/21/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.93
$0.95
-2 cents
$0.93
Iowa
Illinois
$1.18
$1.18
Unchanged
$1.18
Illinois
Indiana
$1.54
$1.54
Unchanged
$1.54
Indiana
Wisconsin
$1.00
$1.00
Unchanged
$1.00
Wisconsin
Minnesota
$0.97
$0.97
-2 cents
$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
$0.89
-2 cents
$0.87
Nebraska
Missouri
$1.19
$1.21
Unchanged
$1.21
Missouri
Kansas
$1.01
$1.10
-2 cents
$1.08
Kansas
Ohio
$0.95
$0.95
Unchanged
$0.95
Ohio
Michigan
$1.16
$1.23
Unchanged
$1.23
Michigan
Midwest Average
$1.05
$1.07
-1 cent
$1.06
Midwest Average

 

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