Farm Fuels in Focus: Propane Exports Increase as Diesel Holds Steady

November 3, 2015 04:32 PM

 

  • LP is down 3 cents on the week to $1.02 per gallon.
  • December 2015 natural gas opened today at $2.25 -- up 18 cents from our last Fuels in Focus.
  • Farm Diesel is unchanged on the week at an average of $2.11 per gallon.
  • December 2015 WTI crude oil opened the day at $46.11 -- $2.33 above our last report.
  • December 2015 Heating oil futures opened the day at $1.50 -- 8 cents higher than our last report.

1132015RubyFarm Diesel -- The national average gasoline price recently hit its lowest level in 11 years according to AAA. That is despite continued outages across the Midwest, most notably in the eastern Corn Belt. The outages are expected to end within a few more weeks, but in the meantime, prices will remain volatile. This week, Missouri posts a 20 cent per gallon gain. That is likely due to supply diversions to help fill gaps out east, or there may be an outage there that we have not yet heard about. When BP's Whiting facility in Indiana was down we noted a price response in Kansas, however, Missouri's price action could simply be at least partially corrective in nature as the Show Me State had previously been priced well below the regional average.

Once both planned and unplanned maintenance at refineries are complete, expect farm diesel prices to soften. We often find opportunities to lock in attractive prices in December and we expect this year to be no different. For now, our farm diesel advice is unchanged... stay hand-to-mouth until the market gives us reason to book ahead.

  • Distillate inventories reported by EIA fell 3.0 million barrels to 142.1 mmbbl. Stocks are currently 21.7 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.89 in Nebraska and the Midwest high is at $2.43 in Ohio.
Farm Diesel 11/3/15
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.99
$1.97
-1 cent
$1.96
Iowa
Illinois
$2.13
$2.13
-1 cent
$2.12
Illinois
Indiana
$2.41
$2.41
-5 cents
$2.36
Indiana
Wisconsin
$2.18
$2.18
Unchanged
$2.18
Wisconsin
Minnesota
$2.07
$2.10
2 cents
$2.12
Minnesota
South Dakota
$1.95
$1.95
Unchanged
$1.95
South Dakota
North Dakota
$1.95
$1.97
Unchanged
$1.97
North Dakota
Nebraska
$1.91
$1.99
-10 cents
$1.89
Nebraska
Missouri
$1.84
$1.81
20 cents
$2.01
Missouri
Kansas
$1.91
$1.96
-2 cents
$1.94
Kansas
Ohio
$2.43
$2.43
Unchanged
$2.43
Ohio
Michigan
$2.39
$2.40
-2 cents
$2.38
Michigan
Midwest Average
$2.10
$2.11
Unchanged
$2.11
Midwest Average

 

Propane -- The United States propane industry is experiencing a dramatic shift. Currently, U.S. propane supplies are at their highest levels on record. That has prompted increased export activity and export capacity improvements have made the U.S. a net exporter of propane rather than a net importer. Declines in European propane production and increased demand in Asia have lent a market to LP exporters. Mexico, Caribbean nations and South America had previously been the primary importers of U.S. propane.

1132015PropanePropane from Saudi Aramco had previously set the global propane export benchmark price, but U.S. supplies have been at as much as an 89 cent discount per gallon to the Saudi price, and global buyers have taken notice. That may create waves as U.S. propane should begin to garner more and more marketshare. Saudi Arabia has been offering crude oil to some Asian buyers just below the U.S. asking price to maintain marketshare. As the crude oil price war continues, some of those same buyers will be looking to the U.S. for competitively priced propane.

It will be interesting to see what the major increase in U.S. propane exports does to the global LP markets, especially now that we are reaching into Saudi Arabia's backyard with much lower prices than they have offered. Since demand at harvest has been low for propane, and farmers are enjoying sunny and mild temperatures demand for home heat will fall as well. Every day spent with the thermostat in the "off" position allows U.S. supplies to continue to build which, in turn, allow U.S. exporters to build a bigger footprint in the global propane market.

  • According to EIA, last week, national propane inventories fell 0.024 million barrels -- now 21.292 million barrels above the same time last year at 101.563 million barrels.
  • The regionwide low is at $0.84 per gallon in Ohio and the regionwide high is in Michigan at $1.28.
LP 11/3/15
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.98
$0.97
Unchanged
$0.97 Iowa
Illinois
$1.29
$1.29
-3 cents
$1.26 Illinois
Indiana
$1.24
$1.26
-11 cents
$1.15 Indiana
Wisconsin
$1.10
$1.10
Unchanged
$1.10 Wisconsin
Minnesota
$0.99
$0.97
1 cent
$0.98 Minnesota
South Dakota
$0.89
$0.89
Unchanged
$0.89 South Dakota
North Dakota
$0.93
$0.93
Unchanged
$0.93 North Dakota
Nebraska
$0.94
$1.04
-14 cents
$0.90 Nebraska
Missouri
$1.10
$1.09
5 cents
$1.14 Missouri
Kansas
$0.93
$0.94
-3 cents
$0.91 Kansas
Ohio
$0.84
$0.84
Unchanged
$0.84 Ohio
Michigan
$1.28
$1.28
Unchanged
$1.28 Michigan
Midwest Average
$1.04
$1.05
-3 cents
$1.02 Midwest Average

 

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