Farm Fuels in Focus: Refining Activity to Limit Diesel Price Strength

April 8, 2016 12:27 PM
  • LP is up 1 cent on the week at $1.05 per gallon.
  • May 2016 natural gas opened today at $2.01 -- up 5 cents from our last Fuels in Focus.
  • Farm Diesel is 7 cents higher on the week at an average of $1.51 per gallon.
  • May 2016 WTI crude oil opened the day at $37.52 -- lower 62 cents from our last report.
  • May 2016 Heating oil futures opened the day at $1.13 -- 5 cents lower than our last report.

dieselFarm Diesel -- Gasoline consumption is projected higher as drivers have taken advantage of lower gasoline prices by driving more miles and purchasing vehicles which are less focused on fuel efficiency. This along with low priced crude oil have refiners making gasoline and distillates at a high rate. Diesel demand is not expected to firm as much as gasoline demand, but as refiners manufacture gasoline, middle distillates -- including farm diesel -- are produced as part of the refining process.

As gasoline demand is projected higher near-term, not so much for diesel. Increased refinery activity ahead of the summer driving season will support higher diesel stocks and without significant demand increases on the horizon, the oversupply should act as a weight on prices. We have thus far supposed the 2016 low in farm diesel was placed in February at $1.43 per gallon regionally and that prices would not soften back to that level. This new insight could change that and as we have wondered if we should front book diesel for fall delivery, refining activity and increasing gasoline demand will swell U.S. diesel stocks and may force farm diesel back near the February low.

  • Distillate inventories reported by EIA firmed 1.8 million barrels to 163.0 mmbbl. Stocks are currently 36.1 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.27 in North Dakota and the Midwest high is at $1.79 in Indiana.
Farm Diesel 4/8/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.50
$1.61
Unchanged
$1.61
Iowa
Illinois
$1.50
$1.51
16 cents
$1.67
Illinois
Indiana
$1.62
$1.71
8 cents
$1.79
Indiana
Wisconsin
$1.60
$1.60
Unchanged
$1.60
Wisconsin
Minnesota
$1.55
$1.54
11 cents
$1.65
Minnesota
South Dakota
$1.44
$1.44
15 cents
$1.59
South Dakota
North Dakota
$1.33
$1.29
-2 cents
$1.27
North Dakota
Nebraska
$1.45
$1.44
11 cents
$1.55
Nebraska
Missouri
$1.48
$1.48
Unchanged
$1.48
Missouri
Kansas
$1.45
$1.46
1 cent
$1.47
Kansas
Ohio
$1.43
$1.43
21 cents
$1.64
Ohio
Michigan
$1.62
$1.62
2 cents
$1.64
Michigan
Midwest Average
$1.50
$1.51
7 cents
$1.58
Midwest Average

 

Propane -- No change to our forecast for propane to bottom in July. Near-term cooler weather will support mild price strength in propane, but stocks remain strong and will limit the upside.

  • According to EIA, last week, national propane inventories firmed 2.033 million barrels -- now 6.899 million barrels above the same time last year at 64.858 million barrels.
  • The regionwide low is at $0.89 per gallon in South Dakota & Nebraska and the regionwide high is in Indiana at $1.54.
LP 4/8/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.02
$0.93
Unchanged
$0.93
Iowa
Illinois
$0.94
$0.94
24 cents
$1.18
Illinois
Indiana
$1.33
$1.53
1 cent
$1.54
Indiana
Wisconsin
$1.00
$1.00
Unchanged
$1.00
Wisconsin
Minnesota
$0.96
$0.96
1 cent
$0.97
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
Unchanged
$0.89
Nebraska
Missouri
$1.19
$1.19
Unchanged
$1.19
Missouri
Kansas
$1.01
$1.05
-4 cents
$1.01
Kansas
Ohio
$0.95
$0.95
Unchanged
$0.95
Ohio
Michigan
$1.16
$1.16
Unchanged
$1.16
Michigan
Midwest Average
$1.02
$1.04
1 cent
$1.05
Midwest Average

 

Spreads