Farm Fuels in Focus: Supply Driven LP Price and Crude Oil Chatter

September 11, 2015 12:35 PM

Farm Fuels in Focus: Supply Driven LP Price and Crude Oil Chatter

  • LP is down a penny on the week to $1.00.
  • October 2015 natural gas opened today at $2.66 -- 2 cents below our last Fuels in Focus.
  • Farm Diesel is unchanged on the week at an average of $2.08 per gallon.
  • October 2015 WTI crude oil opened the day at $44.16 -- 10 cents below our last report.
  • October 2015 Heating oil futures opened the day at $1.54 -- 1 cent lower than our last report.

982015RubyFarm Diesel -- As crude oil futures have firmed, we must consider the impact of this potentially bullish fundamental shift. I am of the opinion that crude oil producers in the U.S. are becoming very savvy to market fluctuations, and as prices rise and fall, rig counts will follow. According to EIA, crude oil stocks ticked higher in the most recent report. EIA will update its data later today and since prices have firmed, we expect production levels to firm as well.

If you scroll down to the bottom of this article you will find a spread analysis chart that I use to cut through the crude oil chatter to ascertain what farm diesel prices are going to do. So far this, along with other fundamentals, has proven to be a very valuable tool, and the key is the spread between heating oil futures and retail farm diesel prices. When the spread dips below our line in the sand (red line), diesel prices firm. Until that happens, diesel prices have exhibited price pressure.

I have written about this before and included this chart at the bottom of past editions of Fuels in Focus, but I wanted to make sure you take a look so you can draw your own conclusions

  • Distillate inventories reported by EIA firmed 0.1 million barrels to 150.0 mmbbl. Stocks are currently 26.6 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.96 in Nebraska and the Midwest high is at $2.19 in Indiana.
Farm Diesel 9/10/15
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$2.07
$2.01
1 cent
$2.02
Iowa
Illinois
$1.98
$1.98
Unchanged
$1.98
Illinois
Indiana
$2.21
$2.21
-2 cents
$2.19
Indiana
Wisconsin
$2.25
$2.20
Unchanged
$2.20
Wisconsin
Minnesota
$2.11
$2.07
2 cents
$2.09
Minnesota
South Dakota
$2.14
$2.14
1 cent
$2.15
South Dakota
North Dakota
$2.15
$2.15
Unchanged
$2.15
North Dakota
Nebraska
$2.00
$1.95
1 cent
$1.96
Nebraska
Missouri
$2.09
$2.09
Unchanged
$2.09
Missouri
Kansas
$1.98
$2.18
-4 cents
$2.14
Kansas
Ohio
$1.98
$1.98
Unchanged
$1.98
Ohio
Michigan
$2.05
$2.04
Unchanged
$2.04
Michigan
Midwest Average
$2.08
$2.08
Unchanged
$2.08
Midwest Average

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Propane -- Propane prices fell a penny on the week and we have been in a penny range for several weeks now. Much like farm diesel, prices are holding steady despite a long history of seasonal price support. Infrastructure is intact and supplies are more than ample. The chart at right from EIA depicts weekly propane stocks and the five-year average range. Propane is a supply driven market and as long as supplies remain above the five-year average by such a margin, propane price strength will be limited.

  • According to EIA, last week, national propane inventories firmed 0.620 million barrels -- now 20.220 million barrels above the same time last year at 96.344 million barrels.
  • The regionwide low is at $0.79 per gallon in Ohio and the regionwide high is in Michigan and Illinois at $1.29.
LP 9/10/15
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.01
$1.01
-6 cents
$0.95
Iowa
Illinois
$1.29
$1.29
Unchanged
$1.29
Illinois
Indiana
$1.09
$1.09
Unchanged
$1.09
Indiana
Wisconsin
$1.13
$1.13
Unchanged
$1.13
Wisconsin
Minnesota
$0.94
$0.94
1 cent
$0.95
Minnesota
South Dakota
$0.84
$0.84
Unchanged
$0.84
South Dakota
North Dakota
$0.85
$0.84
Unchanged
$0.84
North Dakota
Nebraska
$0.80
$0.81
-1 cent
$0.80
Nebraska
Missouri
$1.21
$1.23
Unchanged
$1.23
Missouri
Kansas
$0.90
$0.96
-6 cents
$0.90
Kansas
Ohio
$0.79
$0.79
Unchanged
$0.79
Ohio
Michigan
$1.29
$1.29
Unchanged
$1.29
Michigan
Midwest Average
$1.01
$1.01
-1 cent
$1.00
Midwest Average

 

9102015Spread