Farm Fuels in Focus: Unplanned Disruptions Slow Crude Output

June 10, 2016 01:18 PM

 

  • July 2016 natural gas opened today at $2.59 -- up 19 cents from our last Fuels in Focus.
  • Farm Diesel is unchanged on the week at an average of $1.82 per gallon.
  • July 2016 WTI crude oil opened the day at $50.47 -- up $1.43 from our last report.
  • July 2016 Heating oil futures opened the day at $1.55 -- up a nickel from our last report.

dieselFarm Diesel -- The U.S. Energy Information Administration (EIA) reported earlier this week that unplanned oil production disruptions around the globe have reached their highest level since 2011 (read this week's "Today in Energy" from EIA). Canada, Nigeria, Iraq, Libya, Colombia and Argentina are all experiencing unplanned outages for reasons ranging from factional fighting, power outages and natural disasters. Since the current spate of outages are largely unplanned, we should expect production to resume eventually. But EIA points out that political disputes and conflicts dominate the reasons for production outages, but the above-mentioned reasons have skyrocketed since the beginning of May, and contributed greatly to already existing supply disruptions.

How long the production recovery takes will dictate price action in crude oil markets. EIA predicts the outages to begin to ease this month which would support global inventories and could weigh on crude oil pricing.

Closer to home, our farm diesel/heating oil spread suggests sideways to slightly higher price action near-term. We have speculated that part of the reason for farm diesel's recent runup was agricultural demand. This week, as planting and fertilization comes very near its end, nine of our twelve states are unchanged on diesel this week as Kansas firmed 13 cents per gallon and North Dakota adds 3 cents. Indiana was our only decliner falling 7 cents per gallon.

  • Distillate inventories reported by EIA firmed 1.8 million barrels to 151.4 mmbbl. Stocks are currently 17.9 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.66 in North Dakota and the Midwest high is at $1.92 in Wisconsin.
Farm Diesel 6/10/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.74
$1.74
Unchanged
$1.74
Iowa
Illinois
$1.95
$1.89
Unchanged
$1.89
Illinois
Indiana
$1.94
$1.94
-7 cents
$1.87
Indiana
Wisconsin
$1.92
$1.92
Unchanged
$1.92
Wisconsin
Minnesota
$1.78
$1.90
Unchanged
$1.90
Minnesota
South Dakota
$1.85
$1.88
Unchanged
$1.88
South Dakota
North Dakota
$1.62
$1.63
3 cents
$1.66
North Dakota
Nebraska
$1.67
$1.74
Unchanged
$1.74
Nebraska
Missouri
$1.80
$1.80
Unchanged
$1.80
Missouri
Kansas
$1.59
$1.60
13 cents
$1.73
Kansas
Ohio
$1.68
$1.88
Unchanged
$1.88
Ohio
Michigan
$1.79
$1.86
Unchanged
$1.86
Michigan
Midwest Average
$1.78
$1.82
Unchanged
$1.82
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 1.913 million barrels -- now 1.5.01 million barrels below the same time last year at 77.294 million barrels.
  • The regionwide low is at $0.85 per gallon in Ohio and the regionwide high is in Missouri at $1.12.
LP 6/10/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.89
$0.89
Unchanged
$0.89
Iowa
Illinois
$0.94
$0.99
Unchanged
$0.99
Illinois
Indiana
$1.17
$1.17
-12 cents
$1.05
Indiana
Wisconsin
$1.10
$1.10
Unchanged
$1.10
Wisconsin
Minnesota
$0.95
$0.95
Unchanged
$0.95
Minnesota
South Dakota
$0.89
$0.89
Unchanged
$0.89
South Dakota
North Dakota
$0.89
$0.89
Unchanged
$0.89
North Dakota
Nebraska
$0.89
$0.89
Unchanged
$0.89
Nebraska
Missouri
$1.12
$1.12
Unchanged
$1.12
Missouri
Kansas
$1.08
$1.08
Unchanged
$1.08
Kansas
Ohio
$0.85
$0.85
Unchanged
$0.85
Ohio
Michigan
$1.13
$1.05
Unchanged
$1.05
Michigan
Midwest Average
$0.99
$0.99
Unchanged
$0.98
Midwest Average

 

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