Farm Fuels in Focus: WTI Production Slips As Saudi Stays the Course

April 1, 2016 12:48 PM
  • LP is up 2 cents on the week at $1.04 per gallon.
  • May 2016 natural gas opened today at $1.96 -- up 3 cents from our last Fuels in Focus.
  • Farm Diesel is 1 cent higher on the week at an average of $1.51 per gallon.
  • May 2016 WTI crude oil opened the day at $38.14 -- lower $1.11 from our last report.
  • May 2016 Heating oil futures opened the day at $1.18 -- 7 cents lower than our last report.

FarmDieselFarm Diesel -- Crude oil futures have retreated back below $40 per barrel and taken heating oil futures along for the downward price slide. Meanwhile farm diesel firmed slightly again this week on scattered price increases across the Midwest.

Saudi Arabia has announced it will meet with select OPEC producers including Russia, Qatar and Venezuela later this month, but has stated clearly it will not be the first producer to curtail production. Iran is the sticking point and Saudi officials cited Iran's unwillingness to limit their production as the reason Saudi will continue to produce at historically high levels. The Saudi mindset is still focused on their volume-over-price strategy as they fear loss of marketshare should they reduce output.

Meanwhile EIA reports U.S. crude oil production has fallen to its lowest level since October 2014. WTI production remains above 9 million barrels per day and hedge activity around the $45 area suggests U.S. producers have baked lower crude oil prices into their operations and are able to function profitably at lower levels than from just a year ago. The current dip in global oil futures will make it difficult for some U.S. producers to continue, but it appears all WTI has to do is stay above $30 for high-output U.S. producers to maintain a production pace above 9 million barrels per day.

Spring demand will continue to support mild increases in farm diesel prices, but we expect the per gallon price to tick lower in midsummer although we remain confident the February low will hold for the rest of 2016.

  • Distillate inventories reported by EIA fell 1.1 million barrels to 161.2 mmbbl. Stocks are currently 34.0 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.29 in North Dakota and the Midwest high is at $1.71 in Indiana.
Farm Diesel 4/1/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.44
$1.50
11 cents
$1.61
Iowa
Illinois
$1.50
$1.50
1 cent
$1.51
Illinois
Indiana
$1.62
$1.62
9 cents
$1.71
Indiana
Wisconsin
$1.64
$1.60
Unchanged
$1.60
Wisconsin
Minnesota
$1.54
$1.55
-1 cent
$1.54
Minnesota
South Dakota
$1.44
$1.44
Unchanged
$1.44
South Dakota
North Dakota
$1.37
$1.33
-4 cents
$1.29
North Dakota
Nebraska
$1.44
$1.45
-1 cent
$1.44
Nebraska
Missouri
$1.51
$1.48
Unchanged
$1.48
Missouri
Kansas
$1.38
$1.45
1 cent
$1.46
Kansas
Ohio
$1.43
$1.43
Unchanged
$1.43
Ohio
Michigan
$1.39
$1.62
Unchanged
$1.62
Michigan
Midwest Average
$1.48
$1.50
1 cent
$1.51
Midwest Average

LP

Propane -- winter heating season is slowly coming to an end and short of the occasional cold snap here and there, propane will spend some time on the back burner. We expect prices will come in above last year's price at the summertime low in response to slightly higher crude price projections. We will wait as long into July as we dare before pulling the trigger but supplies are currently ample, giving producers a good spot to jump off and rebuild inventories ahead of winter 2016-17.

  • According to EIA, last week, national propane inventories firmed 0.599 million barrels -- now 5.465 million barrels above the same time last year at 62.825 million barrels.
  • The regionwide low is at $0.89 per gallon in South Dakota and the regionwide high is in Indiana at $1.33.
LP 4/1/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.02
$1.02
-9 cents
$0.93
Iowa
Illinois
$0.94
$0.94
Unchanged
$0.94
Illinois
Indiana
$1.33
$1.33
20 cents
$1.53
Indiana
Wisconsin
$1.00
$1.00
Unchanged
$1.00
Wisconsin
Minnesota
$0.96
$0.96
Unchanged
$0.96
Minnesota
South Dakota
$0.89
$0.89
Unchanged
$0.89
South Dakota
North Dakota
$0.91
$0.93
Unchanged
$0.93
North Dakota
Nebraska
$0.89
$0.89
Unchanged
$0.89
Nebraska
Missouri
$1.18
$1.19
Unchanged
$1.19
Missouri
Kansas
$0.87
$1.01
4 cents
$1.05
Kansas
Ohio
$0.95
$0.95
Unchanged
$0.95
Ohio
Michigan
$1.26
$1.16
Unchanged
$1.16
Michigan
Midwest Average
$1.02
$1.02
2 cents
$1.04
Midwest Average

 

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