Fuels Unchanged as Crude Surges

September 2, 2015 10:10 AM
  • LP is unchanged on the week at $1.01.
  • October 2015 natural gas opened today at $2.68 -- 1 cent above 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 $44.26 -- $6.08 above our last report.
  • October 2015 Heating oil futures opened the day at $1.55 -- 16 cents higher than our last report.

922015Diesel.pngFarm Diesel -- Kansas diesel firmed a startling 20 cents per gallon this week. In response to the refinery outage in Indiana, distillate supplies from other parts of the country were diverted to the Eastern Corn Belt, supporting sharply higher Kansas diesel prices. Since we receive word early last week that BP's Indiana refinery was back up to snuff, we expect Kansas to retreat back to its former level, right around $2.00 per gallon. Had Kansas remained unchanged this week at $1.98, Our regional average would have fallen just a penny. Crude oil gave us a scare this week and still rests above $40.00 per barrel, but this is a result of falling rig counts in recent reports.

As we have said before, U.S. drillers are able to turn certain production units off when prices dip too low and easily resume production when prices recover to a profitable level. For that reason we are sticking with our hand-to-mouth strategy for now. If OPEC reduces production or some other black swan event supports higher farm diesel, we expect to know at least a few days in advance. We have observed a lag between crude price moves and farm diesel prices. Heading in to harvest we may see some short-term price support on heavy agricultural demand and the advent of winter heating season, but even those should be short lived and mild.

  • 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 $1.958 in Nebraska and the Midwest high is at $2.21 in Indiana.
Farm Diesel 9/1/15
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$2.07
$2.07
-6 cents
$2.01
Iowa
Illinois
$1.99
$1.98
Unchanged
$1.98
Illinois
Indiana
$2.27
$2.21
Unchanged
$2.21
Indiana
Wisconsin
$2.27
$2.25
-5 cents
$2.20
Wisconsin
Minnesota
$2.11
$2.11
-4 cents
$2.07
Minnesota
South Dakota
$2.24
$2.14
Unchanged
$2.14
South Dakota
North Dakota
$2.34
$2.15
Unchanged
$2.15
North Dakota
Nebraska
$2.00
$2.00
-5 cents
$1.95
Nebraska
Missouri
$2.14
$2.09
Unchanged
$2.09
Missouri
Kansas
$2.00
$1.98
20 cents
$2.18
Kansas
Ohio
$1.96
$1.98
Unchanged
$1.98
Ohio
Michigan
$2.05
$2.05
-1 cent
$2.04
Michigan
Midwest Average
$2.12
$2.08
Unchanged
$2.08
Midwest Average

922015LP.png 

Propane -- Reports from around the Corn Belt are coming in that some corn is starting to shut down. That usually caries with it high moisture contents and requires a lot of fuel for drying. We expect demand for propane to be high as combines roll in a few weeks. Summer prices in many areas were sub-$1.00 per gallon and a lot of growers, remembering the trouble from a few years ago, jumped at the opportunity. Since national supplies are still extremely high, demand-based price strength should be limited, but harvest will support at least mildly higher prices.

We have been sideways for a few weeks now at $1.01. This is still a good price point and if you have not booked propane for harvest or for home heat, get it done. We do not expect prices to soften from here until March.

  • 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 9/1/15
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.01
$1.01
Unchanged
$1.01
Iowa
Illinois
$1.25
$1.29
Unchanged
$1.29
Illinois
Indiana
$1.03
$1.09
Unchanged
$1.09
Indiana
Wisconsin
$1.08
$1.13
Unchanged
$1.13
Wisconsin
Minnesota
$0.94
$0.94
Unchanged
$0.94
Minnesota
South Dakota
$0.89
$0.84
Unchanged
$0.84
South Dakota
North Dakota
$0.89
$0.85
-1 cent
$0.84
North Dakota
Nebraska
$0.80
$0.80
1 cent
$0.81
Nebraska
Missouri
$1.20
$1.21
2 cents
$1.23
Missouri
Kansas
$0.90
$0.90
6 cents
$0.96
Kansas
Ohio
$0.79
$0.79
Unchanged
$0.79
Ohio
Michigan
$1.29
$1.29
Unchanged
$1.29
Michigan
Midwest Average
$1.00
$1.01
Unchanged
$1.01
Midwest Average

 

 922015Spreads.png