Farm Fuels in Focus: Crude Oil In Flux

Posted on 03/09/2017 10:25 AM

 

  • November 2016 natural gas opened today at $3.34 -- up 31 cents from our last Fuels in Focus.
  • Farm Diesel is unchanged on the week at an average of $1.87 per gallon.
  • November 2016 WTI crude oil opened the day at $50.58 -- down a penny from our last report.
  • November 2016 Heating oil futures opened the day at $1.58 -- down one cent from our last report.
  • Propane is up a penny on the week at an average of $1.02 per gallon regionally.

Farm Diesel -- It was a week of wildly mixed prices in farm diesel that wound up supporting a 3 cent per gallon rise regionally. South Dakota and Missouri led gains each firming 17 cents per gallon. Ohio added 9 cents with only three states unchanged. Illinois was our only decliner falling a massive 24 cents per gallon.

Harvest demand added support to farm diesel this week as crude oil futures found a range between $49 and $52 per barrel. OPEC and Russian crude oil producers seem to be coming to consensus that they will have to do something to stem the tide of global crude oil oversupply. So far, such conversations have yielded nothing. Traders view the current conversation and loose agreements between major world producers as bullish for the market, and this time, the rumors may actually lead to action. A meeting between OPEC officials on November 30 will set any such agreement in stone, but for the time being, fund activity has moved significant positions from the short side over to the long side of Brent and WTI futures.

That may limit the downside potential we expect to see after harvest demand runs out. With harvest in the U.S. rounding past half done according to USDA, we will soon be looking for signs of farm diesel softening. Seasonally, farm diesel has given opportunities to book around Christmas and we expect the same to be true this year. But if OPEC producers agree to freeze or even cut production at the November meeting, the diesel price softness will be mild and short-lived.

Bear in mind that any cuts or production freezes will likely be a "you go first" arrangement. Producers are still grappling for marketshare which carries with it implications of price discovery. As importers look for the best deal, even with an agreement in place, marketshare will drive production targets more than gentleman's agreements.

  • Distillate inventories reported by EIA fell 1.2 million barrels to 155.7 mmbbl. Stocks are currently 10.7 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.45 in Illinois and the Midwest high is at $2.03 in Indiana.
Farm Diesel 10/21/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.86
$1.86
6 cents
$1.92
Iowa
Illinois
$1.69
$1.69
-24 cents
$1.45
Illinois
Indiana
$2.02
$2.02
1 cent
$2.03
Indiana
Wisconsin
$1.92
$1.92
Unchanged
$1.92
Wisconsin
Minnesota
$1.94
$1.92
3 cents
$1.95
Minnesota
South Dakota
$1.82
$1.82
17 cents
$1.99
South Dakota
North Dakota
$1.99
$1.99
Unchanged
$1.99
North Dakota
Nebraska
$1.80
$1.81
7 cents
$1.88
Nebraska
Missouri
$1.72
$1.74
17 cents
$1.91
Missouri
Kansas
$1.86
$1.86
4 cents
$1.90
Kansas
Ohio
$1.83
$1.83
9 cents
$1.92
Ohio
Michigan
$1.93
$1.93
Unchanged
$1.93
Michigan
Midwest Average
$1.87
$1.87
3 cents
$1.90
Midwest Average

 

Propane -- Propane was unchanged this week with very little movement from state-to-state. Half of the states in our twelve state survey were unchanged as Missouri led gains firming 7 cents per gallon and Nebraska and Iowa each added 2 cents. Ohio posted our only declines, down a dime on the week to $1.10 per gallon.

No change to our propane price forecast. If forecasts for a cold, snowy winter are realized, propane demand will outstrip last year's which will leave some needing late season deliveries. Make sure you have at least as much propane on hand as you used last year and consider adding another 5-10% to ensure you don't run out when demand is at its peak later this winter.

  • According to EIA, last week, national propane inventories fell 1.246 million barrels -- now 1.095 million barrels above the same time last year at 102.682 million barrels.
  • The regionwide low is at $0.92 per gallon in Nebraska and the regionwide high is shared by Illinois and Indiana at $1.16.
LP 10/21/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.91
$0.92
2 cents
$0.94
Iowa
Illinois
$1.16
$1.16
Unchanged
$1.16
Illinois
Indiana
$1.16
$1.16
Unchanged
$1.16
Indiana
Wisconsin
$0.99
$0.99
Unchanged
$0.99
Wisconsin
Minnesota
$0.91
$0.96
1 cent
$0.97
Minnesota
South Dakota
$0.95
$0.95
Unchanged
$0.95
South Dakota
North Dakota
$0.92
$0.93
Unchanged
$0.93
North Dakota
Nebraska
$0.86
$0.90
2 cents
$0.92
Nebraska
Missouri
$1.00
$1.00
7 cents
$1.07
Missouri
Kansas
$0.98
$0.98
Unchanged
$0.98
Kansas
Ohio
$1.20
$1.20
-10 cents
$1.10
Ohio
Michigan
$1.09
$1.07
1 cent
$1.08
Michigan
Midwest Average
$1.01
$1.02
Unchanged
$1.02
Midwest Average

 


 

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