Farm Fuels in Focus: Farm Diesel Firms as OPEC Holds the Line

Posted on 03/09/2017 10:25 AM

 

  • LP is unchanged on the week at 99 cents per gallon.
  • July 2016 natural gas opened today at $2.40 -- up 24 cents from our last Fuels in Focus.
  • Farm Diesel is 4 cents higher on the week at an average of $1.82 per gallon.
  • July 2016 WTI crude oil opened the day at $49.04 -- down 66 cents from our last report.
  • July 2016 Heating oil futures opened the day at $1.50 -- a penny lower from our last report.

Farm Diesel -- Leaders from OPEC met this week in Vienna to discuss output and other issues. Despite still-strong global crude oil inventories, the leaders of OPEC decided to maintain current production levels. In response, WTI crude oil futures stopped their advance to the upside, falling short of a close above $50 per barrel in the July contract. OPEC members, however, reportedly declared the war on U.S. oil has ended in shale's defeat. The meeting was also an opportunity to install a new executive director in the person of Nigeria's Mohammed Barkindo. The outgoing director had been set to be replaced in 2012 at the end of his second term, but members could not agree at that time on a suitable replacement.

diesel"So as OPEC inaugurated a new executive director, and declared they had won the global oil production war, nothing in the fundamentals of the crude oil market has really changed much. High-cost producers in the United States and around the globe continue to struggle with low returns on oil production. An article on Forbes.com went so far as to call the meeting a "Love-Fest" among OPEC producers and quoted the new Saudi oil Minister as saying, "There's been too much emphasis on the divisions within the OPEC body." The Minister went on to say, "We will be very gentle in our approach and make sure we don't shock the market in any way."

Increasing demand prospects and OPEC's view that the oil market is beginning to balance had the more stable representatives from OPEC feeling optimistic about the future of production margins, but smaller players like cash-strapped Venezuela seem to have fallen off the radar. Some sources predict a rise in Venezuelan inflation to the tune of 700 percent in 2016. Venezuela had hoped for a much different outcome from Vienna, and the continued flow of oil onto the global market will likely increase the countries economic and social woes.

Here at home, farm diesel is up 4 cents per gallon on the week to $1.82 on strength in Ohio, Minnesota, Michigan and Nebraska. With planting progress pressing up against completion, U.S. demand on the farm is set to fall which may pressure prices through summer somewhat. But if forecasts for near-term crude oil and distillate demand growth globally are realized, prices may continue to firm into fall. We will be looking for opportunities as crude prices appear to want to end this week with a weaker tone.

Read the Forbes article regarding OPEC's June 2 meeting in Vienna here.

  • Distillate inventories reported by EIA fell 1.3 million barrels to 149.6 mmbbl. Stocks are currently 17.0 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.60 in Kansas and the Midwest high is at $1.94 in Indiana.
Farm Diesel 6/3/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.74
$1.74
Unchanged
$1.74
Iowa
Illinois
$1.79
$1.95
-6 cents
$1.89
Illinois
Indiana
$1.90
$1.94
Unchanged
$1.94
Indiana
Wisconsin
$1.92
$1.92
Unchanged
$1.92
Wisconsin
Minnesota
$1.76
$1.78
12 cents
$1.90
Minnesota
South Dakota
$1.85
$1.85
3 cents
$1.88
South Dakota
North Dakota
$1.62
$1.62
1 cent
$1.63
North Dakota
Nebraska
$1.60
$1.67
7 cents
$1.74
Nebraska
Missouri
$1.54
$1.80
Unchanged
$1.80
Missouri
Kansas
$1.58
$1.59
1 cent
$1.60
Kansas
Ohio
$1.68
$1.68
20 cents
$1.88
Ohio
Michigan
$1.79
$1.79
7 cents
$1.86
Michigan
Midwest Average
$1.73
$1.78
5 cents
$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 1.252 million barrels -- now 1.665 million barrels below the same time last year at 75.381 million barrels.
  • The regionwide low is at $0.85 per gallon in Ohio and the regionwide high is in Indiana at $1.17.
LP 6/3/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.89
$0.89
Unchanged
$0.89
Iowa
Illinois
$1.16
$0.94
5 cents
$0.99
Illinois
Indiana
$1.17
$1.17
Unchanged
$1.17
Indiana
Wisconsin
$1.10
$1.10
Unchanged
$1.10
Wisconsin
Minnesota
$0.97
$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
$1.10
$1.08
Unchanged
$1.08
Kansas
Ohio
$0.85
$0.85
Unchanged
$0.85
Ohio
Michigan
$1.13
$1.13
-8 cents
$1.05
Michigan
Midwest Average
$1.01
$0.99
Unchanged
$0.99
Midwest Average

 

DieselSpreads


 

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