Farm Fuels in Focus: Farm Diesel Slides Lower

Posted on 03/09/2017 10:25 AM
  • LP is a penny lower on the week at $1.01 per gallon.
  • March 2016 natural gas opened today at $2.12 -- down 1 cent from our last Fuels in Focus.
  • Farm Diesel is 11 cents lower on the week at an average of $1.45 per gallon.
  • March 2016 WTI crude oil opened the day at $30.17 -- lower $1.45 from our last report.
  • March 2016 Heating oil futures opened the day at $1.05 -- 1 cent higher than our last report.

Ruby"Farm Diesel -- Tuesday's open in WTI crude oil futures has a story to tell. Crude market bulls were gunning for continued rejection of a two-handle on crude oil, but Tuesday's market action pressured the front-month crude oil contract below $28.00 per barrel for a short time. Meanwhile, distillate stocks posted only mild weekly withdrawals, adding pressure to heating oil futures. All of this works in favor of farm diesel prices which slid an unexpected 11 cents this week to a regional average of $1.45 per gallon.

This week, only two states did not post a lower price point on farm diesel, and they were unchanged. The average rate of decline was 13 cents. Not all states moved that much. The Dakotas and Missouri were each down more than 20 cents per gallon as Indiana fell 16 and Ohio shucked 15 cents on the week. These are not the sorts of declines which signal a change of direction for the farm diesel market. In fact, by the end of trade Tuesday, front-month heating oil futures had slipped to close at 98 cents.

Not much to make us bullish on farm diesel right now, and , unlikely as it seems, according to retail price action this week, downside momentum may actually have increased since our last Farm Fuels in focus. Our advice in this uncertain climate is unchanged. Stay hand-to-mouth until we see where retail farm diesel prices shake out -- or, if you can find a bid below $1.10 per gallon, take advantage and book at least a portion for spring. Indiana diesel guys, you'll want to look about a dime above that and book diesel below $1.20.

  • Distillate inventories reported by EIA fell 0.8 million barrels to 159.7 mmbbl. Stocks are currently 25.2 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.31 in Nebraska and the Midwest high is at $1.63 in Indiana.
Farm Diesel 2/9/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.47
$1.47
-2 cents
$1.45
Iowa
Illinois
$1.56
$1.53
-8 cents
$1.45
Illinois
Indiana
$1.79
$1.73
-16 cents
$1.57
Indiana
Wisconsin
$1.69
$1.63
Unchanged
$1.63
Wisconsin
Minnesota
$1.64
$1.63
-10 cents
$1.53
Minnesota
South Dakota
$1.62
$1.62
-24 cents
$1.38
South Dakota
North Dakota
$1.66
$1.66
-27 cents
$1.39
North Dakota
Nebraska
$1.42
$1.37
-6 cents
$1.31
Nebraska
Missouri
$1.67
$1.67
-21 cents
$1.46
Missouri
Kansas
$1.42
$1.42
Unchanged
$1.42
Kansas
Ohio
$1.54
$1.54
-15 cents
$1.39
Ohio
Michigan
$1.56
$1.44
Unchanged
$1.44
Michigan
Midwest Average
$1.59
$1.56
-11 cents
$1.45
Midwest Average

Propane

Propane -- Propane slipped a penny this week with only North Dakota posting a higher price, up 4 cents per gallon. All other states were unchanged or lower on the week. Exports firmed sharply ahead of the winter in September and remained at high levels up through November which is the last data EIA reported. EIA noted in its February 3 petroleum report that Gulf Coast propane inventories fell the most among reporting U.S. regions last week which may be a clue that exports from the gulf were brisk out of the Gulf.

Overall, national propane supplies are beginning to fall toward the top end of the five year average supply range. East coast inventories are above the same time last year in general, but New England stocks are less than half what they were at the same time last year. Stocks in the Midwest and Rocky Mountain regions are also below the same time last year thanks to a few weeks of more typical winter weather including heavy snows, bitterly cold temperatures and periods of moderate wind.

If supplies dip too low, propane prices will firm accordingly however given high levels of crude oil production in the U.S., supplies should rebuild quickly in the spring and limit upside risk for midsummer purchases for winter 2016-17.

  • According to EIA, last week, national propane inventories fell 5.609 million barrels -- now 10.849 million barrels above the same time last year at 78.086 million barrels.
  • The regionwide low is at $0.89 per gallon in South Dakota & Nebraska and the regionwide high is in Indiana at $1.32.
LP 2/9/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.94
$0.94
-2 cents
$0.92
Iowa
Illinois
$0.94
$0.94
Unchanged
$0.94
Illinois
Indiana
$1.52
$1.45
-13 cents
$1.32
Indiana
Wisconsin
$1.00
$1.00
Unchanged
$1.00
Wisconsin
Minnesota
$0.99
$0.99
Unchanged
$0.99
Minnesota
South Dakota
$0.89
$0.89
Unchanged
$0.89
South Dakota
North Dakota
$0.91
$0.91
4 cents
$0.95
North Dakota
Nebraska
$0.93
$0.91
-2 cents
$0.89
Nebraska
Missouri
$1.10
$1.11
Unchanged
$1.11
Missouri
Kansas
$0.93
$0.93
Unchanged
$0.93
Kansas
Ohio
$0.95
$0.95
Unchanged
$0.95
Ohio
Michigan
$1.19
$1.25
-6 cents
$1.19
Michigan
Midwest Average
$1.02
$1.02
-1 cent
$1.01
Midwest Average

 

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