Farm Fuels In Focus | Bearish Fundamentals Point Diesel Lower

Posted on 08/17/2018 1:32 PM

 

  • September 2018 natural gas opened today at $2.90, up 16 cents on the week.
  • Farm Diesel is a penny lower on the week at an average of $2.51 per gallon.
  • September 2018 WTI crude oil opened the day at $65.47, off $2.96 on the week.
  • September 2018 Heating oil futures opened the day at $2.09, unchanged from the same day last week.
  • Propane is unchanged on the week at $1.34 per gallon regionally.

Farm Diesel -- Farm diesel softened a penny on the week with no state posting a higher price. Michigan led declines falling a nickel per gallon as Nebraska shucked 4 cents.farm diesel price chart

For this week's update, I would like to borrow from John Kemp, a Reuters analyst who disseminates a lot of EIA data from week to week. On twitter, Kemp posted the following bullet list of items of note from EIA's Petroleum Status Report for the week ended Aug. 10:

  • U.S. refineries running flat out
  • Refinery crude throughput hit record 17.98 million b/d
  • Distillate production hit seasonal record 5.34 million b/d
  • Distillate stocks rising faster than seasonal norm
  • Distillate stocks still below 2017 and 10-yr average
  • Distillate deficit has consistently narrowed in recent weeks
  • Crude imports accelerated, exports decelerated
  • Net crude imports on rising trend
  • Crude stocks jumped +6.8 million bbl
  • Crude stocks are rising faster than seasonal norm
  • Crude deficit versus 2017 starting to narrow

That is a heckuva list and Kemp is a great one to follow on twitter @JKempEnergy for perspective on EIA's multitude of reports and other energy related issues. (Read the full report pertaining to the above here.)

The list above paints a bearish picture for farm diesel prices and as harvest looms, aggressive refinery runs will ensure there is plenty of diesel around when wheels turn. Our forecasts for lower harvest diesel prices does appear to be panning out, and a wait and see approach seems prudent. Distillate stocks remain near the bottom of the five-year average range, which will limit price pressure to a degree.

It is important to remember that the crude oil market can be extremely volatile as traders chase headlines.  All in all, however, the fundamentals within the distillate market have farm diesel prices pointed squarely to the downside.


  • Distillate inventories reported by EIA firmed 3.6 million barrels to 129.0 mmbbl. Stocks are currently 19.4 mmbbl below the same time last year.
  • The regionwide low currently lies at $2.19 in Wisconsin. The Midwest high is at $2.81 in Indiana.
Farm Diesel 8/17/18
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$2.64
$2.57
Unchanged
$2.57
Iowa
Illinois
$2.31
$2.31
Unchanged
$2.31
Illinois
Indiana
$2.75
$2.81
Unchanged
$2.81
Indiana
Ohio
$2.54
$2.30
Unchanged
$2.30
Ohio
Michigan
$2.54
$2.50
-5 cents
$2.45
Michigan
Wisconsin
$2.19
$2.19
Unchanged
$2.19
Wisconsin
Minnesota
$2.64
$2.61
Unchanged
$2.61
Minnesota
North Dakota
$2.66
$2.61
Unchanged
$2.61
North Dakota
South Dakota
$2.61
 
$2.61
 
Unchanged
 
$2.61
 
South Dakota
Nebraska
$2.60
$2.64
-4 cents
$2.60
Nebraska
Kansas
$2.60
$2.55
Unchanged
$2.55
Kansas
Missouri
$2.64
$2.52
Unchanged
$2.52
Missouri
Midwest Average
$2.56
$2.52
-1 cent
$2.51
Midwest Average

Propane -- Our regional average retail propane price is unchanged this week at $1.34. All states were unchanged save for Nebraska which added 2 cents per gallon.

Propane fundamentals are not quite as bearish as distillate, but propane is also less susceptible to crude oil futures fluctuations. National propane stocks have risen above the year-ago peg and production has been clipping along. The time will soon come to lock in propane for harvest and winter, if you have not already.

Since most bids from dealers are good through the first of September, we have been waiting for prices to fully express their offseason price softness. This year, however, propane is behind schedule and the offseason production ramp-up is just now underway. We will give the retail market time to reflect the supply side fundamentals but plan to be booking harvest and winter supplies in the next few weeks..


  • According to EIA, national propane inventories firmed 3.402 million barrels -- now 0.543 million barrels above the same time last year at 69.782 million barrels.
  • The regionwide low is at $1.05 per gallon in North Dakota, and the regionwide high is in Indiana at $1.63.
LP 8/17/18
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.15
$1.22
Unchanged
$1.22
Iowa
Illinois
$1.43
$1.43
Unchanged
$1.43
Illinois
Indiana
$1.50
$1.63
Unchanged
$1.63
Indiana
Ohio
$1.35
$1.35
Unchanged
$1.35
Ohio
Michigan
$1.40
$1.40
Unchanged
$1.40
Michigan
Wisconsin
$1.20
$1.20
Unchanged
$1.20
Wisconsin
Minnesota
$1.09
$1.33
Unchanged
$1.33
Minnesota
North Dakota
$1.14
$1.05
Unchanged
$1.05
North Dakota
South Dakota
$1.47
 
$1.47
 
Unchanged
 
$1.47
 
South Dakota
Nebraska
$1.05
$1.12
+2 cents
$1.14
Nebraska
Kansas
$1.05
$1.40
Unchanged
 
$1.40
Kansas
Missouri
$1.46
$1.45
Unchanged
 
$1.45
Missouri
Midwest Average
$1.27
$1.34
Unchanged
$1.34
Midwest Average

spread chart

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