Farm Fuels In Focus | Diesel Fundamentals Deteriorate, LP's Improve

Posted on 05/11/2018 1:05 PM

 

  • June 2018 natural gas opened today at $2.80, up 5 cents from our last report.
  • Farm Diesel is up 3 cents on the week at an average of $2.41 per gallon.
  • June 2018 WTI crude oil opened the day at $71.45, up $3.77 from our last report.
  • June 2018 Heating oil futures opened the day at $2.22, up 11 cents from our last report.
  • Propane is off 6 cents at $1.36 per gallon regionally.

Farm Diesel -- Crude oil's sharp runup this week is due to a couple of factors. The first is, of course, the Trump farm diesel price chartadministration's decision to exit the Iran nuclear deal. That injected a fair amount of uncertainty into the market, although the immediate response to the announcement was muted. It took an unexpected draw in U.S. crude, gasoline and distillate stocks reported on Thursday to support a sustained move above $70.

As far as farm diesel goes, the more concerning move is heating oil's sharp rally up to this morning's opening bid at $2.22. That marks an 11 cent rise on the week during peak spring demand. We mentioned last week that, given recent strength in crude oil and heating futures, farm diesel appears to be sorely undervalued. Even with this week's 3 cent per gallon rise, we believe there is risk to around $2.50 regionally, possibly higher.

Fuel market watchers and national reporting agencies are very bullish on fuels this summer, but farm diesel has not yet expressed its upside price risk. Now would be a good time to top off tanks ahead of summer price strength.


  • Distillate inventories reported by EIA softened 3.8 million barrels to 115.0 mmbbl. Stocks are currently 33.7 mmbbl below the same time last year.
  • The regionwide low currently lies at $2.12 in Ohio. The Midwest high is at $2.67 in North Dakota.
Farm Diesel 5/11/18
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$2.49
$2.53
-9 cents
$2.44
Iowa
Illinois
$2.31
$2.31
Unchanged
$2.31
Illinois
Indiana
$2.50
$2.50
Unchanged
$2.50
Indiana
Ohio
$2.12
$2.12
Unchanged
$2.12
Ohio
Michigan
$2.39
$2.29
+15 cents
$2.44
Michigan
Wisconsin
$2.19
$2.19
Unchanged
$2.19
Wisconsin
Minnesota
$2.40
$2.52
+4 cents
$2.56
Minnesota
North Dakota
$2.39
$2.39
+28 cents
$2.67
North Dakota
South Dakota
$2.36
 
$2.36
 
Unchanged
 
$2.36
 
South Dakota
Nebraska
$2.40
$2.44
Unchanged
$2.44
Nebraska
Kansas
$2.35
$2.35
+8 cents
$2.43
Kansas
Missouri
$2.61
$2.61
-19 cents
$2.42
Missouri
Midwest Average
$2.38
$2.38
+3 cents
$2.41
Midwest Average

propane price chart

Propane -- Propane prices are retreating seasonally, and national supplies are rebuilding. Last week we reported on a story out of Michigan that had some potentially supportive news. This week, Michigan propane is down a few cents, and I would r3emind the reader that last week's report did not predict a problem with the pipeline infrastructure in the Upper Peninsula. But the article did point out that there is significant upside potential in the event of a pipeline failure in the area.

I advised last week that propane consumers in northern Michigan contact their preferred retailer for a local update on the situation.

For everybody else, we expect propane prices to continue to fall through the early summer.


  • According to EIA, national propane inventories firmed 2.301 million barrels -- now 2.962 million barrels below the same time last year at 38.671 million barrels.
  • The regionwide low is at $1.19 per gallon in Michigan, and the regionwide high is in Indiana at $1.81.
LP 5/11/18
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.23
$1.23
Unchanged
$1.23
Iowa
Illinois
$1.43
$1.43
Unchanged
$1.43
Illinois
Indiana
$1.81
$1.81
Unchanged
$1.81
Indiana
Ohio
$1.35
$1.35
Unchanged
$1.35
Ohio
Michigan
$1.22
$1.22
-3 cents
$1.19
Michigan
Wisconsin
$1.20
$1.20
Unchanged
$1.20
Wisconsin
Minnesota
$1.61
$1.61
-31 cents
$1.30
Minnesota
North Dakota
$1.39
$1.39
-15 cents
$1.24
North Dakota
South Dakota
$1.47
 
$1.47
 
Unchanged
 
$1.47
 
South Dakota
Nebraska
$1.21
$1.23
Unchanged
$1.23
Nebraska
Kansas
$1.50
$1.53
-18 cents
 
$1.35
Kansas
Missouri
$1.55
$1.53
+4 cents
 
$1.57
Missouri
Midwest Average
$1.41
$1.42
-6 cents
$1.36
Midwest Average

Farm diesel Heating oil futures spread

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