Weekly Farm Fuels Bulletin | LP Export Demand Remains High

Posted on 07/05/2018 10:04 AM

 

Farm Dieseldiesl price chart

  • Farm diesel was flat this week, unchanged in all states save for Michigan and Kansas, each down just a few ticks.
  • Crude oil prices are becoming a concern as front-month futures crested $70 and even firmed as high as $75 for a short time on Tuesday morning. But futures are overbought. That could signal a pending downside correction, but the last time we saw over bought WTI futures, the condition was corrected by time spent rangebound rather than by a price drop. Since that has been the precedent, it is not a stretch to suggest crude oil will find a range above $70 and cure its overbought condition with the passage of time.
  • Heating oil futures have firmed as well, but have traced a slightly different path than WTI, topping in mid-May around $2.30 and then softening to its present $2.18. That is likely thanks to brisk refining activity and the end of spring/early summer propane price chartfieldwork.
  • Our farm diesel/heating oil spread has fallen below our "line in the sand" which indicates pending upside risk.

Propane

  • Propane was unchanged as well at a time when we would expect seasonal price pressure.
  • Here again, most states were unchanged. Only Michigan posted a change, up a penny on the week.
  • EIA reported propane exports in April (the most recent data posted) of 939,000 barrels per day which is the highest April tally since EIA began recording in 1973.
  • Last year's propane price did not begin to fall in earnest until mid-July so we believe there is still some downside potential. We do maintain, however, that increased export demand will support a higher price year-on-year.

Fuel
6/18/18
6/25/18
Week-over Change
Current Week
Fuel
Farm Diesel
$2.59
$2.55
Unchanged
$2.55
Farm Diesel
LP
$1.32
$1.33
Unchanged
$1.33
LP

Our farm diesel/heating oil futures spread compares the weekly average retail farm diesel price with front-month heating oil futures as of the close on the previous Friday. A move below the "line in the sand" indicates pending upside risk. A move above our "line in the sand" indicates downside potential.

farm diesel heating oil futures spread chart


 

 

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