Farm Fuels In Focus | Crude Longs vs. Crude Production

Posted on 03/16/2018 1:13 PM

 

  • April 2018 natural gas opened today at $2.68, down 6 cents from our last report.
  • Farm Diesel is 4 cents higher on the week at an average of $2.40 per gallon.
  • April 2018 WTI crude oil opened the day at $61.19, up 95 cents from our last report.
  • April 2018 Heating oil futures opened the day at $1.89, up 3 cents from our last report.
  • Propane is unchanged at $1.47 per gallon regionally.

Farm Diesel -- Diesel prices firmed this week on some solid upside moves. Nine states were unchanged and no state posted a lower price. Iowa firmed 11 cents, Missouri gained 18 and South Dakota added 19 cents per gallon.

According to EIA, total U.S. distillate stocks are 15.3% behind the same time last year. Higher crude and heating oil futures prices certainly play a role in this week's higher farm diesel price, but the supply-side cushion we enjoyed last year is shrinking, adding to upside risk in retail farm diesel prices.farm diesel chart

However, U.S. crude oil production continues to rise and the most recent weekly data from EIA shows a 13.9% rise in crude production from the same time last year. Fund managers have begun liquidating long positions in the crude oil market, but still heavily favor the long side. It seems as though the market is somewhat immune to news of increasing production, and most prefer to hold onto long positions despite a sharp rise in U.S. crude production.

That may be setting crude oil futures up for a dramatic correction to the downside. The market's overbought condition was cured by time. Since the beginning of March, futures have confined themselves to a $3.33 range, topping at $63.28 and bottoming a nickel below $60. This is not uncommon for crude oil, although the March range in April futures is fairly narrow by comparison. Next resistance is at $64 and beyond that, $66 with a sticky spot at the contact's March high close, twice tested at $62.60 on 3/5 and 3/6.

While U.S. production will likely keep a lid on futures, longs are not likely to give up on their positions easily. We will look for an increase in refinery throughput to help build distillate supplies, which would lend an opportunity to finish booking for spring fieldwork.


  • Distillate inventories reported by EIA fell 4.4 million barrels to 133.1 mmbbl. Stocks are currently 24.2 mmbbl below the same time last year.
  • The regionwide low currently lies at $2.19 in Wisconsin. The Midwest high is at $2.65 in Missouri.
Farm Diesel 3/16/18
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$2.46
$2.39
+11 cents
$2.50
Iowa
Illinois
$2.31
$2.31
Unchanged
$2.31
Illinois
Indiana
$2.54
$2.54
Unchanged
$2.54
Indiana
Ohio
$2.23
$2.23
Unchanged
$2.23
Ohio
Michigan
$2.38
$2.38
Unchanged
$2.38
Michigan
Wisconsin
$2.19
$2.19
Unchanged
$2.19
Wisconsin
Minnesota
$2.33
$2.31
Unchanged
$2.31
Minnesota
North Dakota
$2.50
$2.43
Unchanged
$2.43
North Dakota
South Dakota
$2.40
 
$2.32
 
+19 cents
 
$2.51
 
South Dakota
Nebraska
$2.35
$2.45
Unchanged
$2.45
Nebraska
Kansas
$2.30
$2.35
Unchanged
$2.35
Kansas
Missouri
$2.47
$2.47
+18 cents
$2.65
Missouri
Midwest Average
$2.37
$2.36
+4 cents
$2.40
Midwest Average

Propane -- LP prices were unchanged with Iowa up a nickel and Missouri up 3 cents. Eight states were unchanged as Michigan, our only decliner, fell 3 cents.propane price chart

Propane was steady on the week, but national stocks are down 12.7% from the same week last year, according to EIA. Our forecast is unchanged, calling for seasonal strength to soon end. But we remain convinced retail prices will have a hard time falling below $1.00 per gallon and will likely hold at or above $1.10 through the sumer months.

This week's average propane price reported to your Inputs Monitor is 10 cents per gallon above the year-ago peg, and we are comfortable advising you pencil in your annual propane budget at 10 cents above what you paid last year. We will look for opportunities to book for next winter in August, although many dealers will offer their offseason prices sometime late in June or early July, and will usually stick with those figures through the first of September.


  • According to EIA, national propane inventories fell 2.268 million barrels -- now 5.648 million barrels below the same time last year at 38.820 million barrels.
  • The regionwide low is at $1.20 per gallon in Wisconsin, and the regionwide high is in Indiana at $2.09.
LP 3/16/18
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.39
$1.36
+5 cents
$1.41
Iowa
Illinois
$1.43
$1.43
Unchanged
$1.43
Illinois
Indiana
$2.09
$2.09
Unchanged
$2.09
Indiana
Ohio
$1.35
$1.35
Unchanged
$1.35
Ohio
Michigan
$1.27
$1.27
-3 cents
$1.24
Michigan
Wisconsin
$1.20
$1.20
Unchanged
$1.20
Wisconsin
Minnesota
$1.58
$1.58
Unchanged
$1.58
Minnesota
North Dakota
$1.47
$1.36
Unchanged
$1.36
North Dakota
South Dakota
Not Reported
 
Not Reported
 
+$1.47
 
$1.47
 
South Dakota
Nebraska
$1.31
$1.45
Unchanged
$1.45
Nebraska
Kansas
$1.57
$1.65
Unchanged
 
$1.65
Kansas
Missouri
$1.39
$1.39
+3 cents
 
$1.42
Missouri
Midwest Average
$1.46
$1.47
Unchanged
$1.47
Midwest Average

diesel heating oil spread chart

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