Farm Fuels In Focus | Frigid Weather Forces Fuels to Firm

Posted on 01/12/2018 9:30 AM

 

  • February 2018 natural gas opened today at $3.06, up 38 cents from our last report.
  • Farm Diesel is 6 cents higher on the week at an average of $2.37 per gallon.
  • February 2018 WTI crude oil opened the day at $63.50, up $6.35 from our last report.
  • January 2017 Heating oil futures opened the day at $2.08, up 17 cents from our last report.
  • Propane is 4 cents higher at $1.51 per gallon regionally.

Farm Diesel -- Missouri led farm diesel higher firming a massive 52 cents. Kansas gained 12 cents as Iowa added 7 cents per gallon. Six states were unchanged as Nebraska posted our only farm diesel price decline, down 2 cents per gallon.diesel

It was said by experts earlier this week that the oil surplus has come to the bottom of the barrel. Since the crude oil market has been subject to headline chasers at every turn of the rumor mill, it is prudent to take such a sentiment with a grain of salt. That salt comes in the form of predictions that U.S. shale production will reach 10 million barrels per day, possibly by February. the most recent Short-term Energy Outlook from EIA predicts 2018 U.S. crude oil production will rise 1.0 million barrels per day from 2017's average to 10.3 million barrels per day.

Whether that is enough to pressure futures remains to be seen and as long as OPEC producers continue to comply with the organizations production restraints, the crude market should at least level-off. Despite recent draw-downs in U.S. crude stockpiles, futures may be set for a near-term pullback as the market is currently severely overbought. Traders will likely take profits on the first sign that production is exceeding expectations.

As far as farm diesel prices go, weather forecasters are calling for another cold wave to hit the northeast where heating oil is en vogue as a home heating fuel. That will keep a floor under farm diesel prices for the time being and will delay mid-winter downside potential until the weather warms up. There is risk, however, that crude oil could be trading in the 70's by spring, which would give farm diesel license to post a higher spring price tag.

As we await a crude oil price dip based on the technicals in the market, we continue to wait for opportunities to book diesel for spring.


  • Distillate inventories reported by EIA firmed 4.3 million barrels to 143.1 mmbbl. Stocks are currently 27.0 mmbbl below the same time last year.
  • The regionwide low currently lies at $2.10 in Ohio. The Midwest high is at $2.76 in Illinois.
Farm Diesel 1/11/18
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$2.28
$2.24
+7 cents
$2.31
Iowa
Illinois
$2.76
$2.76
Unchanged
$2.76
Illinois
Indiana
$2.35
$2.45
Unchanged
$2.45
Indiana
Ohio
$2.30
$2.10
Unchanged
$2.10
Ohio
Michigan
$2.41
$2.23
Unchanged
$2.23
Michigan
Wisconsin
$2.19
$2.19
Unchanged
$2.19
Wisconsin
Minnesota
$2.40
$2.31
+1 cent
$2.32
Minnesota
North Dakota
$2.37
$2.39
+6 cents
$2.45
North Dakota
South Dakota
$2.14
 
$2.35
 
Unchanged
 
$2.35
 
South Dakota
Nebraska
$2.19
$2.25
-2 cents
$2.23
Nebraska
Kansas
$2.19
$2.23
+12 cents
$2.35
Kansas
Missouri
$2.26
$2.19
+52 cents
$2.71
Missouri
Midwest Average
$2.33
$2.31
+6 cents
$2.37
Midwest Average

Propane -- Missouri led propane to the upside as well gaining 34 cents per gallon as propaneMinnesota firmed 22 cents per gallon. Eight states were unchanged as Nebraska and Iowa each fell a nickel per gallon.

It doesn't take a rocket scientist to understand why propane prices have firmed. Cold weather always has that effect on the propane market and, since we booked LP for winter back in September, there really isn't much for us to do except to keep tanks from running out at 2 am on a Saturday night. .

Longer term, we expect propane prices to soften, but the days of sub-$1 LP are likely behind us, at least for awhile. Export demand is just too strong for prices to face any significant pressure. We do expect the seasonality of propane prices to remain intact, meaning we will look to late summer, when propane exhausts itself to the downside, to book for winter 2018-19.

In the meantime, keep an eye on your on farm-supply.


  • According to EIA, national propane inventories fell 6.294 million barrels -- now 17.977 million barrels below the same time last year at 61.682 million barrels.
  • The regionwide low is at $1.20 per gallon in Wisconsin, and the regionwide high is in Missouri at $1.82.
LP 1/11/18
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.35
$1.49
-5 cents
$1.44
Iowa
Illinois
$1.69
$1.69
Unchanged
$1.69
Illinois
Indiana
$1.49
$1.49
Unchanged
$1.49
Indiana
Ohio
$1.30
$1.35
Unchanged
$1.35
Ohio
Michigan
$1.53
$1.56
Unchanged
$1.56
Michigan
Wisconsin
$1.20
$1.20
Unchanged
$1.20
Wisconsin
Minnesota
$1.46
$1.40
+22 cents
$1.62
Minnesota
North Dakota
$1.21
$1.34
Unchanged
$1.34
North Dakota
South Dakota
Not Reported
 
Not Reported
 
Unchanged
 
Not Reported
 
South Dakota
Nebraska
$1.43
$1.40
-5 cents
$1.35
Nebraska
Kansas
$1.78
$1.78
Unchanged
$1.78
Kansas
Missouri
$1.35
$1.48
+34 cents
$1.82
Missouri
Midwest Average
$1.43
$1.47
+4 cents
$1.51
Midwest Average

farm diesel spread

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