Middle East Tensions Threaten to Flare Fuel Prices | Advice Updated

Posted on 01/03/2020 1:00 PM

 

We advise growers book 50% of expected spring farm diesel needs at current prices. A U.S. military drone strike has reportedly killed a key Iranian intelligence commander in Baghdad. The move comes after militant groups backed by Iran stormed the U.S. embassy in Baghdad earlier in the week. The commander headed the foreign legion of the Islamic Revolutionary Guard Corps for 20 years and his death is considered a major blow to Iran, marking a dramatic escalation in the Trump administration’s campaign against Iran. The State Department has urged Americans to leave Iraq as Iran has vowed, after three days of national mourning, to retaliate. That has U.S. officials preparing for cyber attacks and other acts of terrorism.

Crude oil and heating oil futures responded higher on Friday morning as grain and oilseed futures tanked. Readers know we keep a close eye on heating oil futures as an indication of near-term farm diesel price moves. As of noon Friday, Jan. 3, front-month heating oil futures were scaling back the roughly 9 cent gain posted in the morning fours of trade, but the contract will likely settle above key $2.00. That indicates a good measure of upside risk for farm diesel prices and so we advise you get out in front of the risk by covering 50% of your expected spring needs.farm diesel price chart

The annual "Santa Clause swoon" was a disappointment as regionally, farm diesel bucked the trend and ticked a few cents higher per gallon. With the introduction of confrontation with Iran in Iraq, our appetite for risk is exhausted.

Farm Diesel --

  • Our regional average farm diesel price is unchanged this week at an average of $2.44.
  • Most states are unchanged on the week with Michigan off 4 cents and Wisconsin down 2. Minnesota posted the only price gain on the week, up a penny per gallon to a state average of $2.44.
  • According to EIA, national distillate stocks softened 200,000 barrels in the week ended December 20. Now 5 million barrels above the same time last year but still in the very bottom end of the five-year average supply range.propane price chart
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Propane --

  • Our regional average propane price gained 2 cents on the week with no state posting a lower price.
  • Illinois led gains firming 11 cents as Michigan added 7 cents and Minnesota firmed 4 cents per gallon.
  • According to EIA, national propane stocks fell2.562 million barrels in the report week. Now 16.179 million barrels above the same time last year, at the top end of the five-year average range and following seasonal production trends closely.
  • It does appear the supply situation has righted itself, and at this point, the Midwest is well supplied.

Fuel
12/16/19
12/23/19
Week-over Change
Current Week
Fuel
Farm Diesel
$2.38
$2.44
Unchanged
$2.44
Farm Diesel
LP
$1.33
$1.33
+2 cents
$1.35
LP

 

 

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