Distillate Stocks Surge on Lagging Air Travel

Posted on 07/10/2020 8:18 AM

 

Farm Diesel --

  • Our regional average farm diesel price per gallon firmed a nickel on the week.farm diesel price chart
  • Missouri and Illinois led gains, each firming 31 cents per gallon. Iowa firmed 6 cents per gallon as Wisconsin dropped 11 cents and Michigan fell a penny. All other states were unchanged.
  • August heating oil futures closed Thursday, July 9 at $1.21, down 2 cents on the week.
  • According to EIA, national distillate stocks firmed 3.1 million barrels in the week ended July 3. Stocks are now 46.7 million barrels above the same time last year.
  • Front-month WTI crude oil futures closed at $39.90 on Thursday, July 9, down 75 cents on the week.

Distillate stocks posted a surprising build in the most recent EIA report week. This as the coronavirusdistillate stocks chart EIA continues to wreak havoc on fuels demand, most notably jet fuel. Thursday's 'First Thing Today' from Pro Farmer reported United Airlines has sent a letter to staff members saying they expect to make significant workforce cuts. Federal aid funding will run out in September, and the company said in the letter the airline, "simply cannot continue at our current payroll level." United expects it may have to cut around 45% of its workforce.

Last week American Airlines said they currently have roughly 20,000 more employees they need. Demand for air travel has been very slow to recover and some executives from the industry expect the demand slump to continue for years. Recall Phil Flynn's comments last month on AgriTalk. When asked what was driving the then sharp increase in distillate stocks, Flynn cited dismal demand for jet fuel as air travel skidded to a halt and airliners were parked.

The economy is trying to reopen, but large population centers are closing back up and putting restrictions on dining establishments, bars and other attractions. Not to mention the general climate of concern for traveling in close proximity to strangers, like on an airplane. To some degree, mask requirements are also contributing to the public's unwillingness to travel by air. There are those who prefer not to wear masks, which most major airlines are requiring for flight, and they have chosen simply not to fly.

For whatever reason people have chosen not to travel, be it restrictions imposed or assumed, the fact is, the airline industry continues to suffer, and a certain number of planes are still parked. If a surplus of jet fuel spurred the initial leg up in distillate stocks a few weeks ago, the current sputtering restart to air travel is likely behind this week's aggressive build in stocks.

It took awhile for a decline in distillate demand to reach retail farm diesel prices. We believe we booked our propane price chartsummer and fall supplies in full at the market's bottom a few weeks ago. But if air travel continues to suffer, retail farm diesel prices may decline in kind and give us an opportunity to lock in some needs for spring 2021.

Propane --

  • Our regional average propane price is unchanged this week at $1.09.
  • North Dakota and Illinois each decline a dime per gallon while Wisconsin firmed 10 cents and Iowa gained 3 cents.
  • According to EIA, during the report week national propane stocks firmed 2.224 million barrels, now 4.535 million barrels above the same time last year.

Fuel
6/22/20
6/29/20
Week-over Change
Current Week
Fuel
Farm Diesel
$1.47
$1.47
+5 cents
$1.52
Farm Diesel
LP
$1.13
$1.09
Unchanged
$1.09
LP

farm diesel heating oil futures spread

 

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