Farm Fuels In Focus | Crude Production Surges, Diesel Falls

Posted on 03/09/2018 1:24 PM

 

  • April 2018 natural gas opened today at $2.74, up 5 cents from our last report.
  • Farm Diesel is a penny lower on the week at an average of $2.36 per gallon.
  • April 2018 WTI crude oil opened the day at $60.24, down $1.07 from our last report.
  • April 2018 Heating oil futures opened the day at $1.86, down 2 cents from our last report.
  • Propane is 1 cent higher at $1.47 per gallon regionally.

Farm Diesel -- Diesel was led lower by South Dakota, which fell 8 cents per gallon as North Dakota and Iowa each dropped 7 cents. Six states were unchanged as Nebraska gained a dime and Kansas firmed a nickel.

This week, EIA raised its U.S. crude oil production forecast for 2018. After February's sharp rise from dieselJanuary's production peg, EIA now has forecast U.S. crude production to average 10.7 million barrels per day, eclipsing the prior record of 9.9 million barrels per day in 1970. View our post which includes highlights from EIA's Short-term Energy Outlook here.

Industry watchers believe that would put OPEC in a tough spot. Those same industry watchers attribute the recent rise in crude oil futures to world demand rather than to OPEC's production caps. If the truth of the current oil market rally is that it is demand based, that places the sustainability of price points above $60 per barrel squarely on the shoulders of the condition of the world economy.

With so much uncertainty regarding matters of U.S. and global trade, crude oil is in a tenuous spot. Shale producers are penciling their books in the context of $40 crude as OPEC members eye $70 per barrel. As long as world demand for crude and fuels remains strong, a fall below $55 seems unlikely. But should demand in the E.U. or Asian markets slip, prices will fall.

Fund managers are decidedly long with the ratio of long to short positions around 14:1 in favor of longs. Bulls have trimmed their bets since January, but there has been no meaningful selloff as of yet. Crude oil traders are notorious headline chasers, and news of a softening economy could pull the rug out quickly and have longs running for the exits. But Trump's trade antics are likely to add support until the lasting effects of tariffs on steel and aluminum are fully measured.

For now, farm diesel prices are softer overall. We still have 50% of our spring supplies to book, but until diesel signals it wants to firm, we will wait.


  • Distillate inventories reported by EIA fell 0.6 million barrels to 137.4 mmbbl. Stocks are currently 24.1 mmbbl below the same time last year.
  • The regionwide low currently lies at $2.19 in Wisconsin. The Midwest high is at $2.54 in Indiana.
Farm Diesel 3/9/18
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$2.46
$2.46
-7 cents
$2.39
Iowa
Illinois
$2.31
$2.31
Unchanged
$2.31
Illinois
Indiana
$2.59
$2.54
Unchanged
$2.54
Indiana
Ohio
$2.23
$2.23
Unchanged
$2.23
Ohio
Michigan
$2.35
$2.38
Unchanged
$2.38
Michigan
Wisconsin
$2.19
$2.19
Unchanged
$2.19
Wisconsin
Minnesota
$2.39
$2.33
-2 cents
$2.31
Minnesota
North Dakota
$2.50
$2.50
-7 cents
$2.43
North Dakota
South Dakota
$2.40
 
$2.40
 
-8 cents
 
$2.32
 
South Dakota
Nebraska
$2.35
$2.35
+10 cents
$2.45
Nebraska
Kansas
$2.36
$2.30
+5 cents
$2.35
Kansas
Missouri
$2.47
$2.47
Unchanged
$2.47
Missouri
Midwest Average
$2.38
$2.37
-1 cent
$2.36
Midwest Average

Propane -- LP prices were more mixed this week. Gains were led by Nebraska which firmed 14 cents and propaneKansas, which gained 8 cents. Eight states were unchanged as North Dakota fell 11 cents and Iowa dropped 3 cents per gallon.

Propane exports in December, the most recent data published by EIA, were high again at 1 million barrels per day. With export infrastructure up and running and world demand high, propane prices will continue to find solid footing at relatively higher prices. The propane game has changed, and U.S. prices are more tied to world crude and energies prices than they have been in several years.

We wrote this up with excerpt's from EIA's This Week in Petroleum earlier this week. Click here to read our thoughts, and to view EIA's report.

We maintain retail propane prices will remain above $1.00 per gallon and likely above $1.10 even through the upcoming offseason.


  • According to EIA, national propane inventories fell 1.625 million barrels -- now 4.138 million barrels below the same time last year at 41.088 million barrels.
  • The regionwide low is at $1.20 per gallon in Wisconsin, and the regionwide high is in Indiana at $2.09.
LP 3/9/18
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.39
$1.39
-3 cents
$1.36
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
Unchanged
$1.27
Michigan
Wisconsin
$1.20
$1.20
Unchanged
$1.20
Wisconsin
Minnesota
$1.58
$1.58
Unchanged
$1.58
Minnesota
North Dakota
$1.47
$1.47
-11 cents
$1.36
North Dakota
South Dakota
Not Reported
 
Not Reported
 
Unchanged
 
Not Reported
 
South Dakota
Nebraska
$1.30
$1.31
+14 cents
$1.45
Nebraska
Kansas
$1.32
$1.57
+8 cents
 
$1.65
Kansas
Missouri
$1.39
$1.39
Unchanged
 
$1.39
Missouri
Midwest Average
$1.44
$1.46
+1 cent
$1.47
Midwest Average

diesel heating oil spread

Add new comment