World Leaders Talk Crude as Diesel Falls

Posted on 04/03/2020 11:57 AM

 

The big news late this week was a conversation surrounding the current oil production war. U.S. shale operations are beginning to suffer the financial impacts and President Trump has reached out to the Saudi regime and Russian President Putin who were reportedly open to discussing managing oil output. It is too son to tell if production cuts will be enacted.

OPEC+ will meet on Monday and has said it will cut production as long as other G20 member nations follow suit. Closer to home, wheels are beginning to turn in farm country. The upcoming demand push will keep a floor under farm diesel, but given recent declines in heating oil futures and crude the downside may still be open for a short while longer.

As far as the oil market adjustments being thrown around, there are too many farm diesel price chartfactors in play right now to be sure what will impact the markets significantly. Crude oil futures initially responded sharply higher at the news world leaders were kicking around some supply side management policies. As for the impact of diesel prices on your farm, I would remind of the lag between futures and retail markets and with any luck, heating oil futures will telegraph upcoming moves in time for us to take action.

For now, stay hand-to-mouth on farm diesel.

Farm Diesel --

  • Our regional average farm diesel price fell 9 cents this week.
  • Michigan led declines falling 62 cents, Wisconsin softened 55 cents as Minnesota fell 9 cents per gallon.
  • North Dakota firmed 24 cents. No other state posted a higher price this week with most other states unchanged.
  • As of the close on Thursday, May heating oil futures fell 7 cents on the week. May WTI crude oil futures firmed $3.81 from the previous Friday's close.
  • Our heating oil futures/farm diesel spread analysis still indicates downside potential for retail farm diesel although the spread has begun to narrow as diesel prices fall (see chart at bottom).
  • According to EIA, in the week ended March 27, national distillate stocks fell 2.2 million barrels to a level 5.9 million barrels below the propane price chartsame week last year. Stocks are running outside the bottom end of the five-year average supply range.

Propane --

  • Our regional average propane price fell a penny per gallon this week and is in lock-step with the year-ago price.
  • Michigan led declines falling 18 cents as Wisconsin softened 7 cents. Meanwhile, North Dakota firmed 9 cents and Minnesota added 3 cents per gallon.
  • According to EIA, national propane stocks softened 251,000 barrels to a level 11.473 above the same time last year.

Fuel
3/16/20
3/21/20
Week-over Change
Current Week
Fuel
Farm Diesel
$2.31
$2.27
-9 cents
$2.18
Farm Diesel
LP
$1.51
$1.47
-1 cent
$1.46
LP

farm diesel heating oil futures spread

 

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