Petroleum Report: Global Distillate Demand Reduces U.S. Stocks

December 4, 2013 08:33 AM

Resurgent strength in WTI crude has the crude chart looking a lot like the December 13 cornzczvsclf futures chart suggesting confidence in commodities is improving. That may bode well for corn prices and the current move higher by WTI may be a sign that traders are willing to play a heavily supplied commodity like new-crop corn and WTI crude oil.

Meanwhile strong export demand for distillate in South America has refiners running above historical levels. Distillate fuel demand growth is a hallmark of emerging societies and as more of the world's population enters the middle class, distillate demand for fuel and industrial uses has increased. This as distillate fuels for home heat fall out of favor in American homes. This has served to minimize distillate fuel volatility and encourage refinery runs.twip131204fig1 lg

However, the increased export demand has fewer barrels of distillate headed for storage as producers look to move product from Gulf Coast refineries straight to South and Central America. This could set off a supply crunch between distillate stocks sent to export and distillate refined into farm diesel, and could raise farm diesel prices, as current stocks are outside the bottom end of the five-year average and 1.5 million barrels behind the same time last year.

Crude Oil --

January 2014 WTI crude oil opened this morning at $96.90. Resistance lies at $98.68 and $103.34. A violation of those levels would make $105.00 bulls next target. Next support is at $92.06 and below that, $91.25. A violation of these levels would suggest downside potential to April 15's low at $85.61. crstuss

U.S. crude inventories fell 5.6 million barrels to 385.8 million barrels -- now 14.1 million barrels above year-ago.

January 2014 Brent crude oil futures opened today at $112.94 and tested resistance at $112.95 before falling to $11.78. Next support lies around $109.50 and $108.25. A move below those levels would suggest downside potential to $106.60. An violation of $12.95 would suggest upside potential to $114.00.

The WTI/Brent crude spread widened $1.34 on the week to $16.04 at the open, with Brent on top.

Home Heat --

  • Residential heating oil up 3 cents on the week to $3.92/gallon.
  • Wholesale heating oil unchanged on the week at $3.15/gallon.
  • Residential propane up 2 cents to $2.57/gallon.
  • Wholesale propane down 2 cents to $1.41/gallon.


Fuels --

Gasoline slightly lower -- Diesel fuels slightly higher.Picture2

The U.S. average retail price of regular gasoline decreased two cents to $3.27 per gallon as of December 2, 2013, 12 cents lower than last year at this time. Prices rose two cents on the West Coast to $3.48 per gallon, and less than a penny on the East Coast to remain at $3.39 per gallon, while falling in all other regions of the nation. The largest decrease came in the Midwest, where the price decreased seven cents to $3.12 per gallon. In the Rocky Mountains the price was $3.11 per gallon, a drop of three cents from last week, and the Gulf Coast price was two cents lower at $3.12 per gallon, according to EIA.

The national average diesel fuel price increased four cents to $3.88 per gallon, 14 cents lower than last year at this time. Prices increased in all regions of the nation, with the largest increase coming in the Midwest, where the price was up five cents to $3.88 per gallon. The East and West Coast prices both were up four cents, to $3.91 per gallon and $4.00 per gallon, respectively. On the Gulf Coast the price was $3.78 per gallon, a gain of three cents, and the Rocky Mountain price rose two cents to $3.86 per gallon, according to EIA.

Farm Diesel firmed 2 cents on the week, currently at $3.395. This week's lowest farm diesel was reported in the state of Wisconsin at $3.26/gallon with the high mark in North Dakota at $3.54. We mentioned this week that urea 'put in a hook' meaning prices moved higher. Given the strong export demand discussed above, the onset of winter and low national distillate stocks we may look to cover some farm diesel for spring in the coming days. Watch for an alert from your Inputs Monitor.

Propane --

U.S. propane stocks fell by 2.7 million barrels to end at 54.3 million barrels last week, 18.2 million barrels (25.1%) lower than a year ago. Gulf Coast regional inventories dropped by 2.2 million barrels, and Midwest inventories decreased by 0.4 million barrels. East Coast and Rocky Mountain/West Coast inventories remained unchanged from the previous week.

Propylene non-fuel-use inventories represented 5.5% of total propane inventories, according todisstuss EIA.

LP moved 3 3/4 cents higher in this week's Inputs Monitor Index to $1.749. The lowest priced LP in our index is in Nebraska at $1.58 while the high mark is at $2.11 in Michigan.

Distillate --

The national distillate supply added 2.6 million barrels to 113.5 -- 1.5 million barrels below year-ago.


Graphs and indicated text provided by EIA.


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