Petroleum Report: Winter Turns Up the Heat on WTI Crude

February 20, 2014 09:45 AM
 

 clj14

WTI crude oil rallied above $100.00 this week despite a slight uptick in national inventories. The increases are uncharacteristically related to weather. Generally, crude prices are less impacted by weather than other petroleum products like propane or distillate fuels, but traders believe domestic demand for refined crude products will remain high as lagging stocks rebuild.

Those refined crude products include farm diesel. Meanwhile, March '14 heating oil futures are up eleven cents from Tuesday's Farm Fuels In Focus report at $3.18.

hoh14

Adding to the increase in WTI prices is the completion of pipeline infrastructure between Cushing, Oklahoma and the Gulf Coast export region and as many had speculated, WTI prices are reaching toward global benchmark returns, and indeed the average Brent/WTI spread has narrowed dramatically in the last year.

To the good, national gasoline inventories are high, but Midwestern regional stocks are the lowest nationwide.

According to EIA, "Gasoline inventory levels are high in all Petroleum Administration for Defense Districts (PADDs), with the exception of PADD 2 (Midwest). In the Midwest, gasoline inventories are below five-year average levels. Midwest gasoline inventories were 0.7 million bbl above the five-year average level on January 10, dropped to 1.8 million below on January 31, and built during past two weeks but are still 1.3 million bbl below the average level. Trade press reports indicate that Midwest refiners were hit hard by cold weather in mid-January, leading to brief periods of reduced refinery runs. PADD 2 gross refinery inputs fell from 3.6 million bbl/d during the final full week of December to 3.3 million bbl/d for the week ending January 17, before rebounding above late-December levels in recent weeks."

This looks very much like a 'risk-on' market. We have advised to fill up to 50% of your spring farm diesel needs by now. Crude oil is higher, heating oil is higher, distillate supplies are very low and WTI can now sport a global price tag. Between the weather premium and global benchmark pricing coaxing WTI higher, Midwestern fuels appear to be headed higher before lower.

Crude Oil -- crstuss

April 2014 WTI crude oil opened this morning at $102.89 -- $2.43 above the same time last week. Today the contract tested resistance at $103.04 fell slightly from there to close at $102.83. Next support is at$98.59 and $96.91 on its way back below $95.00.

U.S. crude inventories gained 1.0 million barrels to 362.3 million barrels -- now 14.1 million barrels below year-ago.

April 2014 Brent crude oil futures opened today at $110.07 and took the long way to close at $110.43 Next support remains at $108.00. A move below those levels would suggest downside potential below $106.00. Tough resistance lies at $111.25.

The WTI/Brent crude spread narrowed $1.19 on the week to $7.18 at the open, with Brent at a premium.

Home Heat --

  • Residential heating oil 2 cents lower on the week to $4.23/gallon.
  • Wholesale heating oil nearly a nickel lower on the week at $3.40/gallon.
  • Residential propane softened another 13 cents to $3.64/gallon.
  • Wholesale propane 43 cents lower to $2.18/gallon.

 

Highway Fuels --

Gasoline & highway diesel firm.

"The U.S. average retail price of regular gasoline increased seven cents to $3.38 per gallon as of February 17, 2014, 37 cents lower than last year at this time. Prices increased in all regions of the nation, with the Rocky Mountain price increasing the most to $3.24 per gallon, 10 cents higher than last week. The Gulf Coast price gained nine cents to $3.18 per gallon and the Midwest price was up eight cents to $3.36 per gallon. The East and West Coast prices increased six cents, to $3.41 per gallon and $3.57 per gallon, respectively," according to EIA.

"The national average diesel fuel price was up one cent to $3.99 per gallon, 17 cents lower than last year at this time. Prices increased in all regions of the nation except the Gulf Coast, where the price dropped a penny to $3.78 per gallon. The largest increase was in the Rocky Mountains, where the price gained four cents to $3.91 per gallon. The Midwest price was $3.99 per gallon, up two cents from last week, and the East Coast price increased a penny to $4.13 per gallon. The West Coast price was up less than one cent to remain at $4.00 per gallon," according to EIA.

Look for information and statistics on LP and Farm Diesel in our weekly 'Farm Fuels in Focus' report.


Crude stocks graph and indicated text provided by EIA.

 

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