Chad Besch’s Energy Market News

Inventory reports this week showed increases in crude oil, gasoline and distillate stocks. Propane stocks built as well at a time they normally show a decline. Refinery utilization saw a decrease of 1.7% and is currently operating at 92.0%.

Looking at the calendar we are at the time of year we often times see diesel fuel and gasoline prices bottom out. While last year didn’t follow many historical averages at all we shouldn’t ignore them and assume this year won’t either. Typically we see demand for gasoline and diesel fuel quite low this time of year which leads to very low basis levels. Gasoline prices are also lower as the summertime formulations are not required, which makes gasoline cheaper to produce and production yields more product. Gasoline demand has been strong throughout the last year and most analysts believe that demand will only strengthen as we go through the year, which could be enough reason for traders to take the price higher.

Diesel fuel could become a follower if gasoline prices start to climb in December or as we get into the New Year. Again, other than last year we historically see prices rally sometime around this time of year through the spring months. With domestic oil production changing the game of world oil prices there are not too many analysts anticipating prices running away but a rally of 30-50% would not be out of line based on what we have seen in the past.

Filling tanks at the price levels we are seeing today appears to be a very low risk plan. Crude oil is hovering around $40 and seems to find good support any time it breaks below that. Prices of diesel fuel are over $1.00 below where they were last year. Nothing in this world is guaranteed but I think it’s a pretty safe bet that filling tanks at today’s level will turn out to be a good move.

Chad Besch
Energy Team Leader
MaxYield Cooperative
West Bend, IA 50597