Distillate stocks in the United States have fallen, and remained, well below the five-year average. This has been the case for the
entirety of 2022. According to eia.gov, Midwestern distillate stocks as of the report week ended September 2 were 14.3% below the same time last year. On the East Coast, however, stocks have fallen to 30.6% below the same time last year with New England stocks off a dismal 57.3% on the year.
Distillate stocks have not been this low since 1996 according to EIA, which does not bode well for harvest prices and supplies. According to a Reuters report, “The seasonal accumulation of distillate inventories since the end of June has been one of the smallest in the last 30 years, pointing to a persistent underlying shortage.”
A combination of factors around the globe have led to aggressive U.S. exports of distillates and, while domestic consumption has been running around 200,000 barrels per day below pre-pandemic levels, export demand has offset summer refill production.
This as winter in New England, where #2 diesel is still popular as a home heating fuel, looms on the horizon, and harvest in the Midwest is set to begin. According to USDA data farm diesel has already bounce from the offseason lows, up from the late July low of $4.27 per gallon to the most recent Iowa/Illinois average quote at $4.41 per gallon.
Last year at this time, prices were on the rise and while the
typical late December low did arrive, the general trend for this year’s prices has been to run between $1.50 and $2.00 higher along similar seasonal price paths.
Our expectation, given supply constraints, is for farm diesel prices to remain around $2.00 higher than last year for the remainder of 2022 and into 2023. But there is significant risk that #2 diesel will cross over the $5.00 mark before harvest is complete.