Securing Diesel Supplies
From the Ag Information Network, I’m Bob Larson. As work on the farm continues, global inventories of diesel fuel remain tight, thanks to the Strait of Hormuz being essentially closed as the war with Iran continues.
Dave Chatterton of Strategic Farm Marketing has been tracking the flow of oil …
CHATTERTON … “We’re having trouble, I guess, quantifying how much oil is actually coming out of the Strait of Hormuz or the Red Sea region - call it the Middle East, in general - and we’ve seen an adaptation by the UAE and in Saudi and some of the other oil producers to use what we call a dark fleet to get oil out. In other words, they turn their transponders off, they’re not officially recognized as ships that are navigating with oil, and they’re smaller ships typically that are pulling cargoes back out into the open sea, either past Oman or past Iran to the South, and then loading them onto larger ocean-going vessels.”
While more oil may be moving than is officially recorded, data shows a 2.4 million barrel per day drawdown in global oil stocks.
That is the largest drop in over a decade and puts global distillate stocks at a three-decade low heading into the fall.
Chatterton is telling farmers to lock in their needs as the opportunities arise …
CHATTERTON … “When we look at cash basis for ULSD or for farm diesel, cash basis is relatively normal or even a little bit weak for this time of year, and that tells us that, you know, right now it’s the futures market that’s doing the pulling, if you will. I suspect that that basis market can heat up as we get into a little bit more of a demand period and start to have a little bit bigger pull on
the system.”
Chatterton says producers without on-farm storage or forward contracts are largely at the mercy of the market and it’s critical they secure inventory.
