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Crude Oil Plunge Signals Fuel-Buying Opportunity

Farmers have chance to lock in prices for spring.

Bryce Knorr 1

January 8, 2009

1 Min Read

After a sharp rally over the holidays thanks to rising international tensions, energy prices fell sharply on Wednesday following a bearish inventory report. While more weakness could be ahead for the market, thanks to the global economic slowdown, the break in prices represents a buying opportunity for farmers to lock in spring diesel needs.

Wholesale prices at the Gulf jumped almost 40 cents a gallon on the Christmas/New Year's rally, suggesting that even a pullback now is likely to leave prices higher once supplies get to the Midwest. Seasonal demand for diesel remains slow — supplies of low-sulfur fuel increased by 4.1 million barrels in the latest week -- but that typically changes in January as farmers start to buy spring supplies. Agricultural demand is usually the swing factor that drives basis between diesel and heating oil futures.

Energy prices enjoyed a two-week rally, driven by three factors. To read Bryce Knorr's complete weekly energy review, click HERE.

About the Author(s)

Bryce Knorr 1

Senior Market Analyst, Farm Futures

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