Diesel Dips 0.9¢ to $2.951 a Gallon
This story appears in the Oct. 4 print edition of Transport Topics.
The national average price for retail diesel dipped 0.9 cent a gallon to $2.951 last week, and gasoline dropped 2.9 cents to $2.694 a gallon, the Department of Energy reported.
Meanwhile, petroleum inventories declined from very high levels because of scheduled refinery maintenance, leading crude oil to rise to the highest close in more than seven weeks on the New York Mercantile Exchange. However, oil analysts differed on whether the change was momentary or the start of a new round of increases. Crude closed at $79.97 a barrel on Sept. 30.
“Diesel prices have been pretty strong, which is a bit surprising, considering the inventory levels and sluggish demand,” said Andrew Reed, Atlantic diesel analyst for Energy Security Analysis Inc., Wakefield, Mass. “There’s nothing too bullish going on to support diesel prices in the U.S.”
Diesel has fluctuated between $2.89 and $3 a gallon since mid-June but has not established a clear pattern. In the past 16 weeks, the average has moved up six times and down 10 times. A year ago, the diesel average was $2.601.
“The fluctuation hasn’t been there in the last two months,” said Paul Wicklund, vice president of operations for two Alabama truckload carriers, White Oak Transportation and Alabama Food Services. He said prices are fairly stable now and a reprieve from the 2007-09 boom and blowout in diesel and oil prices that made fleet management perilous.
With 237 tractors to manage, Wicklund said he still must follow markets and try to chisel away at consumption rates.
“I follow crude oil, the Dow and diesel and heating oil prices,” he said. White Oak managers are investigating purchases of low-rolling-resistance tires and auxiliary power units.
Wicklund also said he monitors fuel mileage through his PeopleNet in-cab communications units and shops carefully for fuel among several vendors.
If a tractor’s mileage falls by an unexplained 0.75 mpg, Wicklund said the vehicle goes to the shop for a checkup. He said the company also uses the Pathway Network to optimize its fuel purchases.
Similar to diesel, gasoline has not moved in a clear direction since May 31. Over the past 18 weeks, it has moved up eight times and down 10, and one week was a push. A year ago, the gas average was $2.499.
The U.S. stock of ultra-low-sulfur distillate fell by 2 million barrels to 108.1 million on Sept. 24, but the record high inventory of 110.5 million was set just two weeks earlier. In contrast, ESAI’s Reed observed, the ULS distillate inventory level was 99.9 million barrels a year ago and 68.27 million two years ago.
DOE’s Energy Information Administration said refinery usage for the week ended Sept. 24 was 85.8%, down from 87.8% the week before and from 90% on Aug. 13.
U.S. crude oil stocks dipped 0.1% to 357.9 million barrels on Sept. 24, and the gasoline inventory dropped 1.5% to 222.6 million barrels.
Bloomberg News reported conflicting views on the oil market.
“The refinery maintenance season is doing what it’s supposed to do,” Edward Morse, head of commodities research at Credit Suisse Group in New York, told the wire service when asked about the traditional fall maintenance season.
The same story also reported an argument that demand for oil is rising.
“Not only are things looking better in the U.S., but we’re also seeing emerging markets such as China continue to heat up,” Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Fla., told Bloomberg. “This is a bullish force in the market.”
Total petroleum supplies fell the most since March, and gasoline demand increased by the largest amount since February. A Chinese purchasing managers’ index showed manufacturing accelerated for a second month in the world’s fastest-growing oil-consuming country, Bloomberg said.
ESAI’s Reed disagreed with the bullish sentiment. He said most recent changes in global diesel consumption have been based on seasonality, with Europe increasing its refined distillate imports from the United States because of the approach of winter.
Reed said South America’s use of distillate is on the decline, not from a bad economy but because summer is now approaching there.
“The impact of economic recovery is limited,” Reed said. “This is more seasonal for distillate. As for crude, there’s probably more downside potential in the market rather than upside.”
