Diesel Drops 2.4¢ to $2.211; Oil Inventories Hit New Peak

The U.S. average retail diesel price fell for the eighth consecutive week, dropping 2.4 cents a gallon to $2.211, as oil inventories stood at the highest point in nearly a century, the Department of Energy reported Jan. 4.

Trucking’s main fuel was 92.6 cents a gallon cheaper than the comparable period a year ago, when it was $3.137, DOE’s Energy Information Administration said.

The price of diesel fell across the country. It was down most in the Rocky Mountain region, dropping 3.6 cents to $2.191; and it fell the least in California, slipping 1.4 cents to $2.595.

Diesel’s lowest price was along the Gulf Coast, down 2.6 cents to $2.114.

The Gulf Coast region is home to the “largest global refining center on the planet,” Denton Cinquegrana, an analyst with the Oil Price Information Service, told Transport Topics.

“Obviously, there is a lot of product pumping out of there. That’s going to make prices lower. Whether it’s gasoline or diesel, the Gulf Coast is going to be some of the cheapest fuel prices to begin with,” Cinquegrana said. “The new phenomenon is not that prices are low, it’s that the prices are as low as they are.”

The national average of $2.211 is the lowest price for diesel since May 4, 2009, when it was $2.192.

Cinquegrana had one word for where he believes diesel prices are headed: “Down,” he said, adding that they could even be in the unusual position of falling below gasoline prices in the spring, when demand for gas rises.

He pointed out that new overseas refineries are focused on making even more diesel. “There is a lot of diesel out there,” he said.

Meanwhile, the national average price of gasoline last week fell six-tenths of a cent to $2.028 a gallon, EIA said.

It was the seventh time in the past eight weeks that gasoline prices have fallen, leaving the fuel 18.6 cents cheaper than a year ago when the cost was $2.214.

“Some colder weather recently in the U.S. weather forecasts is keeping prices from falling farther,” said Stephen Sly, president of risk-management company Stabilitas Energy Inc.

Crude oil futures closed on the New York Mercantile Exchange at $36.76 a barrel Jan. 4, down 5 cents from its close Dec. 28.

With sustained, high crude oil production from countries such as Saudi Arabia, Iraq, the United States and Russia, global fuel inventories rose significantly in 2015, resulting in prices falling to 11-year lows in December.

U.S. inventories stood at 482.3 million barrels and “remain near levels not seen for this time of year in at least the last 80 years,” EIA said in a report for the week ending Jan. 1.

It said distillate fuel inventories, including diesel, increased by 6.3 million barrels last week, climbing to 135.7 million barrels, and are near the upper limit of the average range for this time of year.

A year ago at this time, the ultra-low-sulfur diesel inventory was 124.5 million barrels.

Reviewing 2015, the widely followed S&P Goldman Sachs Commodity Index reported the energy component of the index fell 41% from the start of the year, a larger decline than the industrial metals, grains and precious metals components, which declined 24%, 19% and 11%, respectively, in 2015.

Ultra-low-sulfur diesel and gasoil had the largest price declines of the energy commodities as U.S. and global inventories rose for those fuels in 2015 amid lower economic growth in emerging markets, according to the index.

In contrast, reformulated gasoline had the lowest price decline of all energy commodities because of increased gasoline consumption in the United States and in other countries, the index found.

The latest EIA weekly report also found refineries were slightly busier last week, operating at 92.5% of capacity, up from 91.3% the previous week.

It said distillate fuel production increased last week, averaging 5 million barrels per day. Gasoline production decreased, averaging about 8.8 million barrels per day.

The report also said the use of distillate fuels fell to 3.5 million barrels a day for the week ended Jan. 1. The week before, it was 3.6 million barrels, and a year ago, it was 3.9 million.