Diesel Price Falls 5.4¢ to $4.444 a Gallon
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The national average diesel price dropped by 5.4 cents a gallon over the past week to reach $4.444 a gallon, according to data released Oct. 16 by the Energy Information Administration.
Diesel had been steadily climbing through Sept. 18, but has now dropped in three of the past four weeks.
Every region of the country saw a decrease in the most recent week, from a drop of 2 cents in New England to the biggest decline of 8.3 cents in West Coast less California.
Diesel is now 89.5 cents a gallon cheaper than a year ago.
The spread across the U.S. is more than $2, as the average price is $4.114 in the Gulf Coast but $6.119 in California.
Kloza
Diesel prices have been pegged back some, analysts say, providing a little relief for carriers, especially those relying more heavily on the spot freight market. But that regression is set to be temporary.
“I think the diesel market is in limbo. Because diesel fetches a very high gross margin for refiners, it may occasionally be subject to some price drops in October and November,” Oil Price Information Service founder and energy analyst Tom Kloza said to Transport Topics in an email Oct. 17.
“But I believe that diesel is like a coiled spring ahead of the real winter months of December, January and February,” Kloza said.
“The U.S. is currently in the middle of a very ambitious refinery maintenance schedule. We are only manufacturing about 4.7 million b/d of distillate, which includes diesel and heating oil. I would be much more confident about the upcoming winter if that number were in excess of 5 million b/d,” added Kloza.
De Haan
Patrick De Haan, head of petroleum analysis for GasBuddy, agrees with Kloza.
“We’ll likely see additional downdrafts for diesel this week, but there are clouds that could form on the horizon still before winter,” De Haan wrote Oct 15 on X, the social media network formerly known as Twitter.
EIA gave an indication of where those winter numbers may fall in the agency’s latest monthly Short-Term Energy Outlook, released Oct. 11.
EIA expects retail diesel prices to average $4.57 a gallon in the fourth quarter of 2023, down 2.3% compared with its own September expectations. An average price of $4.57 would be just shy of the recent on-highway nationwide peak of $4.633 in the week ending Sept. 18.
Retail diesel prices are then predicted to average $4.42 a gallon in the first three months of 2024, a 1.5% increase compared with the federal agency’s expectations a month earlier.
U.S. average retail prices for October 16, 2023:
Regular grade #gasoline: $3.58/gallon
On-highway #diesel: $4.44/gallon #gasprices https://t.co/dsfxiPA8Wj — EIA (@EIAgov) October 16, 2023
EIA currently expects retail diesel prices to average $4.29 a gallon in 2024, a 5.3% increase compared with the agency’s September forecast.
Geopolitical volatility underpins support for energy markets, including diesel, in the coming months, observers say. And even before the latest escalation in tensions, crude prices were expected to surge.
“A sharp escalation in geopolitical risk in the Middle East, a region accounting for more than one-third of the world’s seaborne oil trade, has markets on edge,” the International Energy Agency said Oct. 16, citing Hamas and Hezbollah attacks on Israel. “While there has been no direct impact on physical supply, markets will remain on tenterhooks as the crisis unfolds.”
“Although the recent attacks on Israel have not affected physical oil markets, they raise the potential for oil supply disruptions and higher oil prices,” concurred EIA, while noting the attacks took place after it ran its models for the latest STEO.
On-Highway Diesel Fuel Prices
Source: EIA.gov
EIA’s Q4 WTI spot price forecast was cut to $86.65 per barrel from $87.68 a barrel in those predictions, a month-on-month decrease of 1.2%, but the agency raised its Q1 and second-quarter 2024 forecasts by 5.4% and 10.8% to $90.64 a barrel and $92 per barrel, respectively.
“We forecast crude oil prices will rise in the coming months, reflecting our expectations of tightening balances in global oil markets. The Brent crude oil price averaged $94/b in September, $8/b higher than in August and $19/b higher than in June,” EIA said.
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OPIS’ Kloza said diesel prices will follow.
“I could be wrong. But watch ULSD futures from around mid-November through the first quarter of 2024. If there is an epic rally in oil, it may occur for diesel,” he told TT.
Another factor to keep an eye on was diesel’s relationship with gasoline, said Kloza.
“I think that diesel may fetch prices of $1-$3/gal over the price of gasoline this winter,” he said. “The OPEC+ crude cuts removed lots of medium and sour crude that yields plenty of distillate. Refiners (and consumers) may find that there is a higher-than-normal supply of gasoline inventory and a precariously low inventory of diesel.”
On-highway gasoline had an even more pronounced fall than diesel in the most recent week, shedding 10.8 cents to reach a national average of $3.576 a gallon.
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