Diesel Stays at 5-Month High
This story appears in the Sept. 16 print edition of Transport Topics.
The U.S. retail diesel price average was unchanged at $3.981 a gallon last week, holding steady at a five-month high, while regular gasoline dipped 2.1 cents to $3.587, the Department of Energy reported.
The flat diesel reading followed a cumulative gain of 8.5 cents over three straight increases, including the previous week’s 6.8-cent jump, DOE said after its Sept. 9 survey of fueling stations.
It was the first unchanged reading since Nov. 1, 2010. Trucking’s main fuel is 15.1 cents below the corresponding week of last year, while gas is 26 cents below a year ago.
Diesel had risen in seven of the past nine weeks, leaving it 16.4 cents higher than it was in early July. The past two weeks’ prices were the highest since April 1.
Gasoline has dropped about a dime since mid-July, when it was at its highest level since March, declining in five of the past seven weeks.
Oil prices began to ease last week, settling below $108 a barrel following President Obama’s Sept. 10 speech, in which he said he would hold off on U.S. plans for a military strike on Syria.
Crude futures closed Sept. 12 at $108.60 a barrel on the New York Mercantile Exchange, compared with $110.53 a barrel Sept. 6, which had been the highest Nymex closing price since May 2011.
“There are two seasons [for fuel] — we’re coming off driving season and heading into heating-oil season,” said Roger McKnight, senior petroleum analyst with Ontario-based En-Pro International.
McKnight said refineries routinely begin making changes to produce more distillates at this time of year.
Distillate inventories — which include diesel and heating oil — rose by 2.6 million barrels for the week ended Sept. 6, DOE said. Oil stockpiles slipped 220,000 barrels, while gasoline inventories rose 1.7 million barrels.
DOE also noted that domestic oil production increased to 7.75 million barrels a day, the highest level since May 1989, DOE reported.
McKnight told Transport Topics that diesel prices in the eastern United States are more affected by globally traded Brent crude oil futures, which rose in late August to a six-month high of more than $116 a barrel when the situation with Syria began to gain attention.
“The reason diesel consumers east of the Ohio Valley should watch Brent crude is that refineries import Brent crude, as it is light and sweet,” McKnight said. “Eastern refineries cannot process heavy sour crude, which the Midwest refiners can.”
Brent futures finished trading at just over $111 a barrel Sept. 11 following Obama’s speech, Bloomberg News reported.
While Syria does not produce much oil, Middle Eastern OPEC suppliers such as Libya — whose output is down about 90% to about 200,000 barrels a day — have more of an effect on the global Brent crude market, McKnight said.
“I find it rather frustrating that the transportation industry has to look at events happening 4,000 miles away to see what the price will be in, say, Kansas,” McKnight told TT.
Separately, DOE said in its monthly short-term energy outlook released Sept. 10 that diesel will top $4 in the coming weeks and average over that level both this month and in October.
For the year, diesel will average $3.96 — up from its previous $3.92 forecast — and will remain over $3.90 in the fourth quarter. It will average $3.82 a gallon in 2014, which is 6 cents above DOE’s previous forecast.
DOE boosted its 2013 crude oil forecast by almost $2 from last month’s outlook, to $98.59 a barrel. Oil will average $96.21 next year, about $3 higher than last month’s report.
Gasoline, which averaged $3.59 in the first half of the year, will average $3.60 in the third quarter and $3.44 in the fourth quarter. Gas, which averaged $3.63 a gallon last year, will average $3.43 next year, DOE said.
