Diesel prices have dropped for the sixth week in a row and the sixteenth time in the past 17 weeks.
The Energy Information Administration set the industry standard price at $3.855 a gallon on Tuesday. It’s 2.8 cents lower than last week. The weekly average retail price of diesel peaked at $5.81 on June 20 of last year. Since then, more than $1.95 per gallon has been slashed.
Oil prices fell on the same day as the DOE/EIA price drop. The decline seems to be related to concerns about the sustainability of the debt ceiling agreement reached over the weekend. The stock market ended unchanged.
Lading Logistics offers news and services for trucking, logistics, and supply chain. Gasoline and diesel prices are falling. This is good news for logistics and supply chain organizations. The transportation and rail industries are slowing down, so these trends will likely continue.
ULSD Prices and OPEC+ Meeting Update
The price of a gallon of ULSD on Tuesday was $2.2808. It decreased by 8.85 cents from the previous Friday’s settlement. The lowest price for ULSD was $2.2387 per gallon on May 4.
The DOE/EIA price report was delayed until Tuesday because Monday was Memorial Day. There was no CME settlement on Monday.
Positive rustlings don’t stop oil markets from falling. OPEC and its allies will discuss future strategy at a meeting in Vienna this weekend.
IEA predicted a 200,000-barrel-per-day growth in global demand by 2023.
IEA analysis shows that the globe will require OPEC+ to produce 45.2 million b/d by the fourth quarter of this year to maintain market equilibrium. OPEC+ produced less than 42.4 million b/d in April, according to recent data from S&P Global Commodity Insights.
OPEC+ meeting will happen after May production cutbacks. The cutbacks were announced in early April and have been in effect for a month. Crude spreads are steady or slightly weaker. The U.S. diesel market isn’t tight despite a 1.1 million b/d reduction.
The discount between ULSD price on CME and physical diesel price in U.S. spot markets has remained stable, according to DTN Energy’s data. DTN reported a 5.25 cents per gallon difference between Gulf Coast ULSD and CME prices on Tuesday. At the start of the month, the difference was 4 cents per gallon.
ULSD barge lots in New York Harbor cost 0.25 cents more than CME counterparts on Tuesday. The spread at the beginning of this month was 0.5 cents.
The reductions will continue through the end of the year, according to OPEC+. Ministers from OPEC and OPEC+ don’t think there will be another cut at the weekend conference.
Prince Abdulaziz bin Salman warned speculators at a gathering in Qatar. He said they will be “ouching” because they gambled on oil’s price lowering. They caused pain in April. I don’t need to reveal my hand. I am not a poker player. Watch out.
Diesel Prices and Inventory Situation Update
April was referring to the market rise that followed the initial news of the output cut. The average price of a barrel of international crude was $87.33 on March 12. On Tuesday, Brent crude oil settled at $73.54 per barrel and West Texas Intermediate crude oil settled at $69.46 per barrel. This is the first time since May 5 that the settlement for West Texas Intermediate crude oil has been below $70 per barrel.
Diesel prices have fallen despite the tightening inventory situation.
U.S. inventories of ULSD were 94.7 million barrels for the week ending May 19. This is below the 100 million barrel threshold seen in recent years only at periods of high prices, such as last spring and fall. Diesel is about 90% of ULSD. The EIA figure for days cover for all nonjet distillates is 26.7 days. It is much lower than previous weekly reports in May.
Days cover is a ratio. It shows how long stocks would last without production and imports.
The trucking industry is in a slump, but consumption has remained stable. Nonjet distillate consumption is at 4.198 million b/d. This is higher than the six-year average of 3.963 million b/d, according to the most recent data from the EIA.
The front-month spread for ULSD over Brent on CME closed on Tuesday at just under 53 cents a gallon. There are indicators of tight diesel supplies and robust demand. On May 18th, the price was 59.6 cents per gallon.
Conclusion
At last, lower demand and more supply have contributed to lower diesel prices during the last several weeks. Even if supplies are becoming low, fuel prices are down and the transportation business is slumping. Lading Logistics offers warehouse services, final-mile delivery, retail sales and distribution, trade automation services, freight forwarding, and more. Get in touch with Lading Logistics at any time for clarification.
