Saudi Production Imminent as Diesel Benchmark Drops Again

Saudi Production Imminent as Diesel Benchmark Drops Again

On Monday, the weekly average retail price of diesel fell for the 17th time in 18 weeks. The price per gallon dropped 5.8 cents to $3.797. The weekly price is at its lowest since January 24, 2022.  The average retail price of diesel has fallen by $2.013 per gallon since June 20, 2023 when it hit a record high of $5.81 per gallon.

Saudi Arabia will cut its crude supply by 1 million barrels per day starting July 1. The OPEC+ group met in Vienna. OPEC acted together in the past and OPEC+ is currently acting together. OPEC or OPEC+ would make a statement of their intentions, but not all nations would follow or agree with the decision.

The Saudis declared a decrease in output of 1 million barrels per day during the OPEC summit in Vienna. They also decided to implement it on their own. Saudi Arabia supports OPEC and OPEC+ working together to stabilize oil prices. Oil industry media outlets estimate that Saudi Arabia’s production will decrease to around 9 million b/d, a level not seen since before the financial crisis. 

S&P Global Commodity Insights predicted Saudi’s output to be 10.5 million b/d in April. OPEC+ countries were expected to enforce production curbs on May 1, but they have not yet released their May forecast. Planned reductions were 1.66 million barrels per day.

Oil prices jumped on the news of the unilateral Saudi reduction. The rise was short-lived. Brent closed at $76.71 per barrel on Monday. It was up 58 cents from the previous day. The high price of the day was $78.72.

West Texas Intermediate closed at $76.71. It was up 41 cents from Friday’s close. It reached $75.06 in early trading after the Saudi news out of Vienna.

Reports state that Saudi Arabia made the decision due to their anger with stagnant prices and Russia’s failure to comply with committed cutbacks. The dissatisfaction is due to other market indicators pointing to higher pricing soon.

Diesel stockpiles have fallen in the recent market data. The information was posted on Thursday. 

Last week, ULSD stockpiles rose from 94.6 million to 96.8 million barrels. They slipped below 100 million barrels for a few weeks. Supplies have dropped below this level only three times in recent history. Diesel rates were above $5 per gallon in autumn and spring of last year.

Natural gas prices have increased since last year. The price of natural gas at Henry Hub was above $8 per Mcf a year ago. Consumers switched from natural gas to diesel where the two are interchangeable.

In conclusion, the diesel benchmark price has dropped and Saudi output is expected to increase, which is good news for the logistics sector. Businesses that rely on logistics can save money on fuel and maintenance costs.