With regards to retail diesel prices up to now week, the true estate adage applies: location, location, location.
The typical national retail price for diesel, published by the Department of Energy/Energy Information Administration, rose just 4.8 cents a gallon in every week to $4.54/g when the futures price for ultra low sulfur diesel has risen greater than 25 cents a gallon up to now 4 trading days on a wide range of aspects. It’s the very best price since $4.539/g on February 6.
But that solitary number used for many fuel surcharges fails to reflect huge divergences in numerous regions of the country.
For instance, the East Coast average rose just 0.5 cents a gallon, and the worth for what the Department of Energy calls the Lower Atlantic — West Virginia plus all of the states on the Eastern Seaboard from Virginia south to Florida — actually declined 0.2 cents. The northern portion of the East Coast rose 1.1 cents while the center states climbed 2.6 cents.
The Midwest (4.4 cents a gallon) and the Gulf Coast (4.1 cents) were each up lower than the rise within the national average.
The Rocky Mountains were up 8.3 cents a gallon, but as a share of the overall market, it’s small.
That leaves the West Coast, where retail prices are soaring. The typical for the West Coast was up 14.5 cents a gallon, to $5.535 a gallon. But that number will be broken out into two figures: the West Coast less California, which rose 12.5 cents a gallon to $5.153 a gallon; and California, which was up 16.9 cents a gallon to $5.97 a gallon.
California’s average retail diesel prices were greater than $6 a gallon for many of last 12 months, from March into November. And while the most recent DOE/EIA estimate for the West Coast remains to be below that figure, it isn’t by much, and there are other averages that say it’s already at that number.
A have a look at certain individual stores from Pilot Flying J, which provides a downloadable spreadsheet of its retail prices, shows many shops already above $6 a gallon.
Spot market differentials reflect the West Coast strength. Those differentials are for physical barrels traded at key locations, equivalent to the Gulf Coast, Chicago, Latest York Harbor, a Midwest region often called Group 3 and the West Coast. The differentials are a premium or negative differential to the CME ULSD settlement price, and traders swap barrels on that basis versus an outright price for the total barrel.
Those differentials provided by DTN Energy show a market where premiums have shown some strength in most markets but are blowing out on the West Coast.
The spread was 10 cents a gallon on July 21. It’s virtually at all times higher than the CME price, which is a Latest York Harbor basis contract.
In accordance with the DTN data, it hit 30 cents a gallon by Aug. 9, 40 cents a gallon on Aug. 16 and 50 cents a gallon on Aug. 25. On Monday, it was 58 cents a gallon.
Weekly data from EIA doesn’t suggest any slowdown in California refining activity that will result in that region spiking, but refinery operating rates are barely lower than historic norms.
The refinery utilization rate for the West Coast, often called PADD 5, within the week ending Sept. 1, essentially the most recent data, was 90.2%. That’s higher than the prior three years but lower than the 94.7% from the primary weekly report of September in 2019, the 97.6% in 2018 and the 92.7% in 2017.
The outright price of ULSD on CME continued its recent climb Monday, rising 6.31 cents a gallon to $3.3623 a gallon. It was the very best settlement since Jan. 26.
If there was any positive news for diesel consumers to take from Monday’s market, it was that crude softened barely and traders were quoted as saying that recent gains within the crude market are hitting up against technical resistance points. Global benchmark Brent crude was down 1 cent to $90.64 a barrel, and West Texas Intermediate declined 22 cents to $87.29 a barrel.
But with the rise in diesel prices on CME, that meant that the spread between Brent and ULSD continued to blow out. On a straight front-month-to-front-month comparison, the ULSD-to-Brent spread climbed to $1.20 a gallon. Even though it was higher than $1.20 a gallon one other day in August, that spread has not consistently been above $1.20 since January.
For purposes of comparison, in 2019 — the last 12 months before the pandemic, before the impact of IMO2020 and before the Russian invasion of Ukraine — that spread averaged just below 32 cents a gallon for the 12 months.
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