The diesel price used as the premise for many fuel surcharges reversed course this week, rising 3.9 cents a gallon for the primary increase in three weeks and just the third prior to now 23 weeks.
The Department of Energy/Energy Information Administration price was posted at $3.806 a gallon Monday. The reversal of recent trends got here as gains within the broader oil market have been significant and sustained enough that some analysts say the weak market that has been the driving force for a lot of the first half of the 12 months may need run its course.
The Brent market, the world’s crude benchmark, peaked this 12 months with a settlement price of $88.19 a barrel on Jan. 23. After the early April announcement of a cut in production from the OPEC+ group of oil exporters, Brent rose as high as an $87.33-a-barrel settlement on April 12, climbing from prices within the $70s that prevailed for much of the second half of March.
However the OPEC+ cuts, even when bolstered by further Saudi cuts along with the OPEC+ reductions, didn’t have endurance in stemming the slide in prices. Brent on the CME commodity exchange settled at $72.26 a barrel on June 27.
Since then, in mostly regular gains with none spectacular one-day increases, the worth of Brent climbed as high as a $78.47-a-barrel settlement Friday before a decline Monday to $77.69. The Friday settlement was the best since May 1.
The sense that the oil market could have hit a bottom and that fundamental supply and demand was pushing numbers higher was summed up in a press release to Reuters by the top of the International Energy Agency, Fatih Birol.
Based on Reuters, Birol said the IEA still sees the oil market as tight going into the second half of the 12 months.
“Even in sluggish economic growth, China and other developing countries’ demand is robust,” he said. “Taken along with the production cuts coming from key producing countries, we still consider that we might even see tightness out there within the second half of this 12 months.”
That strength is showing up even stronger in diesel markets. After a recent low settlement of $2.3091 a gallon on June 12, ultra low sulfur diesel (ULSD) on the CME climbed Friday to a settlement of $2.5591, up exactly 25 cents a gallon from its June 12 low. The value retreated barely Monday, to $2.5532, down 0.59 cents.
More notable recently has been the strength of ULSD against Brent. The front-month comparison has climbed to roughly 70.3 cents a gallon, up from about 60 cents only one week earlier.
While physical market diesel spreads within the U.S. aren’t showing signs of any particular tightness, Bloomberg reported late last week that was not the case in Europe.
Citing refinery disruptions in Germany and the Persian Gulf, the news agency quoted Philip Jones-Lux, commodity owner at Sparta Commodities, as saying that the diesel market is being hit by reduced flows out of the Middle East. “[With] some volumes on water only expected to reach toward the tip of July, there’s a have to entice more volumes out of storage within the short term,” Bloomberg quoted Jones-Lux as saying.
Water levels on the Rhine proceed to be an issue in Europe as well, having the potential to slow diesel deliveries along that waterway, which supplies parts of Germany, France and Switzerland.
Quantum Commodities, in an email, said the water level on the essential measuring point of Kaub will likely decline to a level below 100 centimeters by the center of this week, citing German government data. Quantum said that puts water levels at a number not seen since not less than 2000.
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