With one other 2.8-cent drop, diesel has fallen 16 of past 17 weeks

For the sixth week in a row and the sixteenth time up to now 17 weeks, the diesel price used for many fuel surcharges has declined.

The benchmark price was pegged by the Department of Energy/Energy Information Administration at $3.855 a gallon on Tuesday. That’s down 2.8 cents from the prior week. Since June 20 of last yr — the high-water mark with a price of $5.81 — the weekly average retail diesel price is down greater than $1.95 a gallon.

The drop within the DOE/EIA price got here on a day when oil prices across the board experienced a major downturn, for reasons that gave the impression to be tied completely to economic uncertainty over whether the debt ceiling deal negotiated over the weekend would hold. Equity markets, meanwhile, finished little modified after earlier weakness.

Ultra low sulfur diesel (ULSD) on the CME commodity exchange settled Tuesday at $2.2808 a gallon, down 8.85 cents from Friday. It was the bottom settlement for the united states contract since a $2.2387-per-gallon settlement on May 4.

The DOE/EIA price was released a day later than usual due to the Memorial Day holiday. There also was no CME settlement Monday.

Oil markets proceed to sink whilst there are more bullish rustlings amongst traders than bearish ones. A number of the market speculation centered on this weekend’s in-person OPEC+ group meeting in Vienna to debate future strategy.

Those bullish aspects will be seen in the most recent International Energy Agency report from midmonth, wherein the agency increased its forecast for average world demand in 2023 by 200,000 barrels a day from only a month earlier.

It may possibly even be seen in the identical IEA report that claims by the fourth quarter, the world will need OPEC+ to supply 45.2 million b/d to maintain the market in balance. But in April, in keeping with the most recent survey by S&P Global Commodity Insights, OPEC+ produced lower than 42.4 million b/d.

The OPEC+ meeting will likely be happening following the primary month’s completion of the production cuts the group announced in early April to be implemented in May. That reduction of about 1.1  million b/d thus far has not shown to have tightened markets, with physical crude spreads seen as mostly stable to barely weaker and little sign of physical tightness within the U.S. diesel market as well.

In accordance with data supplied by DTN Energy, the spread between physical diesel in various spot markets across the U.S. and the value of ULSD on the CME has barely budged. Gulf Coast ULSD was reported by DTN Tuesday at 5.25 cents a gallon lower than the CME price; at the beginning of the month, the spread was 4 cents lower than the CME price. 

In Latest York Harbor, barge a lot of ULSD on Tuesday were 0.25 cents greater than the CME price. At first of the month, the spread was 0.5 cents.

OPEC+ said the cuts were expected to last through the yr. News reports have quoted several ministers from member nations of OPEC and the OPEC+ group of non-OPEC nations led by Russia as saying an extra cut is unlikely to return out of the weekend meeting. 

Nonetheless, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman told a forum in Qatar that what he called “speculators” who’ve bet on the value of oil dropping “will likely be ouching. They did ouch in April. I don’t have to point out my cards. I’m not a poker player … but I’d just tell them be careful.”

The reference to April was related to the market surge that first accompanied the announcement of the cut in production. The world crude benchmark reached a settlement of $87.33 a barrel on March 12. On Tuesday, Brent settled at $73.54 a barrel, and West Texas Intermediate, the benchmark U.S. crude, settled Tuesday at $69.46 a barrel, the primary settlement below $70 since May 5.

The continuing decline in diesel prices is available in the face of a list picture that continues to tighten.

At lower than 100 million barrels, U.S. inventories of ULSD for the week ended May 19 of 94.7 million barrels of distillate — generally about 90% diesel — were at levels that in recent times have been seen only in periods of high prices, corresponding to last spring and fall. The most recent EIA figure on days cover for all nonjet distillates, 26.7 days, is the bottom since last fall and significantly below where days cover generally stands for the third weekly report of May.

Days cover represents inventories divided by average each day consumption, to offer a figure of how long inventories could supply consumption if production fell to zero and imports ceased. 

Consumption, despite the weak trucking market, is at or near normal. The most recent EIA report put consumption of nonjet distillate at 4.198 million b/d, significantly above the six-year average of three.963 million.

Despite those signs of tight diesel inventories and strength of demand, ULSD’s front-month spread against Brent on CME closed Tuesday at slightly below 53 cents a gallon. It was about 59.6 cents a gallon as recently as May 18.  

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