Benchmark diesel price down a second straight week on slide in futures

The Department of Energy/Energy Information Administration average retail diesel price fell 4.5 cents a gallon to $3.534, with the price released Tuesday morning but with an effective date Monday. It’s the second consecutive decline, coming after three weeks of gains that added 9 cents a gallon to the DOE/EIA price. The two latest declines then sliced 10.5 cents off the price.  

For most of April, the futures price of ultra low sulfur diesel on the CME commodity exchange has been extremely volatile, but it hasn’t broken out with a steady upward or downward trend during that time. After a settlement of $2.322 a gallon on April 2 and just under $2.19 a gallon the next day, a wide trading range of about $2.04 to $2.11 has settled into place.

At about 11:45 a.m. EDT Tuesday, ULSD had risen on the back of surging equity markets to be up about 1.86% to $2.1071 a gallon, an increase of 3.85 cents.

The result is that the retail prices reflected in the DOE/EIA number, which always lags futures and wholesale moves, is down 10.5 cents a gallon primarily from catching up to the big earlier drop rather than any recent changes in futures markets.

But it’s been a wild ride in the past year. 

A year ago almost to the day, on April 23, the price of ultra low sulfur diesel on the CME commodity exchange settled at $2.5792 a gallon. Since that date, ULSD has settled higher than that only seven times. The most recent was on Jan. 17, when ULSD settled at $2.621.

ULSD has been on a steady slide since then. In the most recent decline, the latest high settlement of $2.2877 per gallon was recorded on March 26. The most recent low point was $2.0464 on April 10. That was the lowest settlement in the past year. 

Analysts continue to reach for oil-specific reasons for movements in petroleum markets and are challenged to come up with any. In a Reuters article Tuesday, the news agency quoted SEB analyst Bjarne Schieldrop as saying that “the daily fluctuations in Brent crude oil prices have been quite well aligned with fluctuations in equity prices.” Brent is the world’s crude benchmark.

However, what has been specific to oil are demand projections, whether they are oil forecasts or general outlooks on economic activity translating to demand for petroleum.

A report from Rystad Energy that received wide media coverage Tuesday  said a “prolonged trade war” could result in China’s demand growth being cut by half.

In its latest monthly report, the International Energy Agency projected global demand growth of just 730,000 barrels a day in 2025, an extremely low number by recent non-COVID points of comparison. It projected that Chinese growth would be 160,000 barrels per day. That was a reduction of 70,000 from the prior month’s IEA forecast. 

If Rystad’s projection were based off the 160,000-barrel-per-day number, that would take another 80,000 barrels per day off the IEA’s forecast, which is just short of another 11% drop in its demand forecast.

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