The run of up and down minor moves in the diesel price used as the basis for most fuel surcharges continued this week.
The Department of Energy/Energy Information Administration average weekly retail diesel price, released Tuesday and effective Monday, inched up a half-cent per gallon to $3.754/g.
It is now exactly where it was August 11. Since then, the lowest level it has been under the August 11/September 29 price is 4.6 cts/g. The most it has been above that number is 1.2 cts/g, for a total swing of 5.8 cts/g between low and high.
A year ago, the September 30 DOE/EIA price was $3.544/g. That was 16 cts/g less than it had been seven weeks earlier. Take any seven-week stretch of prices over the last several years and it is likely that the spread over that time was far wider than the 5.8 cts/g the market has just recorded.
A spike in oil and diesel futures prices late last week, mostly on the back of geopolitics, was largely erased in futures markets Monday and Tuesday. The DOE/EIA change, or lack thereof, is reflecting the stability in the market before last week’s jump. But that increase has now been followed by two significant days of declines.
The reasons for the late-week upward move were based on the possibility of additional sanctions against Russian oil exports implemented by the U.S., rather than the reality of any actual reduction in supply.
The reality of most models going forward remains oversupply, and that kicked back in to the market Monday and into Tuesday.
Ultra low sulfur diesel (ULSD) settled Monday at $2.3566/g, a decline of 7.23 cts/g. On Tuesday, at approximately 11:35 am EDT, ULSD was down another 2.85 cts/g to $2.3302/g.
The latest downward push came with the news reported by several agencies that the OPEC+ group, at its upcoming Sunday meeting, will consider adding another 411,000 barrels/day of supply to the market.
Eight OPEC+ countries, including Saudi Arabia and Russia, will be meeting to discuss their next steps. The group has completely reversed its production cutbacks that went back to 2023 and totaled about 2.5 million b/d.
An increase of 411,000 b/d, according to Reuters, would be three times the October increase of 137,000 b/d. Bloomberg also reported there has been discussion of an increase totaling 500,000 b/d.
With the models pointing to supply outracing demand, the focus in the market on why it can maintain such stability has fallen squarely on China.
As Javier Blas of Bloomberg wrote in a recent column, “China has purchased more than 150 million barrels — costing about $10 billion at current prices — above its actual use so far this year. For a country that buys more electric vehicles than anywhere else, that demands dissecting.”