It’s been almost a year since the benchmark diesel price used for most fuel surcharges fell as much as it did in its most recent posting Tuesday.
The Department of Energy/Energy Information Administration average weekly retail diesel price fell 7.3 cents/gallon to $3.758/g. It was the largest one-week decline since December 9, when it slid 8.2 cts/ to $3.458b/g.
The latest price was announced Tuesday but was effective Monday. With last week’s decline, which came after four weeks of increases, the DOE/EIA price is down 11 cts/g over the last two weeks following the four-week run that lifted the price by 24.8 cts/g.
The price plunge came on the heels of a recent decline in the price of ultra low sulfur diesel (ULSD) on the CME commodity exchange, a trend that appears to have stabilized in recent days.
November was a volatile month for the ULSD contract on the CME commodity exchange. Its settlement on the first trading day of the month, November 3, was $2.4053/g. It climbed to a settlement as high as $2.7011/g on November 18 before beginning a steady downward drift that saw the month close with a settlement of $2.333/g, about 7 cents less than the first day of the month.
In the last five trading days, ULSD on CME has mostly been in a range of $2.32-$2.35/g. In early trading Tuesday, it was $2.3239/g at approximately 10:05 a.m. EST.
One thing that did not occur in trading Monday and into Tuesday was any sort of reaction to the decision by OPEC+ over the weekend, meeting virtually, to hold its production level steady.
The group, which consists of OPEC members and several non-OPEC oil exporters nominally led by Russia, has been increasing its output for several months. While the actual increases haven’t always matched what the group said it would do, total OPEC+ output, according to S&P Global Energy, rose from 41.79 million b/d in June to 43.09 million b/d in October.
Brent crude, the world’s benchmark, declined just 3 cents/barrel Monday after the news of the OPEC+ decision to hold the line on its output increases.
That decision to keep quotas steady is effective in January. The OPEC+ group already had decided on a 137,000 barrels/day increase in December.
Another oil market development in recent days has been a deflation of the surge in diesel prices relative to crude.
Much of that jump had been attributed to a tightness in inventories. The chart below shows how total U.S. inventories of non-jet distillate, which are generally a little less than 90% ULSD, compared in the fourth report of November over the last 10 years. Products like heating oil make up the balance beyond diesel. (Jet is a distillate but has its own EIA category).
