The Department of Energy Reports:
Diesel Prices Are Down, Market Stable After Recent Surge

Market Stability Amidst Lower Prices

Diesel Prices are down after a four-week climb, according to the latest figures from the Department of Energy/Energy Information Administration (DOE/EIA). The average weekly retail diesel price dropped by 3.9 cents per gallon, settling at $3.826. This new price is just two cents higher than the same time last year, marking a significant shift in the fuel market.

A “Dull” Market Landscape

Energy economist Philip Verleger described the current oil market as “very dull” in his latest weekly report. Despite some tightness in the diesel market, Verleger noted that the pressure on prices is less intense compared to this time in 2022 and 2023. He predicts muted upward price pressure from the distillate complex, which includes diesel, jet fuel, and heating oil.

Physical Market Softness

Physical markets also reflect this market softness. For instance, the price of ultra-low sulfur diesel (ULSD) in the Buckeye Pipeline system, which services parts of the Northeast and the Ohio Valley, was 15.5 cents lower than the CME price on Friday. This contrasts with July 1, when the prices were even. Similarly, in Chicago, the ULSD market price was 21 cents below the CME price on Monday, down from a 3-cent difference on July 1.

Inventory and Supply Updates

The latest EIA inventory report shows a significant increase in ULSD stocks in the U.S., which rose by about 4.5 million barrels to 113.8 million barrels in one week. This brings the inventory levels close to the early July average of 118.2 million barrels, excluding the unusually high numbers from 2020.

The International Energy Agency (IEA) continues to highlight a supply-demand standoff in its recent monthly report. Despite non-OPEC group cuts, global oil demand growth is slowing, with second-quarter 2024 growth easing to 710,000 barrels per day year-on-year. The IEA forecasts global gains just below 1 million barrels per day in 2024 and 2025 due to economic growth challenges, increased efficiencies, and vehicle electrification.

OPEC+ and Global Supply

OPEC+ has managed to reduce its output by 680,000 barrels per day since December, according to S&P Global Commodity Insights. However, this reduction has not significantly impacted the overall market, which remains relatively stable. Global supply increased by 150,000 barrels per day, with non-OPEC+ contributing significantly to this growth.

Looking Ahead

Despite some recent volatility, the diesel market has stabilized, reflecting a “dull” trading range. Since diesel prices are down, there is a bit of relief after weeks of increases. Even so, the market remains closely monitored due to its complex dynamics. As the year progresses, the balance between supply and demand will continue to play a crucial role in shaping diesel prices and the broader energy market.