Diesel markets may seem stable, as the week-to-week moves in the benchmark price have been relatively restrained, but that may mask the fact that the two-month trend is pointing down and prices continue to trend lower.
The weekly average retail diesel price published by the Department of Energy/Energy Information Administration Monday declined 1.8 cents a gallon to $3.476.
That price is still more than that of two weeks ago, when the Dec. 9 posting of $3.458 a gallon was the lowest DOE/EIA price since Oct. 4, 2021. The $3.476 a gallon posted Monday is now the second-lowest since then. It moved up by 3.6 cents a gallon last week.
Following a 54-basis-point decline Monday in the settlement price for ultra low sulfur diesel on the CME commodity exchange, ULSD on CME was down about 4 cents a gallon from where it had settled a week earlier.
The volatility of the past few years in oil markets, fed first by COVID and then by the Russian invasion of Ukraine, has quieted in recent weeks. But the trend remains decidedly bearish.
On Oct. 15, the DOE/EIA price was $3.631. The price posted Monday of $3.476 was 15.5 cents less than that over a span of 10 weeks.
The latest broad non-oil factor that is pushing prices lower is the U.S. dollar’s reaching its highest value in about two years.
The DXY index, the most widely followed index reflecting the strength of the dollar, was at about 106 two years ago. Until mid-December, the DXY had closed below that every day since, but it has pushed up toward 108 from about 107.6 just in the past day. The DXY was slightly more than 100 at the end of September.
Commodities denominated in dollars tend to move in the opposite direction of the strength of the dollar.
Analysts quoted by commodity reporters continue to cite the same litany of reasons for the gradual decline in prices besides the dollar: weak Chinese demand figures (though prices have moved higher in short spurts anytime a new dataset out of China shows some market strength), continued strong production figures from OPEC+ and non-OPEC, and the failure of Middle East tensions to have any impact on production.
The latest news on the production front is that the OPEC+ group produced 40.58 million barrels of oil a day in November, according to S&P Global Commodity Insights. That was a jump of about 320,000 barrels a day from a month earlier, a large increase for a group dedicated to keeping supplies in check. It is still far less than the 41.55 million barrels a day for December last year.
With this sort of increase in #oil output, it’s easy to see why OPEC+ rolled back its plans to start unwinding its prod’n cuts for several months. It added 320k b/d between Oct. and Nov., a huge increase. Libya was one reason, according to @SPGCI; Kazakhstan was another. pic.twitter.com/YRZVASlo1A
— John Kingston (@JohnHKingston) December 11, 2024
But it also undercuts the impact of the decision of the OPEC+ group earlier this month to dial back its plans to begin increasing supplies next month. That increase now has been pushed back to April, just the latest in delays by the group as it confronts a market that does not need all the oil that OPEC+ has to offer.
OPEC+ is a group made up of the members of OPEC as well as several non-OPEC oil exporters, nominally led by Russia, that in recent years has cooperated with OPEC on limiting oil supplies.
The job of OPEC+ has been made more difficult by several countries that continue to produce oil at levels well beyond what has been forecast.
While there has been a school of thought that the U.S. is nearing peak production, at least for now, the data published each week by the EIA is not showing it. U.S. crude output for the week ended Dec. 13 was more than 13.604 million barrels a day, the second consecutive week that it was above the 13.6 million-barrel-per-day level. It had never crossed that mark prior to the last two weeks.
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