Diesel retailers have been whipsawed by big swings in futures and wholesale prices in the past six to seven trading days, but the end result for the trucking industry’s key diesel benchmark was a drop in the weekly price.
The Department of Energy/Energy Information Administration average weekly retail diesel price fell 3.7 cents a gallon Monday to $3.536. It’s the second decline in the past three weeks for the price used for most fuel surcharges, and takes it to the lowest level since Sept. 23.
The sharp drop in diesel futures prices from a week ago, which at the time looked like it might signal the end of a recent cycle of higher commodity and retail diesel prices, fully reversed itself in one week and ended up moving higher in Monday trade. But retail prices lag futures moves, as evidenced by this week’s decline.
Last week’s diesel futures market kicked off with a big drop followed by five consecutive days of gains, including the increase Monday of 5.02 cents a gallon to $2.2841, the highest settlement since Oct. 11.
Without any significant change in market fundamentals last week, the price of ultra low sulfur diesel traded on the CME commodity exchange had an eventful week. On Oct. 28, ULSD fell almost 11 cents a gallon after an Israeli retaliatory attack on Iran did not target any of Iran’s oil production or export facilities.
But ULSD futures prices then climbed during the course of the week, with the only real news on fundamentals being a somewhat bullish midweek report on U.S inventories. By Friday the settlement price of ULSD was just 42 basis points – 0.42 cents – less than where it had settled the prior Friday before the limited Israeli action.
ULSD Monday rose 5.02 cents a gallon to $2.2841. The big increase Monday did come on the back of several pieces of news. Multiple reports said Iran was planning its own retaliatory attack on Israel that was likely to be larger in scope than the Oct. 1 attack by Iran on Israel. That was in retaliation for earlier actions Israel took against Hezbollah in Lebanon and other Israeli proxies in the region.
The other fundamental news in the market over the weekend was the decision by the OPEC+ group to again cancel a 2.2 million-barrel-a-day increase in production that had originally been planned for September but was pushed back to December as oil markets continued to weaken.
In a television interview, OPEC Secretary General Haitham Al Ghais downplayed the significance of the delay.
“We have demonstrated to the market that we’re always very proactive when necessary, and we take decisions always in a way whereby we have the ability to pause them, reverse them or change them,” Al Ghais said. “And this is just a continuation of our policy of making sure that we’re very attentive to the market, the way the market behaves.”
He added that OPEC+ will be meeting Dec. 1 to map out its next steps.
The 2.2 million-barrel-per-day increase in production that was supposed to go into effect in October was decided upon by OPEC+ – which consists of the members of OPEC as well as several other non-OPEC oil exporters, led by Russia – in early June when the price of international crude benchmark Brent was solidly more than $80 a barrel. Brent settled Monday at $75.08 and has settled on some days in recent weeks at less than $72.
There also was more increased production in recent days from Libya. A post on X by the Libyan National Oil Corp. said output in the country now exceeds 1.3 million barrels a day and was on its way to 1.5 million. During a recent standoff between the rival regional governments that are each seeking to control the country, Libyan output fell to near 700,000 barrels a day.
In his television comments, Al Ghais addressed his organization’s bullish projections on increased global oil demand next year. The International Energy Agency sees oil demand next year rising less than 1 million barrels a day. OPEC projects an increase of 1.9 million barrels a day.
He said OPEC has reduced its demand projections as well, though not as much as the IEA. But otherwise, Al Ghais said, “We’re still quite robust on demand.”
Al Ghais added that bearish projections on China were in conflict with OPEC’s view that with Chinese stimulus measures being implemented, and with Chinese projections of GDP growth at 5%, “we’ve seen data coming out for the third quarter that they’re very close to that.”
Also citing a strong U.S. economy, Al Ghais said, “I think there’s a bit too much doom and gloom and pessimism in terms of the demand output by some corners in the market.”
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