After weeks of consistent declines, and an overall steady drop through much of 2023, the benchmark diesel price used for most fuel surcharges has hit something of a trading range.

The latest average weekly retail diesel price published by the Department of Energy/Energy Information Administration was up 2.9 cents a gallon to $3.867. That marks the third time in the past six weeks that the price was up. 

In the 13 weeks prior to that, the price fell 11 times.

The end result of the latest up-and-down is that in the past six weeks, there has been an overall decline of 4.7 cents a gallon. More broadly, since the Sept. 18 price of $4.633 a gallon, a recent high-water date, the price is down 76.6 cents.

The calm in the market comes against a continued backdrop of international tensions that conventional wisdom might otherwise lead one to conclude that global oil markets were set to surge on the latest escalation of violence: the deaths of three U.S. service personnel in an attack in Jordan tied to Iran-based militias.

But oil markets barely budged Monday and by the end of the day had declined, with ever-present discussion of weak Chinese demand negating any upward move by what happened in Jordan.

Brent, the world’s crude benchmark, dropped $1.38 a barrel to $82.40 on Monday. Ultra low sulfur diesel on the CME commodity exchange followed suit to a lesser degree, declining 0.95 cents to $2.8399 a gallon. That decline of 0.33% was less than the Brent drop of 1.3%.

However, although trading on the day after the soldiers’ deaths may have been muted, it wasn’t quiet at the end of last week, reacting much as might be expected as the threat of a wider war grows.

While Monday’s drop might have been considered surprising, it came after two days of significant upward movement based not on any specific development but a market that seemed to react all at once to what was going on in the Red Sea and the Suez Canal.

ULSD rose in two trading days to a Friday settlement of $2.8434 a gallon from a settlement Wednesday of $2.6818, an increase of 16.16 cents.

There was a suggestion in the market last week that after weeks of declines, the Thursday and Friday surge was related more to trader short covering than any sudden concern about supplies created by Middle East tensions. 

In an interview on CNBC Monday, Helima Croft, global head of commodity strategy at RBC Capital Markets, described the lack of upward movement on the weekend news as “very much a muted response, with people trying to weigh the economic news out of China.” (On Monday, a Hong Kong court ordered the liquidation of Chinese real estate development company Evergrande.)

“I think there’s a corner of this market that believes that this is not going to escalate to Iran,” Croft said, discussing possible retaliation by the U.S. “But again, we are getting closer and closer to a wider war.”

Croft contrasted the impact on shipping with diversions away from the Red Sea and Suez Canal — where ships can avoid that increasingly dangerous area by going around southern Africa — with tanker traffic out of the Strait of Hormuz at the mouth of the Persian Gulf. Military action in the Strait of Hormuz, including a possible closure, has always been seen as the doomsday scenario for oil markets.

“I would just point out the fact that while you can divert ships away from the Red Sea, if this were to spread to the Straits of Hormuz, there is not an easy way to divert ships out of that important choke point,” Croft said.

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