After an eight-week run of falling prices was interrupted a week ago by an increase, the weekly diesel benchmark price used for most fuel surcharges has moved down again.
In a price posted Tuesday but dated Jan. 1, the average weekly retail diesel price posted by the Department of Energy/Energy Information Administration declined by 3.8 cents, to $3.876 a gallon. It’s the ninth decline in the past 10 weeks and the 12th in the past 15. The decline offsets last week’s increase of 2 cents a gallon and brings the price down 75.7 cents from the $4.633-a-gallon where it stood on Sept. 18, the price posted by DOE/EIA before the run of mostly declines began.
After a surge of prices caused by a combination of short covering after a long decline, and concern about supply impacts from ship diversion away from the Red Sea and Suez Canal, markets trended downward over the final trading days of 2023 and the first day of 2024.
Ultra low sulfur diesel on CME reached a peak settlement of $2.7168 a gallon on Dec. 19, up from $2.5074 just four trading days earlier. Since then the price of ULSD declined seven of the next eight trading days, with the market settling Tuesday at $2.5258 a gallon, a drop of 19.1 cents from that Dec. 19 high.
The downward move in markets Tuesday came after prices moved higher at the start of post-New Year’s Day trading. West Texas Intermediate crude, the U.S. benchmark, traded as high as $73.64 a barrel before an ultimate $1.27 downward move from Friday’s settlement to $70.38 a barrel. With a low price for the day at $70.06 a barrel, trading swung more than $3.50 a barrel between low and high.
The fading of the Red Sea/Suez concerns came even as Maersk said Tuesday that it was going to continue to avoid that route following a new round of attacks by Houthi rebels on shipping.
There is a clear lack of bullish reaction to the Red Sea/Suez crisis in the oil markets, and Helima Croft, managing director and global head of commodity strategy at RBC Capital, suggested on CNBC Tuesday that such a view might be shortsighted.
“Oil market participants are essentially saying, ‘I will believe a disruption when I see it,’” Croft said. “So yes, you’ve had some run-up in prices. But given the importance of this region in terms of shipping of crude, it’s not really reflecting the ratcheting up of tensions.”
The run-up Croft referenced is in the rearview mirror. The price of Brent, the world crude benchmark, settled Tuesday on CME at $75.90 a barrel, down $5.18 a barrel from just four days earlier.
“Traders are saying, ‘Look, we’ve had problems in the Middle East before. Tell me why this is different,’” Croft said. “I think it’s materially different, but right now, we’ve had no major disruption of oil supplies.”
She noted that many traders “got burned” when the price of oil surged after Russia’s invasion of Ukraine almost two years ago, but the higher prices did not stick.
Brent peaked at a settlement of $123.89 a barrel on March 8, 2022, a few weeks after the invasion. But it dropped below $100 a barrel on Aug. 30 and has not returned to that level since.
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