With oil markets showing evidence of relative calm in the past week, retail prices are moving lower to catch up with at least some of the earlier declines from 2021 highs.
The Department of Energy/Energy Information Administration average weekly retail price declined 2.5 cents, effective Monday, to $3.649 a gallon. That is the fourth consecutive week the benchmark has declined. It also marks the first four-week drop since March.
It’s the lowest DOE/EIA price posted since Oct. 11’s $3.586 a gallon.
Since the most recent high of $3.734, the DOE/EIA price is down 8.5 cents a gallon.
The downward move in the DOE/EIA price began with a 1-cent decline Nov. 22, but commodity market prices plummeted soon after as concerns about demand in the wake of the discovery of the omicron variant hit the market.
The day before Thanksgiving, ultra low sulfur diesel on the CME commodity exchange settled at $2.383 a gallon. As news of the omicron variant took hold, ULSD fell as low as $2.0638 a gallon on CME.
But since then, with many traders and analysts in the market believing the initial sell-off was overdone, ULSD moved up to a recent trading range of roughly $2.22 to $2.26 a gallon. The price of ULSD has stayed in that range only for five days, but given how volatile the price was for much of October and November, the temporary pause in big moves is notable.
The steady decline in retail diesel prices exhibited in the DOE/EIA price is in contrast to big swings in wholesale diesel markets, which mirror commodity markets. The national average wholesale diesel price on Nov. 27, two days after Thanksgiving, stood at $2.5578 a gallon. With price reporting agencies closed the day after Thanksgiving, and without the guidance those numbers provide to the companies setting their wholesale prices, the market known as the “rack” took a few days to react.
When it did, prices in the ULSDR.USA data feed in SONAR dropped to $2.308 a gallon by Dec. 1, climbing back to $2.438 a gallon by Monday. That roughly 12-cent decline since Thanksgiving compares to what is now an 8.5-cent decline in retail prices as measured by the EIA.
Oil markets generally have been without significant news in the past week, which may be a reason why commodity prices appear to have taken a breather. There is no news out of OPEC, which most recently went ahead with its decision to put more oil on the market.
Markets this week will be watching the bids for 18 million barrels of crude that the U.S. government is offering out of its Strategic Petroleum Reserve. That oil is being offered as part of the U.S. contribution to the multicountry initiative to release strategic stock and dampen upward moves in the crude market. Bids are due Friday.
The SPR will make available for sale 18 million barrels of oil. There have been times when the SPR offered oil to the market but found no takers, which is generally seen as a bearish sign that no buyers found it necessary to get their supply from that source.
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