Another jump in DOE/EIA diesel price adds 19.4 cents in 2 weeks

Commodity diesel prices higher in the past week, but pace of gains slows

The weekly Department of Energy/Energy Information Administration average retail diesel price continued to climb in the latest posting, though the red-hot commodity market for ultra low sulfur diesel and crude oil is showing signs of slowing.

The DOE/EIA’s latest price is $3.671 a gallon, up 8.5 cents from last week’s price. The run of increases in the benchmark price that is heavily used for fuel surcharges means that for five consecutive weeks, the price published by DOE/EIA was either the highest price since 2014 (for the first week in the series) or since 2008 for the most recent four weeks. The latest price is the highest since the $2.809 a gallon recorded on Nov. 17, 2008.

After two weeks of sharp gains, the DOE/EIA price is now up 19.4 cents a gallon since Oct. 4. However, to find a two-week increase that large, one needn’t go back that far. When the DOE posted a price of $3.072 a gallon on March 1, that marked a two-week gain of 19.6 cents.

The latest increase comes even as the commodity markets show signs of a slowing in their recent increases. Between the settlement Monday of $2.5492 a gallon and a week earlier, the price of ULSD on the CME rose 3.32 cents. During the prior Monday-to-Monday period, it was up 7.84 cents a gallon. ULSD on CME Monday fell 2.45 cents a gallon, a decline of 0.95% on the day. It was the third-largest decline in the price of ULSD in the past month.

Markets on Monday also featured a steep reversal from gains posted earlier in the day. The price of West Texas Intermediate, the domestic crude benchmark, peaked at $83.87 a barrel for the day in early trading but eventually sank as low as $81.84 before settling at $82.44. That was up 16 cents a barrel on the day.

Even though the gains have slowed, markets are not dealing with any significantly bearish news. Last week, Japan joined the U.S. in calling on OPEC and the OPEC+ group to put more oil supply on the market. The U.S. made its request for more oil back in August.

According to the International Energy Agency, the OPEC+ group, which consists of OPEC and a group of non-OPEC oil exporters led by Russia, added about 500,000 barrels per day of oil supply to the market in September, more than the 400,000 the group had committed to. It also is assumed to be willing to increase output by that amount in November and December. Howevereven though increased output from the group exceeded its targets in September, some countries are having difficulty meeting their commitments to deliver more oil. The ability to make those targets came from higher output from Saudi Arabia, Russia and a few other countries.

But the same report also discussed what is increasingly being seen as a key factor in the increase in oil prices: substituting oil for natural gas in the generation of electricity. That is not occurring in the U.S. yet; the price of natural gas has not risen to the extremely high levels seen in other parts of the world. But the IEA said the substitution of oil for natural gas in generating electricity will increase oil demand by 500,000 barrels per day from September through the first quarter of next year. That level of increase effectively consumes all of a month’s worth of increases coming out of the OPEC+ group.

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.