After seven weeks of decreases, the Department of Energy/Energy Information Administration average retail diesel price moved higher this week.
Its price, effective Monday, is $3.657 a gallon, an increase of 4.4 cents from the prior week. The seven-week decline had only taken 12.1 cents off the price, meaning more than one-third of the fall has been clawed back with the latest increase.
The benchmark price declined in only 15 weeks in 2021, and 2022 kicked off with a decrease as well.
Monday’s increase in the DOE/EIA price comes after a week in which the price of ultra low sulfur diesel on the CME commodity exchange climbed sharply. With the settlement Monday at $2.4876 a gallon, ULSD prices have tacked on 8.88 cents a gallon since the final trading day of 2021.
Wholesale prices have gone up even more. From Jan. 4 through to Monday, average national wholesale diesel prices per the ULSDR.USA data series in SONAR have risen more than 11 cents a gallon.
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One notable development in the price: The premium of ULSD over RBOB gasoline–a gasoline blendstock that serves as the trading vehicle for gasoline–has blown out to 21.22 cents a gallon. That is the widest since the wild days of April 2020, when gasoline was plummeting far more than diesel. Diesel may be following natural gas higher, as the ULSD contract on CME also is used as a hedging tool for the price of heating oil, which is structurally similar to diesel.
ULSD appears to be moving in concert with natural gas delivered at the U.S. benchmark point of the Henry Hub. That benchmark price has tacked on almost 37 cents per thousand cubic feet in just five trading days, settling Monday at more than $4 for the first time since early December.
Crude markets have received some bearish news in the past few days. An agreement between warring factions in Libya is expected to bring another 300,000 barrels a day back on to the market, after production there was cut to 700,000 barrels per day as a result of a militia group stopping output at a key field. And in Kazakhstan, Chevron said it was restoring production at its Tengiz field, the country’s largest. Output there had been cut because of violent unrest throughout the country.