The national average price of retail diesel eked out a small increase effective Monday, rising 0.2 cents per gallon to the highest level since November 2018.
The Department of Energy/Energy Information Administration published the price Tuesday, though it was listed as effective Monday.
The price of $3.255 a gallon is the fifth consecutive week that the benchmark number used in fuel surcharges rose. It also marks the sixth week that there was no decrease, as the week before the latest run of increases was unchanged from the prior week.
The DOE/EIA retail diesel price has not been this high since the $3.261-a-gallon number of Nov. 26, 2018.
Petroleum prices in general were stronger Tuesday with the benchmark Brent crude contract settling above $70 for the first time in roughly two years.
More importantly for the trucking and transport sector, the gain of 2.7 cents a gallon in the ultra low sulfur diesel price on the CME commodity exchange, to a settlement fo $2.0794, is the highest settlement in that key price since a settlement of $2.0614 a gallon on the first trading day of 2020. The ULSD contract traded as high as $2.1135 earlier in the day before falling back.
The DOE price rose only slightly even though wholesale diesel prices have climbed significantly in the last several days. According to the ULSDR.USA data series, the national average wholesale price for diesel is up 6.7 cents from May 28, rising to a level of $2.216/g Tuesday.
The higher prices came on the same day that the OPEC+ group met to ratify a planned increase in output for July. The virtual meeting reportedly didn’t even last a half-hour but gave a go-ahead for the final stage of the previously approved plan to add approximately 2.1 million barrels per day of crude production to the market. That process began in May and will be finishing up that increase with the higher output in July.
Most models see oil markets are in significant deficit between supply and demand, and OPEC+ has no further plans to add production. But there are two wild cards.
First, in a statement issued after the meeting, OPEC Secretary-General Mohammad Barkindo described COVID-19 as a “persistent and unpredictable foe, and vicious mutations remain a threat.” There is doubt among some of the members of OPEC and its non-OPEC allies that make up OPEC+ whether the strong demand forecasts going forward will actually be realized because of lingering impact from the pandemic.
But what OPEC+ is even more concerned about is the role of Iran. Sanctions did not stop Iran from producing 2.43 million barrels per day in April, according to S&P Global Platts. That was its highest level in almost two years. With rumblings regarding progress on a new nuclear deal between Iran and Western nations, it opens the door to an easing of sanctions that could bring Iranian supply back to significantly higher numbers than that, a key area of concern for producers.
One other note about diesel prices: They are not increasing faster than crude. The spread of Brent to diesel measured in cents per gallon had been more than 42 cents several days ago but is now less than 40 cents.