This text highlights the declining trend in diesel prices and explores various market factors contributing to this trend. Key points include:
Diesel Price Decline: The Department of Energy/Energy Information Administration’s average weekly retail diesel price has dropped by 2.5 cents a gallon to $3.838, marking the 14th decline in 18 weeks.
Secular Decline: Since September 18, the average diesel price has witnessed a substantial decline of 79.5 cents, with an additional cent drop reported two weeks ago. The year-on-year decline is 76.6 cents, and since its peak in October, the DOE/EIA diesel benchmark has fallen by $1.503 a gallon.
Weather Impact: Traders anticipating a rise in prices are realizing that the potential impact of cold weather on diesel prices may have run its course. Warmer-than-usual temperatures are forecasted for the next 10 to 14 days, signaling the potential end of the heating season.
Natural Gas Prices: The impact of warmer weather is visible in the price of natural gas at the Henry Hub in Louisiana, which has seen a significant drop to $2.419, down almost 90 cents in five trading days.
Shipping Diversion: A bullish factor in the market is the continued diversion of shipping away from the Red Sea/Suez Canal, particularly tankers carrying middle distillates, including diesel. This diverts inventory for longer, supporting prices.
Weakness in Physical Diesel Markets: Despite potential bullish factors, physical diesel markets show signs of weakness or at least stability. Wholesale diesel prices, as indicated by the ULSDR.USA data series, have declined despite a relatively flat ULSD price on CME.
Regional Weakness: Differential data for physical diesel in key markets such as Chicago and Group 3 (Midwest region) indicate weakness, with the differential in Chicago falling to minus 51 cents a gallon.
The text suggests that while certain factors may support diesel prices, the overall trend is currently influenced by weather forecasts, market dynamics, and a prevailing weakness in physical diesel markets.
Inspired by: https://www.freightwaves.com/news/another-decline-in-benchmark-diesel-prices-comes-as-winters-impact-fades
