The fifth consecutive decline in the weekly Department of Energy/Energy Information Administration average retail price marks the first time the number has gone down that many weeks since September of last year.
The decline of 2.6 cents per gallon, to $3.2626, brings the benchmark price down 10.8 cents a gallon over five weeks from its most recent high of $3.734. The five weeks of declines is the first of that duration since five weeks of declines in September 2020 that stretched into one week of October. During that decline, the benchmark dropped 5.4 cents a gallon, exactly half the current level of decline. However, that drop was against a smaller base, with the five-week streak beginning at $2.441 a gallon.
The decline in retail diesel prices reflected in the DOE/EIA number is a small fraction of just how much commodity prices have declined in the past week, most of it coming Monday.
A week ago, on Dec. 13, ultra low sulfur diesel on CME settled at $2.2328 a gallon. That was another stop in what has been a roller coaster ride in oil benchmark prices.
ULSD, for example, first reacted to the news of the omicron variant on the day after Thanksgiving by dropping 8.83 cents a gallon, down to $2.0638. That remains the lowest price in the omicron-driven market, which just a few days after the day-after-Thanksgiving plunge recorded three consecutive days of increases in the ULSD price: 7.28, 5.34 and 3.67 cents, respectively.
As markets seemed to become comfortable with the idea that omicron was going to be a quick and relatively mild hit on petroleum demand, ULSD on CME steadily rose to a recent peak settlement Thursday of $2.2663 a gallon. But that has quickly reversed course, with a two-day decline of 9.33 cents over the last two trading days. That decline took place in almost equal halves of 4.64 cents on Friday and 4.69 cents Monday.
Oil markets are otherwise experiencing a relatively dry run of other-market moving news. OPEC earlier this month made its decision to add its agreed-upon production increase of 400,000 barrels per day in January after some doubt that it might do so after news of the omicron variant broke. A release of crude from the U.S. Strategic Petroleum Reserve is awaiting bids that will not come until after the new year, so new supply through that channel remains a few weeks off.
The market has been focused almost exclusively then on whether omicron will impact demand. In particular, concerns about air travel being even further reduced from current levels have hit the spread between diesel and crude, given that diesel is a middle distillate like jet fuel.
The weakness can be seen in a simple spread between Brent crude on the CME commodity exchange and ULSD. Although the first news about omicron narrowed that spread slightly, it widened out to 47.84 cents a gallon on Dec. 9. By Monday, the spread was down to 37.53 cents a gallon, the lowest level since that wild trading the day after Thanksgiving.
However, that is the only sub-40-cents settlement in recent weeks. Prior to that, the only sustained run of a sub-40-cents spread between ULSD and Brent was in August. But it’s now been in the high 30s for three consecutive trading days.
The DOE is not delaying next week’s price due to the holiday. It is being published Monday, Dec. 27.
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