For the 19th consecutive week, the average retail diesel price published by the Department of Energy’s Energy Information Administration has risen.
The latest price is $3.191, an increase of 4.8 cents per gallon from a week earlier.
At 19 straight weeks, the benchmark price for fuel surcharges left behind the previous 15-week record for increases a month ago. It also has left behind all other prices since December 2018; that was the last time the weekly DOE/EIA average retail diesel price was as high as $3.19 a gallon.
The benchmark price has now risen 81.9 cents a gallon since the price that posted on Nov. 2. That was the last week that marked a decrease from the prior week. The price that day was $2.372 a gallon. Compared to a year ago, the diesel price is 45.8 cents a gallon more than in 2020.
While the diesel market has been boosted by the loss of as much as 5 million barrels per day of refining capacity on the (mostly) Texas Gulf Coast as a result of February’s deep freeze, the reality is that the market for global benchmark Brent crude has risen 10.2% from the Friday before the freeze hit starting over the weekend of Feb. 13-14. Ultra low sulfur diesel on the CME commodity exchange has risen just 9.8% since that time. (The comparisons are with the CME settlement for Brent and ULSD on Monday.)
But the diesel market will continue to watch what is happening with the return of refining capacity. The news continues to be good from the perspective of diesel buyers. In recent days, both S&P Global Platts and Bloomberg have published articles on a solid pace of return of those refineries. Platts described the refineries on the Gulf as being “in various stages of restart.”
Bloomberg listed eight refineries as back to normal, eight restarting (though with some fully restarted in some but not all operations), and two preparing to initiate a restart.
The most recent weekly EIA report on refining operations said refineries in PADD 3, a geographic division that includes the Gulf Coast, operated at 60.7% of capacity in the week ended March 5. That four-week run of capacity numbers went 86.5%, 62.8%, 40.9% and 60.7%. The next report on operations will be this Wednesday for the week ended last Friday.
But even if that number takes a significant jump in the coming weeks, the reality is that the deep freeze and the shutdowns did tighten diesel inventories. Inventories of all nonjet distillates, which includes diesel, have declined over the past four EIA reports from 36.5 days cover to 33 days cover, less than the five-year average at this time of year. By contrast, days cover for distillates was more than 50 last summer, a record-breaking period of huge inventories created by the pandemic and refiners making more diesel than they needed to so they could avoid producing what they really didn’t want to make at that point: gasoline.
As far as whether the 19-week streak will continue, there are three things to note: One, it’s too early to know; two, the national average wholesale price found in the ULSDR.USA data series in SONAR was down to $2.22 a gallon Sunday, a drop from where it was a week earlier at $2.228; and three, ULSD on the CME did start the week off Monday with a 1.86-cent decline to $1.9489 a gallon.
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