The latest weekly Department of Energy/Energy Information Administration retail diesel price is a clear example of how retail numbers lag broader market moves.
The price for Monday was $3.72 a gallon, a decline of .04 cents. The decline marked the second week in a row that the benchmark number moved down, the first time the DOE/EIA reported consecutive declines since August.
Meanwhile, the commodity price of ultra low sulfur diesel (ULSD) on the CME commodity exchange has swung like a flag flapping in hurricane winds. On Monday of last week, the ULSD market settled at $2.3254 a gallon. That was down roughly 7 cents per gallon from a week earlier. Two days later on Wednesday, ULSD rose to a settlement of $2.383 a gallon.
But when markets opened Friday after taking a day off for Thanksgiving, the price of ULSD fell almost 29 cents per gallon, to $2.0945, the second-biggest one-day drop in price in the history of the contract. (In percentage terms, there have been several days with bigger declines.)
On Monday of this week, the same day the DOE/EIA released its number with the small decline, oil prices bounced back along with the rise in equity markets. ULSD on the CME rose 5.76 cents a gallon, to $2.1521. Still, even with that increase, the commodity price of ULSD is down just over 44 cents a gallon since its recent high of $2.5923, recorded Oct. 20.
The following Monday after that recent high-water mark, the DOE/EIA price was $3.713 a gallon. With the latest price, the DOE/EIA price is up 7 cents per gallon while the commodity price has fallen more than 40 cents.
Wholesale prices recorded Monday by the ULSDR.USA data stream in SONAR showed only a small decline since Friday. Part of that is likely linked to the fact that major price reporting agencies such as S&P Global Platts did not publish daily assessments Friday for U.S. petroleum products such as diesel.
Wholesale prices key off those physical assessments, more so than the CME price, because the physical assessments of the price reporting agencies capture variations in regional markets such as the U.S. Gulf Coast. The size of the drop to be recorded in wholesale markets Tuesday will be a key number to watch.
Friday’s big decline in price did have one tangible reaction in the market: OPEC is stepping back from decisions it was expected to make this week.
OPEC and its fellow non-OPEC exporters in the OPEC+ group were expected to agree this week to add another 400,000 barrels a day of crude to world oil markets in December. But the possibility of slower economic activity due to the omicron variant of COVID-19 has led the group to push back early-week technical meetings to later in the week as the group tries to estimate how much of a hit on demand will be created by the variant.
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