The benchmark diesel price used to calculate most fuel surcharges in the United States recorded its steepest weekly drop in more than three years.
The Department of Energy’s Energy Information Administration said the average weekly retail diesel price fell by 20.5 cents per gallon to $5.403 per gallon. That marks the largest one-week decline since December 22, 2022, when the benchmark dropped by more than 22 cents.
It was also the second consecutive weekly decline after twelve straight weeks of increases.
Including the smaller fall recorded the previous week, the DOE/EIA benchmark has now dropped by 24 cents over a two-week period.
Even so, recent movements in futures markets suggest there may still be room for further declines. The ultra low sulfur diesel contract on the CME has been highly volatile over the past two weeks.
On April 8, after a ceasefire was announced in the Iran war, ULSD prices collapsed by 66.6 cents per gallon in a single day, a decline of 14.88%, leaving the contract settled at $3.8084 per gallon.
Since then, there have been three trading days where prices fell by 17.5%, 21% and 43.6% respectively. But those declines were offset by other days of strong gains, including two sessions up 12.9%, as well as increases of 7.25%, 8% and 14.4%.
By Monday, ULSD had settled at $3.5409 per gallon, which was 26.75 cents lower than its already sharply reduced April 8 closing level. By around 12:10 p.m. EDT on Tuesday, however, ULSD had recovered by 14.8 cents to $3.6889 per gallon, a gain of 4.18%.
Many oil analysts continue to stress that while futures prices are highly visible and liquid, they do not always reflect the best real-time picture of the physical oil market. In some cases, physical crude trades at a premium to futures.
One example is dated Brent, the physical version of the global crude benchmark for oil to be loaded during various periods over the coming 30 days. According to several news sources, dated Brent traded Monday at around $105 per barrel, while Brent futures for June delivery were roughly $10 per barrel lower.
Oil analyst Paul Sankey, speaking to CNBC on Monday, highlighted this disconnect and its impact on global jet fuel markets — an issue that matters to diesel consumers because diesel and jet fuel are both distillates and often move in similar relation to Brent.
Sankey said jet fuel prices in Asia and Europe were effectively at $200 per barrel, compared with less than $100 per barrel before the current escalation. He warned that European jet fuel demand typically rises by around 40% during summer because of holiday travel, and suggested that supply may not be able to keep pace. In his view, that could lead to cancelled holidays.
Dan Pickering, chief investment officer at Pickering Energy Partners, also told CNBC that if peace talks aimed at ending the Iran war succeed, oil prices could fall significantly. He said his firm expected crude could retreat into the mid-$70s per barrel range. Brent futures settled Monday at about $95 per barrel.
Even so, Pickering cautioned that the market still has a long way to go before returning to normal conditions. He said the market continues to tighten each day, especially as Asian importers compete for available crude. In his view, the situation remains very real and problematic, and is likely to continue for several more months.
His conclusion was that the market needs to stop reacting solely to rhetoric and instead focus on actual physical barrel flows.
