The benchmark diesel price used as the basis for most fuel surcharges inched up this week, the fourth consecutive week of increases, in the midst of an oil market that still is pushing higher.
The average weekly retail diesel price published by the Department of Energy/Energy Information Administration rose 0.7 cents/gallon effective Monday, published Tuesday, to $3.688/g, up 0.7 cts/g.
It is the smallest gain in the ongoing four-week climb that has taken the price up from $3.459/g on January 12 to the latest number. That January 12 price was the lowest since June.
With the usual lag between the price of ultra low sulfur diesel (ULSD) on the CME commodity exchange and the price at the pump, it’s uncertain where retail markets might be headed next.
Calendar impacting prices
The price of ULSD on the CME commodity exchange is significantly lower now than it was two weeks ago, but that has little to do with the overall market and everything to do with the calendar.
Two weeks ago, and through trading on January 30, the front month ULSD contract traded on CME was for barrels delivered into New York harbor in February. On February 2, the front month became March as February expired.
Given that March is generally warmer than February; that ULSD and heating oil are structurally similar; and that markets two weeks ago were reacting to a deep freeze affecting heating oil demand, ULSD on CME closed out the month with a January settlement of $2.7356/gallon, the highest since April 2024.
But by Monday, the settlement for March barrels was down to $2.3598/g, as markets then were reacting to reports of possible progress in U.S.-Iran relations as well as the rollover in the contract.
Up and down trading in the days that followed brought the ULSD settlement as high as $2.47/g on Wednesday, before easing to settle Monday at $2.4169/g.
Crude benchmark is rising
Even as that was going on in ULSD, the market for global crude benchmark Brent has been steadily moving higher. After a settlement Monday of $69.04/barrel, it has increased by $8.19/b from the December 31 settlement of $60.85.
This was going to be the year of the oil glut, according to major forecasting agencies like the International Energy Agency. They looked at the OPEC and OPEC+ nations having unwound much of their earlier reductions in output, then saw demand increases that were modest at best, three in higher output from a list of countries that included Guyana, Brazil, Canada and the U.S., and the conclusion was that significantly lower prices were on tap.
Where’s the glut?
But almost six weeks into the year of the forecast great glut, that is not occurring. The latest developments in oil prices have undercut that narrative.
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