The final benchmark retail diesel price of the year came on the same day that distillate market fundamentals pushed futures prices significantly higher.
The Department of Energy/Energy Information Administration average retail diesel price, the basis for most fuel surcharges, came in at $3.503 a gallon, an increase of 2.7 cents. The past four weeks have seen the price rise twice and fall twice.
The final count for the year: The DOE/EIA price in the past 52 weeks declined 37.3 cents per gallon from the level that was posted Jan. 1, when it was $3.876 a gallon. A few weeks later, the DOE/EIA price was $4.109 for two consecutive weeks. This week’s price is down 60.6 cents from that level.
The relative stability of the recent market alongside the overall weakness of prices this year can be seen in the fact that this week’s DOE/EIA price is the highest in four weeks, even as it is also the fifth lowest recorded in 2024.
But one of the most basic fundamentals in the market for distillates – winter weather – had an enormous impact on prices Monday, signaling higher prices ahead for diesel.
With long-range forecasts now projecting some extremely cold January weather in the U.S. and Europe, traders pushed up the two key prices tied to heating demand: ultra low sulfur diesel (ULSD) and natural gas.
ULSD, which like heating oil is a distillate, rose 5.47 cents a gallon to settle at $2.2995 a gallon, for a gain of 2.44%. The settlement was the highest since Nov. 5.
Meanwhile, natural gas for delivery at Louisiana’s Henry Hub rose 12% to settle at $3.936 per thousand cubic feet (Mcf), a gain of 42.2 cents. Natural gas settled slightly higher one day last week, but in general, if prices in this range hold, they will be the highest continuous prices in two years.
Since a low of $1.575 per Mcf on March 26, the natural gas price on CME has risen almost 152%.
U.S. inventories of all non-jet distillates is relatively low for this time of year, according to DOE data. (Jet fuel is a distillate, but the EIA breaks out statistics separately for jet.) The most recent report for the week ended Dec. 20 put total non-jet distillate inventories at 116.5 million barrels.
Making comparisons to five-year averages, which is the standard practice, is skewed by the fact that the comparison would include 2020, when distillate inventories soared as refiners during the pandemic turned away from gasoline output and shifted operations more toward distillate production, given the collapse in gasoline stocks.
But however the comparison is made, inventories are looking low entering into what for January at least looks like the coldest weather in several years. (The ability of the oil market to sail through the winter of 2023, the first full winter after Russia invaded Ukraine, was attributed in part to the moderate weather that Europe experienced that year.)
