The Department of Energy/Energy Information Administration average retail diesel price on Monday posted its biggest one-week decline this year.
The price, the basis for most fuel surcharges, dropped 7.8 cents a gallon to $3.553. The last time the price had dropped at least that much was Dec. 18.
This week’s decline broke a string of four consecutive weeks of rising prices. And it comes on the back of movement in the futures market that has eliminated earlier increases driven by the prospect of escalated military action between Iran and Israel.
That fear hasn’t completely disappeared; prices for ultra low sulfur diesel (ULSD) on the CME commodity exchange Monday moved up primarily on new speculation about what renewed shooting between the two nations would look like and whether that might impact Iranian oil production or exports, despite other reports that Israel has no such plans.
After falling for the prior five trading sessions, ULSD rose 3.11 cents per gallon. It put the settlement price at $2.1833, about 17 cents less than where it was Oct. 10, the high-water mark of speculation regarding the impact of an Iran-Israel series of attacks.
A pair of interviews on Bloomberg TV on Monday drove home the reason why a situation where a major oil exporter, Iran, might be on the verge of having its oil facilities attacked by a significant military power has had minimal impact on oil markets. (Brent, the world crude benchmark, is down $6.64 from its Oct. 7 high settlement of $80.93 a barrel even after an increase of $1.94 Monday.)
Javier Blas, a longtime journalist now with Bloomberg Opinion covering commodities, said he did not think the most bearish forecasts of global demand are completely accurate. “We are growing demand at around a million barrels a day, and that is quite remarkable, considering all the amount of electric vehicles and energy efficiency that we are introducing in the global economy,” Blas said in the interview.
For Blas, the price of crude is closer to $50 a barrel than it is to $100 because of the supply side of the equation.
That supply forecast sees OPEC+ possibly unwinding some of its production cuts in 2025, as well as the continuing gains in output from the Americas: the U.S. (though production has plateaued for several months), Brazil, Guyana and Canada.
“This is not just a question about how strong China is. It’s also a question about supply,” Blas said. “You can have very strong demand and very strong supply and therefore an oversupplied market.”
A similar perspective on demand was discussed by the director of the International Energy Agency, Fatih Birol, also on Bloomberg TV. His agency produced a closely-watched monthly report on oil market fundamentals.
Birol sees electric vehicles as having an outsized role in demand forecasts. Given that prices of any commodity are always set on the margin – what is the supply/demand dynamic for the last unit of that commodity sold? – a creeping percentage of sales of electric vehicles displacing petroleum does have an impact on oil markets.
Given that prices of any commodity are always set on the margin – what is the supply/demand dynamic for the last unit of that commodity sold? – a creeping percentage of sales of electric vehicles displacing petroleum does have an impact on oil markets.
“As the engine switches to electricity now, we expect that global oil demand will be weak, and before 2030 it will peak,” Birol said. The IEA’s recently published estimate for global oil demand in 2025 is 103.84 million barrels a day, up 1 million barrels a day from 2024. But that increase is less than the IEA had been projecting, and a 1 million-barrel-a-day jump is extremely low compared to recent years.
Even after that peak is reached, Birol noted, “we still need oil.”
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