The diesel price used for most fuel surcharges rose for the fifth straight week, climbing on the back of earlier gains in the futures market that before Wednesday had lost momentum in recent days.
The Department of Energy/Energy Information Administration average weekly retail diesel price rose 2.3 cents/gallon Monday, announced a day late on Wednesday due to the President’s Day holiday, to $3.711/g. Five weeks of increases have increased the price by 25.2 cts/g, the benchmark having stood at $3.459/g before the run of higher prices.
Those gains were powered in part by the brutal winter in the U.S. Northeast where heating oil is the fuel of choice to keep people and dwellings warm. Heating oil and diesel are structurally similar and the correlations of price movements between the two is high.
But the range of price movements since the start of February, when ULSD barrels for March delivery became the front month contract on the CME commodity exchange, has been relatively narrow.
After exiting January with a temperature-driven settlement of $2.7356/g for ULSD barrels to be delivered in February, the March contract opened this month with a settlement of $2.3598/g. That has been the low settlement for the month so far. But the high was $2.4404/g on February 11, just about 8 cents higher, showing how uneventful the market has been.
Crude to diesel spread holding
There has been little shift in the spread between ULSD and Brent, the world’s crude benchmark. It all suggests that after a wild first two months of the year, driven not only by geopolitics but the decline in the dollar (which is bullish for oil) and weather as well, a temporary period of stability may have been reached.
One piece of bearish news in the past week was the monthly report of the International Energy Agency. The IEA has been publishing supply and demand forecasts for 2026 which showed an enormous surplus of supply relative to demand.
IEA moves demand estimate down again
The February report widened that gap. Where in its January report the IEA projected that global demand growth for 2026 would be 930,000 barrels/day, that number in the latest report was down to 850,000 b/d.
Despite that, as long-time energy journalist John Kemp wrote recently in a report, investors who see oil as an asset class are not buying the bearish scenario.
“Investors are increasingly bullish about the outlook for oil prices as potential risks to production and tanker traffic multiply – including threats of U.S. military action against Iran and stricter sanctions enforcement,” Kemp wrote. He cited data from commodity exchanges on the net buying of investors in oil contracts.
Those bullish views were on display Wednesday at midday. ULSD was up 8.43 cts/g to $2.4749/g, an increase of 3.53%. If the ULSD price settles there, it would be the highest settlement this month.
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