The Energy Information Administration (EIA) warned today that the end may be in sight for declining oil prices. That word comes thanks to a 1.2 million barrel/day cut in production announced by OPEC last week and a sharp decline in inventories for the week ending Oct. 20.
Diesel prices rose for the first time in ten weeks for the week ending Oct. 22, up 2.1 cents to $2.524 per gallon, according to EIA. Not all regions posted an increase, however. California saw the sharpest decline, down 3.4 cents to $2.669. California was also the most expensive region in which to fill up. The 4.3-cent price increase in the Midwest was the sharpest in the U.S., yet prices remained below the national average at $2.502. The Gulf Coast was the cheapest region in which to buy diesel at $2.477 in spite of a 1.6-cent increase.
Meanwhile, gasoline prices fell—if at a moderating pace—1.8 cents to $2.208.
The diesel market is slated to see a seasonal increase in prices as demand for distillate, a petroleum product from which diesel and home heating oil is derived, increases as cold weather drives up heating oil use.
“There is a seasonal aspect of distillate demand for the winter heating season,” Jonathan Cogan, EIA energy information specialist told FleetOwner. “Also the overall demand for distillate over the last several years has been increasing fairly rapidly. We may be at a trend where prices level off, if not increase. Demand for diesel has been increasing for the last several years at twice the rate of gasoline. For example, in 2005 gas demand rose 7.7% while demand for diesel rose 18.8%. That means there’s a lot of demand pressure on diesel vs. gasoline.”
In spite of a tightening supply situation for both crude oil and distillates, they are still well above the seasonal average. Oil stocks numbered 332.3 million barrels, 15.9 million barrels above the same period last year. Distillate stocks were 144 million barrels, 22.9 million barrels more than the same period last year.
On Oct. 15, some diesel retailers switched from low sulfur diesel to ultra-low sulfur diesel (ULSD) to comply with an Environmental Protection Agency (EPA) rule. In general, there were no major supply disruptions reported last week as a result of the transition. Since June 1, refiners have been required by the EPA to allocate 80% of its supply of on-highway diesel to ULSD. Diesel distribution supply chains have been transitioning since to deliver uncontaminated batches to retail pumps.
For more information, go to www.eia.doe.gov