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DOE/EIA price up 1.9 cents, retail diesel starting to significantly lag wholesale prices

DOE/EIA price up 1.9 cents, retail diesel starting to significantly lag wholesale prices

The weekly average retail diesel price of the Department of Energy/Energy Information Administration rose Monday to $3.274 a gallon, an increase of 1.9 cents per gallon.

Given recent increases in both commodity and wholesale prices that had not been reflected in relatively minor recent upward moves in retail prices, the increase could be seen as smaller than expected.

While retail prices do not automatically reflect wholesale prices, the small retail increase contrasts with movement in the national average wholesale diesel price based on the ULSDR.USA data series in SONAR. That number rose 7.6 cents a gallon between May 28 and Monday, increasing to $2.282 a gallon from $2.216 on the Friday just before Memorial Day weekend. The wholesale price according to ULSDR.USA is also up 13.3 cents from May 21. 

Yet the increases in the DOE the past three weeks, a timeline that largely aligns with those increases in the ULSDR price, now total just 2.5 cents a gallon. 

As a result, the FUELS.USA data series in SONAR, which measures the spread between wholesale and retail diesel prices, stood Monday at just more than 92 cents a gallon, the lowest it’s been all year. 

To learn more about FreightWaves SONAR, please go here.

The restrained increase in diesel prices also stands in contrast to what is going on in commodity markets. Even with a slight decline in prices on Monday, the ultra low sulfur diesel price on the CME commodity exchange has risen a bit more than 7 cents a gallon since May 28.  

But one feature of the market for the past several weeks has been that the spread between CME diesel and the price of Brent, the international crude benchmark, has traded in a tight range mostly from 40 to 42 cents per gallon.

Diesel is neither outperforming nor underperforming crude. That has not been the case for much of 2021, where diesel’s spread against crude has gradually and steadily climbed from levels at the start of the year near 25 cents a gallon. It appears to have reached an equilibrium now near the 40- to 42-cents-a-gallon level,  which is where it opened 2020 before the impact of the pandemic drove it down on the back of excessive diesel production relative to demand.

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7 June 2021, 23:37