Diesel prices have remained constant in retail, with indications from futures markets suggesting an upcoming rise.
In the world of commodities, the price of Ultra-Low Sulfur Diesel (ULSD) on the CME Commodity Exchange has seen some significant fluctuations recently, but real-time access to current market data, including the impact of political events in Ukraine, remains unavailable.
Let's delve into the recent price movements. The weekly Department of Energy/Energy Information Administration (DOE/EIA) average weekly retail diesel price, effective Monday, July 25, saw a decrease of 2.7 cents per gallon, settling at $3.739 per gallon. However, these changes in the diesel benchmark price have brought numbers at the pump back to where they were on July 11.
The most notable surge occurred on Tuesday, when ULSD on the CME commodity exchange settled at $2.3935 per gallon, marking a 6.24 cent increase on the day and more than 10 cents in just two days. This settlement was the highest on CME since a $2.3995 per gallon price on July 31.
The recent increases in ULSD prices on the CME commodity exchange are linked to several factors. One of these is the pressure aimed at stopping purchases until Moscow moves toward some sort of cease-fire with Ukraine. Another factor is the increase in pressure from the Trump administration on countries that buy Russian oil to halt their purchases.
Ukraine has also been actively targeting Russian oil infrastructure. Most recently, Ukrainian forces attacked a Russian oil refinery. This escalation has led to Russia's Transneft pipeline, which transports more than 80% of Russian crude output, restricting companies from storing too much oil with it due to the risk of drone attacks.
The spread between ULSD and the global crude benchmark Brent on the CME has also increased. On Tuesday, the front month prices were more than 76 cents per gallon, compared to near 65 cents per gallon at the end of August.
Interestingly, despite these price increases on the futures market, there has been no sign of the recent increases in the DOE/EIA price yet. This is likely due to the lag between futures price movement and retail prices.
Lastly, the charter rates for a Very Large Crude Carrier (VLCC) of crude from Saudi Arabia to China have reached $87,000 per day, the highest in 2 1/2 years. This increase in charter rates could potentially impact the overall cost of diesel and other petroleum products in the future.
In conclusion, the price of Ultra-Low Sulfur Diesel on the CME Commodity Exchange has seen significant fluctuations in recent weeks, driven by a variety of factors including political events in Ukraine and increased pressure from the Trump administration on countries buying Russian oil. However, the impact of these changes on retail prices is yet to be fully realised due to the lag between futures price movement and retail prices.
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