Benchmark diesel price up for second straight week, futures markets rise sharply

After up-and-down movements for several weeks that netted out to lower retail diesel prices, two weeks of upward moves as well as developments in the futures market are signaling that a bottom may have been reached for now.

The average weekly retail diesel price published Monday by the Department of Energy/Energy Information Administration rose 2.5 cents a gallon to $2.592. That price is used for most fuel surcharges and is up 4.3 cents per gallon over the past two weeks.

But it is still well below the prices that prevailed for most of January and February. The price hit a recent high of $3.1716 a gallon on Jan. 20.

Futures prices for crude oil and products all rose on the CME commodity exchange Monday. Ultra low sulfur diesel (ULSD) settled at $2.314 a gallon, up 5.31 cents on the day, an increase of 2.35%. Benchmark U.S. crude West Texas Intermediate rose $2.12 a barrel, to $71.48, jumping 3.06%. It was the first WTI settlement above $70 a barrel since Feb. 27.

ULSD’s settlement was the highest since $2.3549 a gallon on Feb. 28. The low for this month was $2.1622 a gallon on March 13; the Monday settlement marked an increase of 7% in just over two weeks.

News reports tied the increase in oil prices to weekend articles that said President Donald Trump was “very angry” with Russian President Vladimir Putin and might put secondary tariffs on the country that would work to restrict Russian oil exports. An article from Bloomberg quoted Rebecca Babin, senior energy trader at CIBC Private Wealth Group, as saying supply fears were the dominant feature in the market Monday because of the threat of new restrictions against Russia.

But Babin also was quoted as saying that “if broader risk assets continue to weaken, crude may eventually succumb to demand worries.”

An increase in prices in January was generally attributed to restrictions the Biden administration put on Russia in its final days in office.

Another factor in the market Monday were the U.S. crude production numbers in the monthly supply and demand report from the EIA. That report is on a two-month lag, and the data in it is considered more accurate than the weekly figures released each week by EIA.

The EIA reported that U.S. crude production fell to 13.15 million barrels a day in January. It’s the lowest in 11 months and was a bigger drop than the weekly numbers would have indicated.

The production figure was down 2.3% from December’s output of 13.451 million barrels a day. The key state of Texas showed a decline of 1.8% while North Dakota was down 0.8%. New Mexico, which is now the second-biggest producing state in the U.S., saw a decline of 2.5%.