The U.S. average retail price of diesel increased 1.1 cents to $2.787 a gallon as oil prices along with Middle East tensions rose as opposing forces in Iraq clashed over control of the city of Kirkuk and nearby oil fields.
Diesel now costs 30.6 cents more than it was a year ago, when the price was $2.481 a gallon, the Department of Energy said Oct. 16. Regional prices for trucking’s main fuel rose everywhere except in California, where they dropped 0.7 cent a gallon, and in New England, where they fell 0.4 cent.
The U.S. average price for regular gasoline fell 1.5 cents to $2.489 a gallon. It is 23.2 cents higher than it was a year ago, DOE’s Energy Information Administration said.
Gas prices fell in all regions except the Midwest, where the average price climbed 4.2 cents to $2.375.
Diesel prices may have found a floor as inventories have softened, one analyst said.
“In recent weeks, distillate inventory [primarily ultra-low-sulfur diesel used in transportation and to a lesser degree as heating oil] has been running 20 million to 25 million barrels below last year. And if you want to talk about one of the barometers OPEC is looking at to tell if inventories are starting to clean up, it is total inventories versus the five-year average,” Denton Cinquegrana, chief oil analyst at Oil Price Information Service, told Transport Topics.
“Distillate inventories have moved below that five-year average over the last couple of weeks,” he said. “That may be why [retail] prices are moving up a little.”
With diesel tight, Cinquegrana expects retail diesel prices to continue to show “a little bit of strength.”
Also, over the next six months, demand for diesel is likely to rise given the “tremendous rebuilding effort” needed after the recent series of natural disasters from hurricanes, earthquakes and wildfires. Also, increased activity in oil field services, mining and from the economy are doing well. “With construction, comes diesel,” he said.
Distillate inventories largely have fallen heading into this winter because of recent refinery outages along the U.S. Gulf Coast after Hurricane Harvey coupled with strong demand as global industrial and economic activity expands, according to EIA.
About .72% of the current oil production in the Gulf of Mexico remains shut-in, which equates to 12,614 barrels of oil per day, according to the Bureau of Safety and Environmental Enforcement’s final report on Tropical Storm Nate issued Oct. 14 .
Also, U.S. production of biodiesel was 149 million gallons in July, the latest available timeframe, 9 million gallons higher than production in June, according to EIA.
West Texas Intermediate crude futures on the New York Mercantile Exchange closed at $51.87 per barrel Oct. 16, compared with $49.58 on Oct. 9.
Crude climbed to a two-week high as Iraqi troops clashed with Kurdish forces, disrupting supplies from a region that produces more than half a million barrels a day, Bloomberg News reported.
The Kurds in September voted in a referendum to break away from Iraq, and had controlled Kirkuk.
“The Iraqis are flexing their muscle,” Thomas Finlon, director of Energy Analytics Group in Wellington, Fla., told Bloomberg. “It’s unlikely that it escalates to anything serious. I’m not too concerned about a flashpoint at all.”
At the same time, U.S. crude oil production will average 9.4 million barrels per day in the second half of 2017, 340,000 more than in the first half of the year. Production in 2018 is expected to average 9.9 million barrels day, surpassing the previous high of 9.6 million set in 1970, based on projections in EIA’s latest Short Term Energy Outlook.
Meanwhile, the weekly U.S. rig count fell to 928 during the week of Oct. 13, eight rigs less than the week before and 389 more than a year earlier, oil field services company Baker Hughes Inc. reported.
Houston-based Baker Hughes ranks No. 15 on the Transport Topics Top 100 list of the largest private carriers in North America.
In the continental United States, rig counts typically lag changes in the WTI price with by about four months. Changes in the number of active rigs lead to changes in production volumes within about two months, according to EIA.