November 13, 2017 5:45 PM, EST

Diesel Climbs 3.3¢ to $2.915 a Gallon

Crude Price Holds Steady
Diesel truck stopJohn Sommers II for Transport Topics

The U.S. average retail price of diesel rose 3.3 cents to $2.915 a gallon as oil hovered near $57 a barrel amid mounting talk of the glut of oil receding.

It was diesel’s highest price since March 16, 2015, when the price was $2.917.

Diesel now costs 47.2 cents more than it did a year ago, when it was $2.443 a gallon, the Department of Energy said Nov. 13.

Prices for trucking’s main fuel rose in all regions.

Also, diesel inventories have been shrinking.

At the end of September and October, inventories of distillate — primarily ultra-low sulfur diesel used in transportation and to a lesser degree as heating oil — fell below the five-year average for the first time since March 2015, according to EIA’s latest Short-Term Energy Outlook.

Also, the U.S. average price for regular gasoline climbed 3.1 cents to $2.592 a gallon, and was 40.8 cents higher than it was a year ago, DOE’s Energy Information Administration said.

Average gas prices rose in all regions.

One trucking industry executive expected generally stable oil prices would hold down the price of diesel.

“With technology allowing us to find oil so easily, I don’t know when we ever see $100 a barrel oil again, right. So I don’t know if you’re going to have the huge spikes in diesel that you had in the past, either,” W.M. “Rusty” Rush, chairman and CEO of Rush Enterprises Inc., said in a third-quarter conference call with stock analysts.

Rush operates more than 100 heavy- and medium-duty truck dealership locations in 21 states.

Total U.S. crude oil production will average 9.2 million barrels a day for all of 2017 and 9.9 million barrels in 2018, which would mark the highest annual average production, surpassing the previous record of 9.6 million barrels set in 1970, according to EIA.

Meanwhile, West Texas Intermediate crude futures on the New York Mercantile Exchange closed at $56.76 on Nov. 13, compared with $57.35 on Nov. 6.

The current price of oil could be at the mid-range of what lies in store for oil prices next year.

In its outlook, EIA noted NYMEX contract values for February 2018 delivery that traded during the five-day period ending Nov. 2 suggest that a range of $45 to $67 a barrel encompasses the market expectation for February WTI prices at the 95% confidence level.

Oil has climbed 20% since the beginning of September as global supplies tightened and speculation mounted that the Organization of Petroleum Exporting Countries and allied producers will extend output curbs beyond the end of March.

In Abu Dhabi Nov. 13, OPEC Secretary-General Mohammad Barkindo described the production curbs as the “only viable option” to erode excess supplies, Bloomberg News reported.

“With OPEC raising estimates, there’s an expectation that the market’s a lot tighter,” Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago, told Bloomberg. “We’ve gone from mentality of glut, glut, glut, to more rebalancing.”

One factor that potentially could lift diesel prices slightly and affect supply and demand takes effect in 2020. That’s when the International Maritime Organization will cap the sulfur content of marine diesel fuels at 0.50% m/m, or mass/mass. The ultra-low-sulfur diesel is intended to replace the sulfur-laden bunker fuels that ocean-going vessels now use.

“The main belief is [the IMO rule] is going to increase diesel demand and could potentially tighten up the market a little bit,” Denton Cinquegrana, chief oil analyst at the Oil Price Information Service, told Transport Topics.

“The picture will get a little more clear in 2019. Right now it’s still a little bit murky,” he said.

But tighter supply and demand may not register as much on the trucking industry because trucks continue to get more and more fuel efficient, he said.

Turning to oil, Cinquegrana said the previous glut of crude is easing somewhat.

“You can say we are coming off the glut, but there is still a lot of oil out there,” he said. “One thing that is impressive is that OPEC has been incredibly disciplined in this whole situation.”

In the meantime, the weekly U.S. rig count was 907 during the week of Nov. 10, nine rigs more than the week before and 339 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.