Diesel prices decline for the third consecutive week
In a recent development, the average retail diesel price has witnessed a significant drop, marking the third consecutive weekly decline. The decline is primarily attributed to higher U.S. crude oil inventories, steady U.S. oil production, and forecasts of lower crude oil prices.
The S&P Global Commodity Insights' latest monthly report sheds light on these factors. U.S. crude oil stocks have recently increased by over three million barrels, signalling easing demand against strong supply. The U.S. oil production is on track to reach a record 13.4 million barrels per day in 2025.
Moreover, Brent crude prices are forecasted to dip below $60 per barrel later in 2025 and potentially near $50 in 2026. This predicted downward trend in crude prices is expected to have a significant impact on diesel prices, given that crude costs constitute a major part of diesel pricing.
Regarding OPEC+ production levels, the report does not provide specific recent figures or detailed changes. However, the context of abundant U.S. oil production and elevated inventories suggests that OPEC+ production may be steady or potentially facing pressure to adjust as global supply stabilises or grows, influencing crude prices downward.
The decline in diesel prices is also attributed to the on-again, off-again nature of a possible agreement between Russia and Ukraine. Other factors contributing to the decline include a strengthening dollar and recent increases.
It's worth noting that the report does not discuss the current retail diesel price or the settlement price of ULSD on the CME commodity exchange. Similarly, the report does not specify the exact production level for non-OPEC countries in July, nor does it attribute the OPEC+ production decrease to any specific external factors.
The futures price of ultra low sulfur diesel (ULSD) on the CME commodity exchange has been gradually decreasing since late July, largely tied to lower crude price forecasts and higher availability of supply, mirroring retail diesel trends.
In summary, the diesel market is currently influenced by strong U.S. supply and inventory levels combined with predicted weaker crude prices. OPEC+ production remains a factor but without clear recent data showing significant cuts or hikes. The Department of Energy/Energy Information Administration average weekly retail price is the basis for most fuel surcharges, currently standing at $3.754 per gallon.
The S&P Global Commodity Insights report suggests that the reduced diesel prices could be influenced by the anticipated decrease in Brent crude prices below $60 per barrel in 2025 and potentially near $50 in 2026, since crude costs are a significant part of diesel pricing (finance, energy). The abundant U.S. oil production and increased crude oil inventories are expected to have an impact on OPEC+ production levels, potentially leading to pressure for adjustments as global supply stabilizes or grows (industry).
