On the CME commodity exchange, the price of ultra-low sulfur diesel has risen by more than 45 cents in just two trading days.
The dramatic growth is being fueled in part by abnormally low diesel and jet fuel supplies. Both jet and diesel are distillates, and the recent high price of jet fuel compared to crude and other products has sparked concerns that refinery output may shift substantially toward the more profitable manufacture of jet and away from diesel.
The price of ultra-low sulfur diesel on the CME jumped 25.4 cents per gallon on Wednesday, after rising 19.67 cents the day before. While the Wednesday settlement price of $3.7184 per gallon is still significantly below the contract’s all-time high of $4.1534 on March 24, the two-day increases are considerable.
However, given the recent volatility in the oil and diesel trade, those two rises pale in comparison to the highest one-day gain — 51.58 cents per gallon on March 8. Even as a two-day increase, 45.07 cents per gallon is less than the nearly 50-cent two-day rise of March 17 and 18.
The Energy Information Administration announced Wednesday that total jet fuel supplies in the East Coast’s PADD 1 region were 6.466 million barrels, the lowest in more than 30 years. Last Monday, the New York harbor market reached a value that equated to prices far above $7 per gallon.
Meanwhile, national inventories of ultra-low sulfur diesel have dropped to slightly over 100 million barrels, the lowest level since November 2019.
As a result, ULSD increased 7.33 percent in the market. On Wednesday, the U.S. crude benchmark West Texas Intermediate rose 3.65%, the global crude benchmark Brent rose 3.96%, and RBOB gasoline, an unfinished gasoline blendstock that serves as a proxy market for completed gasoline, rose 4.36%.
It is a continuation of a pattern in which diesel has risen compared to crude benchmarks, fueled by Russia’s substantial role as a global diesel supplier.
There are some hints of improvement elsewhere. S&P Global Commodities, which includes the legacy Platts company, valued physical diesel in the Gulf Coast at 7.75 cents per gram more than the CME price on Wednesday. On March 31, it peaked at 17.25 cents.
The day’s settlements put the differential between ULSD and Brent at around $47.40 per barrel. That is not a recent high; it was above $50 per barrel for many days in mid-March. However, a year ago, that spread averaged less than $16 per barrel.
Retail prices have been trending downward, but with wholesale costs expected to rise as a result of the increase in futures prices, that downward trend may be reversed.
A comparison of average retail diesel prices at all Pilot Flying J locations, derived from price spreadsheets published on the chain’s website, shows that prices have reduced by around 10.4 cents per gallon companywide since April 4.
According to the DTS.USA data series in FreightWaves SONAR, the average daily retail diesel price on Wednesday was $5.031 per gallon. On March 29, it reached a high of $5.141.
According to the ULSDR.USA data series in SONAR, wholesale prices increased to $3.796 per gallon on Wednesday, up from $3.632 the day before. However, the Wednesday price would have reflected numbers at the start of the day, so it would not have adjusted to account for the significant increase on the CME later that day.
The weekly EIA data also indicated a potential decrease in diesel demand, which would correspond with estimates of slower freight tonnage. 4.128 million barrels per day is the five-year average for the first full week of April, excluding the pandemic-impacted 2020 number. However, the statistics for the previous week were 3.484 million.
