U.S. diesel prices drop as Europe’s ban on Russian imports begins By Reuters


© Reuters. FILE PHOTO: A Chevrolet pickup truck drives past fuel pumps at Terrible’s Road House, the world’s largest Chevron gas station, in Jean, Nevada, U.S., February 27, 2022. REUTERS/Bing Guan

By Laura Sanicola

(Reuters) – U.S. diesel prices have dropped this month and could go lower, analysts said, an unexpected swoon that coincided with the start of a British and European Union ban on Russian fuel imports.

The falling demand behind the price drop has allowed the United States to rebuild stocks, especially along the East Coast where scarce supplies six months ago raised prospects of curbs on U.S. exports. Lower prices could ease inflation worries that have occupied investors.

Distillate fuels – including , jet fuel and diesel – were in short supply during much of 2022 as refinery closures and strong demand combined to lift prices. Heating oil futures had hit $5.14 per gallon in late April and mostly remained above $3 per gallon until this month.

In part, European buyers had increased purchases of Russian distillates ahead of the import ban that took effect on Feb. 4. A relatively warm winter across the United States and Europe and lower commercial trucking activity lowered demand.

Those factors helped push up U.S. inventories this week to 120.5 million barrels, the highest level in a year.

“This week was supposed to be when diesel prices blew out to the moon, but that’s not close to what happened,” said Bob Yawger, director of energy futures at Mizuho.

Diesel demand by truckers fell off at the end of this year as high inflation impacted U.S. demand for goods. The Cass Freight Index for December, which measures cross-country shipments, showed a 3.9% year-on-year decline in shipments.

The closely watched Cowen/AFS Freight Index also showed a 13.7% year-on-year drop in truckload volumes for the fourth quarter of 2022.

Demand for one type of distillate – jet fuel – is expected to rise ahead of the summer vacation, according to Patrick DeHaan, petroleum analyst at GasBuddy.

Refiners also have a heavy slate of planned downtime at their facilities, which has the potential to send inventories tightening again in the next two months

“I wouldn’t say we’re out of the woods yet, especially with a brisk schedule for turnarounds,” said DeHaan.


Source link

Leave a Reply

Your email address will not be published. Required fields are marked *