A further drop in the benchmark price of diesel brought that figure down by the biggest drop over a five-week period in two years.
The Department of Energy/Energy Information Administration’s weekly average retail diesel price fell 6.3 cents/gallon to $3.544/g. It stood at $3,868 before this five-week streak of falling numbers.
The drop of 32.4 cts/g during this period is the largest in a 5-week period since it fell 37.9 cts/g in the five weeks ended December 11, 2023.
The latest price, effective Monday and published Tuesday, is the lowest for the benchmark used for most fuel surcharges since it was $3.471 on June 11.
Retail prices lag declines in the futures market. The price of ultra-low sulfur diesel (ULSD) on the CME commodity exchange has stabilized in recent trading sessions after a decline that began on November 18 with an ULSD settlement of $2.7011/g.
And while the price of ULSD on the CME settled on November 12 at $2.1980/g, it fell to $2.1219/g on Friday before rising to $2.1581/g on Monday.
Ironically, part of market stability comes from uncertainty. The uncertainty is whether recent developments between the United States and Venezuela will slow Venezuelan oil production.
In the long term, the end of the Maduro regime in Venezuela would almost certainly be pessimistic. This would give the oil industry an opportunity to recover from years of mismanagement.
Argus Media’s most recent estimate of Venezuelan production is around 1 million barrels/day. Before Hugo Chávez took power in the country in 1998, Venezuelan production approached 3.5 million b/d.
The other uncertainty in the market concerns the precise quantity of oil coming from Russia.
The uncertainty surrounding oil supplies, given these two major geopolitical factors, meant that although ULSD declined slightly last week, Brent on the CME settled at $62.07/bbl on Monday, up from $60.56/bbl a week ago.
There is still a lot of talk about glut. It is expectations of this weakness that have been the main driver of the drop in oil prices over the past six weeks.
But geopolitics, at least for a short time, can override the impact of supply and demand.
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