Diesel Prices Continue Downward Trend Amidst Stable Market
Despite the relatively calm week-to-week movements in benchmark diesel prices, a closer look reveals a two-month trend of steady decline. The latest data from the Department of Energy/Energy Information Administration shows a weekly average retail diesel price of $3.476 per gallon, a 1.8-cent decrease from the previous week.
A Bearish Trend Takes Hold
This downward trend is a significant shift from the volatility that characterized oil markets in recent years, fueled by the COVID pandemic and the Russian invasion of Ukraine. While the market has stabilized, the overall direction remains bearish. In fact, the DOE/EIA price has fallen by 15.5 cents over the past 10 weeks, from $3.631 on October 15 to $3.476 on Monday.
The Strong Dollar’s Impact
One key factor contributing to the decline in diesel prices is the strengthening U.S. dollar. The DXY index, which measures the dollar’s value, has reached its highest point in two years, hovering around 108. This surge has pushed commodities denominated in dollars downward, as they tend to move in the opposite direction of the dollar’s strength.
Weak Demand and Strong Production
Analysts point to several factors driving the gradual decline in diesel prices, including weak Chinese demand figures, strong production from OPEC+ and non-OPEC countries, and the lack of impact from Middle East tensions on production. The latest data from S&P Global Commodity Insights shows that OPEC+ produced 40.58 million barrels of oil per day in November, a significant increase from the previous month.
OPEC+ Struggles to Keep Supplies in Check
Despite OPEC+’s efforts to limit oil supplies, several countries continue to produce oil at levels beyond forecast, making it challenging for the group to achieve its goals. The decision to delay increasing supplies until April has also been undercut by the latest production figures.
U.S. Crude Output Remains Strong
Meanwhile, U.S. crude output continues to defy expectations, with the EIA reporting a weekly average of over 13.604 million barrels per day for the week ended December 13. This marks the second consecutive week above the 13.6 million-barrel-per-day level, a milestone never reached before.
As the diesel market continues to trend downward, it remains to be seen how these factors will influence prices in the coming weeks. One thing is certain, however: the strong dollar and weak demand will continue to play a significant role in shaping the market.
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