Diesel prices, which serve as a benchmark for many fuel surcharges, increased on Monday, ending a 10-week streak of price drops. The Department of Energy/Energy Information Administration reported a rise of 1.3 cents per gallon, bringing the price to $3.539. This is the first increase since July 8, when prices rose 5.2 cents to $3.865—32.6 cents higher than Monday’s price.
This increase follows recent signs in the futures and physical markets indicating a possible rebound from the decline in diesel prices. Since early July, when ultra-low sulfur diesel (ULSD) traded at around $2.60 a gallon on the CME commodity exchange, prices have been falling. The futures price for ULSD hit its lowest point on September 13, settling at $2.0843 per gallon, the lowest since late November 2021.
After a brief recovery that saw prices rise almost 9 cents per gallon in just four trading days, settling last Thursday at $2.172, ULSD prices have fallen for two consecutive days. On Monday, the price dropped 1.64 cents to settle at $2.1451, slightly over 6 cents above the recent low.
John Kemp, a former chief energy correspondent for Reuters, now provides independent market analysis. He noted that traders betting against the market—those with short positions—have reached record levels. Kemp explained that these short positions have emerged as inventories rise and businesses report slowing activity across major industrial regions.
“Persistent selling has anticipated, accelerated, and amplified the slump in both crude prices and distillate refining margins over the last two months,” Kemp added. This refers to the fact that diesel prices have decreased at a faster rate than crude prices.
In early July, the price difference between Brent crude and ULSD was about 57 cents per gallon. Currently, that difference has narrowed to 36-38 cents, meaning around 20 cents of the diesel price decline is due to weaknesses in that market rather than overall crude price drops.
Some market supporters point to inventory data, which show that levels remain relatively tight. For the week ending September 13, U.S. ULSD inventories stood at 125.1 million barrels, according to EIA data. Although this is higher than the previous two years for that week, it remains below the five-year average of 128.2 million barrels, excluding the large inventories of 2020.
Economist Philip Verleger noted that the current inventory situation may be due to lower storage value than usual. He referenced a report from Energy Intelligence that said, “Global storage levels are loosening their tight link to benchmark oil prices due to profound structural changes in the market.” These changes include new trading methods, shifts in crude supply, and geographical changes in refining and demand centers, all of which reduce the impact of inventories on price.
Verleger concluded, “The prospects for higher prices are dim, given limited consumption increases, further global discoveries, a weakened oil cartel structure, decreasing refining margins, diminished support from commodity speculators, and declining confidence in oil producers’ ability to resolve the situation.”
Bloomberg also highlighted a bearish factor in the market, reporting that the autumn maintenance season in the U.S. is expected to be light. During this time, refiners usually undertake major projects that can significantly reduce refining capacity. Bloomberg, citing IIR Energy, noted that refiners plan to take offline only about 529,000 barrels per day, which is about half the amount from last year and the lowest since 2021.
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