Retail and wholesale diesel prices are projected to be lower than a year ago. Meanwhile, residential heating oil prices are set to decrease by 5% this winter, according to the latest data from the Energy Information Administration (EIA).
The forecasts for diesel, which is a key fuel for trucking, softened over the past month. This is despite a slight increase in retail prices ahead of the peak Midwest harvest season. As of October 7, the national average diesel price rose by 4 cents to $3.584 per gallon, marking a third consecutive weekly increase. However, this rise totals only 5.8 cents after ten weeks of decline. Compared to last year, the national average is down by 91.4 cents.
Looking ahead, retail diesel prices are expected to stabilize. The EIA anticipates an average price of $3.54 per gallon in the fourth quarter of 2024 and $3.53 per gallon in the first quarter of 2025. These figures represent declines of 1.8% and 4%, respectively, from earlier EIA forecasts made in September. For the entire year of 2025, the average retail diesel price is projected to be around $3.50 per gallon, down 5% from previous predictions.
Additionally, the EIA revised its wholesale diesel price forecast for the fourth quarter, cutting it by 11.2% to $2.06 per gallon from a previous estimate of $2.32. The agency now expects average wholesale diesel prices for 2024 to be $2.40, down from $2.50 a month ago. For 2025, wholesale prices are expected to average $2.30 per gallon, reflecting an 8.4% decrease from prior estimates.
Despite ongoing geopolitical tensions, the EIA lowered its spot Brent crude price forecast for 2025 to $78 per barrel, a decrease of $7 from earlier expectations. This reduction is mainly due to an anticipated slowdown in global oil demand growth. Investment bank Citi forecasts that front-month Brent futures could drop to $65 per barrel in the first quarter and further to $60 by the end of the year.
Global diesel demand is also declining, particularly in China. The EIA reported that diesel consumption in China fell to 3.9 million barrels per day in June, marking an 11% decrease from the same month last year. This represents the largest year-over-year decline since July 2021. The EIA attributed this drop to reduced economic activity, particularly in the construction sector, as liquefied natural gas is increasingly used instead of diesel in heavy-duty trucks.
As of October 7, front-month Brent crude futures exceeded $80 per barrel for the first time since August. Crude prices rose over the past month due to geopolitical unrest, but it’s important to note that they had been relatively weak before this increase. According to energy analyst Tom Kloza, benchmark West Texas Intermediate (WTI) futures had not closed lower in 452 days, while gasoline and wholesale diesel futures also saw extended periods of stability.
In the Midwest, retail diesel prices rose by 6.7 cents to an average of $3.587 per gallon in the latest week, largely driven by harvest demand. However, this price is still 78.9 cents lower than last year. The harvest season typically peaks in mid-October and continues through November, with the 2024 harvest expected to be on schedule or slightly ahead.
The U.S. Department of Agriculture reported that Midwest crops of corn and soybeans are progressing slightly ahead of schedule. Notably, the ratio of soybean acreage to corn acreage is higher than in previous years, with soybeans having an earlier harvest season.
After the harvest season, demand for heating oil usually increases, which will help sustain demand for distillates. The EIA forecasts an average price of about $4.20 per gallon for residential heating oil this winter, approximately 10 cents lower than last winter.
A positive development for fleet fuel buyers in the coming months is a smaller crack spread for distillates. The EIA expects the heating oil crack spread to be around 80 cents per gallon this winter, about 25 cents lower than last winter.
It is important to consider that last year, heating oil prices and crack spreads reached historic highs. The EIA noted that many factors contributing to high distillate crack spreads last year, such as lower inventories and refinery capacity, still persist. However, U.S. and global distillate fuel demand is down, and refinery capacity has increased. Additionally, the global distillate supply chain has returned to normal after the disruptions caused by Russia’s invasion of Ukraine in 2022.
You Might Be Interested In
- Is It Okay to Use Diesel Oil in a Gas Engine?
- Can You Burn Diesel in an Oil Furnace?
- Can You Use Diesel Oil in a Petrol Car?