An oil market that was the friend of consumers for much of the fourth quarter has now turned to be a serious headwind, with the futures price of ultra low sulfur diesel settling Tuesday at its second-highest price in almost two years.
The rising price of diesel futures, even before the latest surge in recent days, was reflected in the Department of Energy/Energy Information Administration average weekly retail diesel price. It rose for the second consecutive week, published Tuesday but effective Monday, jumping 9.4 cents/gallon to $3.624/g. Combined with the prior week’s increase of 7.1 cts/g, the price used as the benchmark for most fuel surcharges is up 16.5 cts/g after eight weeks of decline.
The latest price is still below a recent high of $3.868/g on November 17. That price was followed by eight weeks of declines.
But with the gains posted in the price of ultra low sulfur diesel (ULSD) on the CME commodity exchange, next week’s move will almost certainly be higher.
Powered by cold weather and the fact that ULSD and heating oil are structurally similar–wider differences in the past have been narrowed by various environmental regulations–the price of ULSD is getting toward the highest levels it has been for more than 2 ½ years.
ULSD Monday settled at $2.6462/g, an increase of 7.82 cts/g. The price has risen 27.94 cts/g in the last three trading days; it settled at $2.3668 on Thursday.
More significantly, the Tuesday settlement was the second highest since April 2024. ULSD on April 16, 2024 settled at $2.6513/g. Tuesday’s settlement is the second-highest since then, topped only by $2.7011/g on November 18.
The current cold snap is driving diesel higher at a far faster rate than crude. For example, the spread between global crude benchmark Brent and ULSD, normalized to cents per gallon, was about $1.04/g Tuesday based on the settlement prices on CME. It was about 86 cts/g Friday and opened the year at about 67 cts/g.
An article published Tuesday in Bloomberg noted that U.S. diesel prices have blown out to a premium over look-alike products in Europe that translate to about 40 cts/g, which it said was the widest in about three years.
There are three separate weather-related trends powering the diesel market higher.
The cold weather has caused operating problems at several refineries around the country. Patrick De Haan, the VP, Petroleum Analysis & Media Relations at GasBuddy, said in his widely-followed feed on X that by his count there are more than a half dozen U.S. refineries with operating issues, many of them caused by the cold weather.
