Low distillate stocks in the U.S. are tightening the diesel market ahead of harvest and winter heating season. If U.S. manufacturing activity returns to growth soon, supplies of diesel and heating oil could become even tighter, pushing prices higher.
Economic activity in the U.S. manufacturing industry contracted for the 11th consecutive month in September, the report said. data Award from the Institute for Supply Management (ISM). But while still showing contraction, the readings were more optimistic than in the spring and summer.
ISM Manufacturing Research Committee Chairman Timothy Fiore said manufacturing continued to shrink, but at a slower pace, with September recording its best performance since November 2022.
Reuters columnist John Kemp said diesel demand, which is highly cyclical, would rise if manufacturing activity picks up soon. Note.
Increased diesel consumption could put further pressure on the already tight U.S. diesel market. Concerns about inflation This is because increased trucking and logistics costs will increase the price of shipped goods.
A pick-up in inflation could further complicate the Fed’s task of managing a soft economic landing, just as concerns over longer-term interest rates hit financial and commodity markets this week.
A recovery in U.S. manufacturing will boost prices for diesel and related products, especially as inventories are low, especially in the Northeast.
U.S. distillate fuel inventories fell by 1.3 million barrels in the week ending Sept. 29, and are currently about 13% below the five-year average for this time of year, according to EIA’s latest weekly inventory report. Indicated.
With refinery outages, shifts in global oil trade flows, a cautiously optimistic U.S. freight market, and inventories at their lowest levels in years, the diesel market is tight and likely to continue in the coming months. It is likely that the situation will become even tighter. Winter has hit the Northeast, and supplies of diesel and other distillates are extremely tight.
National average diesel prices are lower than this time last year, but prices have risen over the past month due to higher oil prices and lower-than-usual inventory levels. The average U.S. diesel price as of Oct. 5 was $4.554 per gallon, up from $4.452 per gallon a month earlier. AAA data.
The Northeast heating oil, diesel and other middle distillate markets are currently unusually tight ahead of the winter heating season, with inventories nearing five-year lows, RBN Energy analysts say. They wrote in the article. analysis this week. Although prices are rising, the outlook for a short-term recovery in stock prices is “modest at best,” he said.
During the winter of 2022-2023, approximately 5 million U.S. households used heating oil (distillate fuel oil) as their primary heating fuel. Approximately 82% According to EIA data, those households were located in the northeastern United States.
A perfect storm of major maintenance at refineries in eastern Canada and the U.S., tight global diesel supplies, and a resilient U.S. economy with decent manufacturing and freight demand means that diesel and other Distillate oil prices will again be under upward pressure.
“We may find that the wolf is at the door by the end of November,” said Tom Kloza, global head of energy analysis at Oil Price Information Service. new york times This week I commented on the US diesel market.
Rising diesel prices are not good news for U.S. inflation, as they could push up consumer prices more than the Fed expected and create another hurdle on the central bank’s path to starting to cut interest rates.
Written by Tsvetana Paraskova, Oilprice.com
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