London August 11 2023: 7Prices for diesel and other distillate fuel oils have surged as expectations for a soft landing and an improving economic outlook in the United States threaten to deplete already low inventories even further.
Futures prices for ultra-low sulphur diesel delivered in New York Harbor in September climbed to $135 per barrel on Aug. 9, up from $95 on May 31.
Prices for diesel and other distillate fuel oils have been rising much faster than for crude petroleum, widening margins for refiners.
The crack spread for making diesel from U.S. crude, with both delivered in September 2023, has doubled to $50 per barrel from $25 at the end of April.
The crack for making diesel from U.S. crude, with both delivered in December 2023, has climbed to $43 per barrel from $27 at the end of April.
Diesel prices are rising as traders anticipate that shortages will quickly re-emerge if the economy avoids falling into a recession later in 2023.
Distillate inventories have not recovered significantly despite the slowdown in manufacturing and freight activity evident since the middle of 2022.
U.S. inventories amounted to 115 million barrels on August 4, up from 111 million a year ago, but otherwise the lowest for the time of year since 2000.
Inventories were 24 million barrels (-17% or -1.31 standard deviations) below the prior ten-year seasonal average on Aug. 4, based on data from the U.S. Energy Information Administration (EIA).