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Market Close: Nov 16 Down

Fueling Strategy: Please tonight before 23:00 CST have tanks completely FULL of fuel due to Thursday prices will jump UP 10 cents but Friday look for a small correction down of 2 to 3 cents ~ Be Safe

 

NMEX Crude     $ 85.59 DN $1.3300

NYMEX ULSD    $3.6136 DN $0.0277

NYMEX Gas      $2.5080 DN $0.0081

NEWS

(Forbes) Last week, the Energy Information Administration (EIA) reported that distillate inventories were at their lowest levels since 2008. (The primary distillates are diesel, jet fuel, and heating oil). However, in 2008 distillate levels were low coming out of spring. Currently, they are low going into fall. That’s far worse than the situation in 2008.

Distillate demand generally spikes in spring — when farmers are planting crops — and in fall, when they are harvesting those crops and people start buying fuel oil for winter. Thus, a low distillate inventory in late April 2008 isn’t quite as serious as a low inventory in October 2022. In fact, distillate inventories haven’t been this low in October since the EIA began reporting this data in 1982.

These low distillate inventories are why diesel prices are above $5.00 a gallon nationwide, even though the nationwide average price for gasoline has dropped below $4.00 a gallon.

Why is there a diesel shortage this year?

There are four factors, but two of those factors are in play every year.

As mentioned above, distillate demand spikes at this time of year. But, it does that every year. This is also the time of year that refineries are doing maintenance. They tend to do that in the spring and fall, which is when demand is lower and the weather is decent. So, refinery capacity drops at this time of year. Third, U.S. refinery capacity has fallen in the past few years as several unprofitable refineries were closed. So, that’s a new factor that has appeared in the past couple of years.

But the primary reason is the cutoff of Russian imports. Prior to Russia’s invasion of Ukraine, the U.S. was importing nearly 700,000 barrels per day (BPD) of petroleum and petroleum products. Most of those imports were finished products and refinery inputs that boosted distillate supplies in the U.S. The loss of those Russian imports have caused problems for refineries as they struggle to fill holes in their product slates. Refineries do have a small amount of flexibility in shifting gasoline production to diesel production. But it’s a relatively small amount (e.g., ~5% in a refinery I once worked in). That also means that if refiners do shift production, it potentially creates shortages in the gasoline market.

Some relief is on the way, as some diesel imports are on the way from Europe to the East Coast. But, the distillate market won’t likely return to normal before next summer at the earliest.

Have a Great Day,

Loren R Bailey, President

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Cell: 479-790-5581

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Categories: Fuel News
loren: Fuel Manager Services Inc. "Serving the trucking industry since 1992" I've been in and around the trucking industry for 45-years beginning in owner operator operations at Willis Shaw Express. I bought a small trucking company that I ran for 6-years then sold and went to work for J.B. Hunt Transport in 1982. After 10-years with Hunt, I started Fuel Manager Services, Inc., we are in our 29th year of serving the American trucking companies. Our simple goal was and is to bridge the gap between the trucking companies and the fuel suppliers.