Diesel Prices Hit 10-Month High Amid OPEC's Production Cuts and Global Demand Surge

Diesel prices rose again on September 12, 2023, to a 10-month high after the Organisation of Petroleum Exporting Countries (OPEC) announced its global Gasoline and Diesel demand forecast and further production cuts amid tight supplies. Both the crude contracts have been reaching their pick since the announcement of Saudi Arabia and Russia's voluntary cuts in November last year. US crude futures have reached USD 88.34 a barrel, while the Brent contract jumped to USD 90.56 with a 1.3% hike on Tuesday.

In their monthly reports, OPEC has been stuck to the forecast of robust demand for Diesel and Gasoline globally in this fiscal year 2023-24. They also have stated that this high demand for Diesel will continue to next fiscal year even with more severe economic headwinds. According to the unchanged forecast by OPEC last month, in 2024, the world oil demand will grow by 2.25 million barrels per day compared to 2.44 million barrels per day in the current year.

According to market participants, the US's Consumer Price Index (CPI) increased in August at a faster pace than in July, which will again raise concern for future rate hikes.

OPEC said that the economic recovery forecast in the tourism sector and international air traveling with global economic growth will keep driving the Diesel demand. Furthermore, as per the forecast of the industry body, American Petroleum Institute, the US crude inventory has been expected to fall by about 2.2 million barrels a day in the second week of September this year.

Moreover, it has been reported that extreme flooding has caused Libya to shut four of its eastern export terminals, which has given support to the tight supplies of Diesel.

The European Commission released its forecast on Monday, predicting that Germany, the biggest economy of the Eurozone, will fall into recession this year.

On the other hand, as per traders, European oil refineries have cut down the number of maintenance schedules in Diesel units since they wanted to earn more margins amid high Diesel and Gasoline demand and less inventory.

The Fawley refinery in southern England has been reopened after planned maintenance on a Diesel production unit on August 31. In early August, the refinery producing Diesel has been reported noise associated with the restart of a unit, and the maintenance has been running longer than expected.

BP's (BPL) Castellon coking refinery in Valencia is supposed to carry out an October maintenance, a spoke person said on Monday. According to industry sources, The Pembroke refinery of the UK has been planning temporary shutdowns in the spring.